In April 2017, the ACT Planning and Land Authority approved a development application filed by Capital Recycling Solutions for the construction of a hard stand structure and associated works, including a rail siding, on Block 11 Section 8 Fyshwick.

The company owned the old Shell block next door, and wanted to buy the section of rail corridor from the ACT government in order to export recyclables to Port Botany via the rail line.

However, the approval came months before Capital Recycling Solutions announced its plans to divert almost the entire waste stream from the city's tip at Mugga Lane to Fyshwick.

And despite the development application approval, the sale of the rail corridor was never finalised.

Documents released under freedom of information laws show the company offered to buy the block in October 2017 for $867,000.

The block was valued at more than $1 million however $200,000 was knocked off the price due to required works.

However the documents suggest the sale was delayed because of community concern over the permitted use of the land.

This is despite planning minister Mick Gentleman ruling the company was eligible to buy the rail corridor block via direct sale back in March 2016.

The company tried to finalise the direct sale in May this year, however was told it would need to wait until a forthcoming development application for more works on the site was approved.

However, it is understood the offer of sale was withdrawn in July because of the inconsistencies with the planned use of the land and the territory plan.

The zoning of the land prevents it from being used as a railway, despite the fact the area was used as a stabling yard for many years.

Now officials have reversed their 2017 decision to approve works on the site.

An internal review concluded the development application had wrongly been assessed in the merit track, which meant it had to tick fewer boxes to be approved.

In its decision last Thursday, the planning authority said the application could have been assessed in the merit track despite the zoning, if there was a lease in place authorising it.

However, because there was no lease, they deemed the decision invalid.

Officials justified the reversal by saying the approved work had not yet begun on the site.

ACT chief planner Ben Ponton said the review was sparked by third-party complaints.

Freedom of information documents show the complaint made in December alleged the planning official who approved the application ignored evidence that the work would involve upgrading the rail siding, in contravention of the zoning.

It was then alleged a senior planning official, who had responded to complaints about the approval, sought to downplay concerns that the construction would allow the site to be used as a railway.

Mr Ponton referred the allegations to the directorate’s senior executive responsible for business integrity and risk and public interest disclosure officer, Chris Reynolds.

Mr Reynolds - who was also the Environment, Planning and Sustainable Development Directorate's chief operating officer - found while the allegations were serious, "no deliberate misrepresentation or maladministration is recognised to have occurred".

Mr Reynolds also noted the delegate who approved the application was no longer working for the planning authority.

Mr Ponton said based on this review, there was no reason to believe there had been any "deliberate misconduct" in the making of the initial decision.

"Assessing and deciding a development application calls for judgment on the part of the delegate of the planning and land authority to classify or categorise a proposed development within a description that is either permissible or prohibited in a particular zone and assessment track," Mr Ponton said.

"The classification of a proposed use is sometimes a complex matter that could be open to interpretation. In this case the correct and preferable interpretation that flowed from a review of the decision by a more senior delegate, did not align with the initial assessment of the development application."

President of the Griffith-Narrabundah Community Council Leo Dobes, who has been a vocal opponent of the recycling plant, said he respected and applauded the public servants "who had been willing to go in and correct what had been a wrong decision".

However Capital Recycling Solutions' director Adam Perry said they were reviewing their legal options.

The company has 20 days to appeal the decision.

"The reversal of a development consent is highly irregular and quite possibly, unprecedented," Mr Perry said.

Mr Perry refused to say whether the reversal would be a set back for the recycling plant proposal.

It's not the first time this year planning officials were found to have wrongly approved a development application.

In March, the ACT Administrative and Civil Tribunal overturned their decision to approve the Woolworths car park redevelopment in Dickson, finding it broke too many planning rules.

It's understood the proponent of that project, Coles, is appealing ACAT's decision.