The builder contracted to transform a site in Manly's town centre has accused the former Manly Council of misleading conduct for failing to reveal it bungled the contract when the company signed up to the doomed project.
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But the new Northern Beaches Council has levelled the blame at the previous council's general manager, Henry Wong, who it claims in court documents was not authorised to enter into the agreement.
The new council's decision to abandon the controversial revamp prompted Built Development and Athas Holdings to launch legal action in the NSW Supreme Court, seeking damages of $74 million.
The dispute centres on the developer's contract with the Manly Council to turn the Whistler Street car park and Manly Library site into a new library with rooftop gardens, a cinema and community spaces.
That project, positioned behind The Corso, was contingent on a separate plan to build a car park beneath nearby Manly Oval.
Manly Council voted to award contracts for the project, which had attracted strong opposition from some councillors and the community, at a closed meeting soon before the council mergers in 2016.
The administrator of the new Northern Beaches Council – formed by the merger of Manly, Warringah and Pittwater councils – later cancelled the contract on the basis the project was financially risky.
The developer argues it is entitled to compensation because the council wrongfully terminated the contract for the project, although the Northern Beaches Council has denied any wrongdoing.
The council alleges in court documents the development deed wasn't valid because of the way it was handled by Manly Council and any agreement reached between the two parties was legally void.
It says the former council and its general manager, Mr Wong, breached local government regulations that required the mayor or at least one other councillor to be present when Mr Wong executed the deed under seal.
The council argues Mr Wong didn't have the power to enter into the contract, which it says also named the wrong entity.
Mr Wong has since moved to Strathfield Council. In July, he was reappointed as that council's general manager for the next five years.
Court documents said the former council was aware of "widespread ratepayer concerns over the illegality of [that] meeting", which it argued had breached local government laws, and of public opposition to the project.
Court documents also said the former council knew four of Manly's nine councillors opposed the redevelopment and had "complained about the processes by which it and the Manly Oval project were conceived".
"[Manly] Council held reasonable concerns that the development deed and the transactions contemplated by it may be unlawful, such that the development deed was void and unenforceable," the documents said.
The developer argues the council engaged in "misleading or deceptive conduct" if it entered into the contract knowing it wasn't properly authorised and didn't comply with the relevant laws.
Separately, the developers are appealing against a decision by Supreme Court judge Michael Ball to strike out part of the council's defence in the case. It returns to court in September.
In February, independent Northern Beaches councillor Vincent de Luca called for an investigation into the councils' handling of the redevelopment.
That will most likely not take place until the court case is finalised.
Built Development and Athas Holdings said earlier this year they were "disappointed that council frustrated the process and erroneously abandoned the project".
The council's chief executive Mark Ferguson previously said the decision to cancel the project was in the community's best interests "based on a comprehensive review and advice from independent experts".
