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The council last year declined consent on the basis painting the building's panels would have a ''substantial adverse effect on the Exchange environment, whatever colour scheme was used''.
Plaza Property Trust, which owns the Princes St property, had requested resource consent so it could repair the building's panels, which had been hit with ''concrete cancer'' - where precast concrete facade panels crack and partly crumble, causing fragments to fall off.
Lawyer Phil Page, who is representing the owners, said the reason it had appealed the decision to the Environment Court was simple.
''The short answer is because the council's hearings committee has misconceived how the townscape rules work.
''The council planners and the council hearings appear to be treating it as if it were a stone building, which is what the townscape provisions in the district plan try to preserve in an unpainted state.
''It's not. It's a concrete building and we know that because it's got concrete cancer,'' he said.
The next step was for the parties to meet for court-assisted mediation at the end of this month.
If mediation was unsuccessful, it would go to a hearing.
Hearings committee chairman Cr Andrew Noone, who will be representing the council at mediation along with senior planner Phil Marshall and a legal representative, would not comment on Mr Page's concerns, but said it was ''committed'' to mediation.