The ACT Planning and Land Authority had approved Capital Recycling Solutions' development application in 2017 but more than a year later tried to reverse it, saying the approval should never have been given in the first place.

Capital Recycling, which hopes to build a waste management facility on the Fyshwick site, challenged the decision in the ACT Supreme Court and on Friday won their appeal when Associate Justice Verity McWilliam declared the ACT Planning and Land Authority's revocation invalid.

The associate judge also ordered the government pay Capital Recycling's costs.

The company's director Adam Perry said the decision was a win for common sense.

"Can you imagine getting approval to build a house, and then you go ahead and sign up for a bank loan, buy all of the materials, get everything ready to go and then 16 months later, without warning, the planning department decides to revoke your approval?" he said.

"No discussion, no negotiation, no compensation, nothing, just take it off you.

"To borrow the words used in the Supreme Court judgment handed down today: '…the system would be unworkable.'"

Mr Perry said the group did everything it could to avoid going to court but the government was not open to discussion.

"Hundreds of thousands of ACT taxpayer dollars have been wasted on this court case," he said.

"The strength and integrity of the entire planning system was called into question. Thank goodness the right decision was reached today."

At the centre of the case was a proposed concrete slab and associated works.

In April 2017, Capital Recycling Solutions was granted approval to build the slab on the Fyshwick site so that trucks could travel on it.

The slab was the first step in a proposal to build a waste management facility to sort and recycle material that would have ended up in landfill.

The group says its proposed facility could process 300,000 tonnes of waste per year.

Critical to the proposal is a plan to use rail sidings and the existing railway to freight material out of Canberra.

But the planning authority said approval for the slab should never have been granted because the development application was prohibited under Canberra's planning laws.

It reversed the decision in August last year, 16 months after the approval.

Capital Recycling immediately appealed to the ACT Supreme Court.

Lawyers for the group said the authority had no power to reverse the original decision.

The authority said it did, and also said that the first decision was invalid because the proposed development was for railway use, which was prohibited in the area.

But Associate Justice McWilliam said on Friday the authority's arguments must be rejected.

She said a decision's invalidity needed to be established by a court, rather than by the government.

"If the position were otherwise, the operation of the vast number of administrative decisions made daily would be compromised, and the system would be unworkable," she said.

"Indeed, to paraphrase the legal philosopher Hans Kelsen, the system would be reduced to a 'state of anarchy'."

Associate Justice McWilliam said the statement had particular force in a planning context.

She said that "no one would be in a position to build or develop with any certainty if a development approval granted on one day were able to be unilaterally treated as void and of no effect by the authority the next day."

ACT chief planner Ben Ponton said the judgement provided guidance in relation to the decision-making process for development assessment in Canberra.

"The authority will now carefully consider the decision and any implications that it may have in relation to the work of the authority."