X-Ray Trust Ltd filed civil proceedings when it heard about the "halfway house" that Millbrook Country Club Ltd intended to build.
X-Ray owns two properties neighbouring Millbrook’s latest Coronet course extension.
It is also seeking a judicial review of the decision by the Queenstown Lakes District Council to grant New Zealand Open organisers a 10-year consent to operate the golf tournament at Millbrook.
It is understood that review will be heard at a later date, but yesterday’s hearing was centred around the cafe proposed on the new 18-hole Coronet course at Millbrook.
Counsel for the trust David Bigio KC said there was an agreement between the two parties that retail and buildings larger than 40sq m near the boundary were prohibited.
The trust claimed Millbrook had said it was building a small toilet block, but unbeknown to the trust Millbrook was designing a place for golfers to rest, eat and drink which was known as a "halfway house".
Millbrook obtained resource consent from the council to build the halfway house, which the trust only discovered after reading an article in the Mountain Scene.
Mr Bigio said the role of the council was "absolutely irrelevant to the premises" because the two parties had a private agreement.
The agreement said Millbrook would not develop or subdivide the land near the border, but the court heard the parties disagreed on the meaning of "develop".
Later, the original plan with a dining area and kitchen was abandoned and a new proposal of a building less than 40sqm was proposed, but it would have a food caravan.
"It’s clever, but... not effective in terms of the covenant", Mr Bigio said.
"[X-ray] don’t want a cafe, or anything like it, near their property."
Mr Bigio said the building was not permitted as an accessory building under the agreement and it certainly was not a small toilet block.
Counsel for Millbrook, Jack Wass, said the building was an accessory to the resort and would not have an adverse effect on the plaintiff.
Milbrook had done some landscaping along the boundary to mitigate the visibility of the building from X-ray’s dwellings and help to maintain the rural outlook for both properties.
The new design was for a building smaller than 40sqm and would be appreciated by the golfers.
Justice Jonathan Eaton is presiding over the hearing at the High Court in Invercargill, which is expected to take up to seven days.
The judge and counsel went to visit the site yesterday afternoon.
