The judicial review followed complaints from 30 neighbours last year when they became aware a house under construction in Briar Bank Dr had exceeded the 7m height restriction.
At 8.9m in some places, it was also breaching the skyline from Penrith Park Drive and was visible around the lake.
In December 2018, owners of Lots 60 and 61 Briar Bank Dr, David and Paula Clarke, had been granted non-notified consent by the Queenstown Lakes District Council to construct their substantial home on an elevated position on Lot 60 and to undertake related earthworks, landscaping and vegetation removal.
The site is within the Penrith Park Special Zone of the Operating District Plan.
All of Lot 60 and part of Lot 61 are subject to specific zoning regulations relating to visibility of buildings and visual amenity and parts of both lots attract vegetation removal regulations.
In their evidence, applicants Murray Frost, William Brown and Jennifer Munns said if they had had the opportunity to submit on the application, they would have sought to ensure the proposed dwelling complied with the Zone policies and rules, in particular, the maximum height for controlled activities of 7m, and that the (then) existing protected kanuka on the site was retained so that screening vegetation could serve its intended purpose.
The applicants alleged the council had failed to consider the adverse effects on the public environment and those with views of the site from Briar Bank Dr and Penrith Park Dr, and failed to correctly assess vegetation removal.
Justice Rachel Dunningham found there was an error in the assessment of vegetation removal, but insufficient to warrant relief, and for those reasons, the court has not quashed the resource consent for the house.
There was a material error in the removal of the consent notice that required the house to be invisible from the Lake shoreline and that consent notice must be reinstated, she said.
In his affidavit to the court, Mr Clarke said by the time they received notice of the challenge to the consent in November 2020, about 33% of construction had been completed and $1,365,000 spent. If the building had to be taken down, the cost which would be incurred would be more than $2,000,000.
Counsel for the applicants, Phil Page said "if the Clarkes wished to keep their house, which is plainly visible from the lake shore, they will have to pursue again their application to remove the consent notice from their title.
"The court seems to be of the view that reconsideration of that process may be the forum for mitigation proposals to be considered.
"The applicants have won, but to what end remains to be seen," Mr Page said.
