Ms Upton had issued a notice to suspend council in February, after allegations were raised of an association between the man appointed to conduct asbestos investigations, Michael Tooma, and a former council employee, Mark Mulligan.

Council sought an injunction in the NSW Supreme Court to prevent her going ahead with any suspension.

This was granted on February 23.

But the minister appealed to the NSW Court of Appeal, which today (June 20) ruled in her favour in a unanimous 3-0 decision.

It has set aside the injunction but stayed that order for seven days to allow council to further consider its legal position.

The Court of Appeal also declined to order council to pay the minister’s costs. It found that, although the minister was successful, the decision had allowed the court to clarify the law for the benefit of any subsequent cases relating to council suspensions. 

The mayor, Mark Greenhill, said the seven-day stay on the order would allow council to decide what action to take.

“The decision of the court allows the council to consider whether to make a new application for an injunction to the NSW Land and Environment Court or to otherwise seek to resolve the matter through discussions with the Minister.”

The mayor said that much had happened since the suspension notice was issued in February.

“We have demonstrated that the independent investigation into asbestos management by the council was conducted appropriately by Mr Tooma of Clyde & Co,” Cr Greenhill said.

“Despite concerns, there was no conflict of interest or bias between Mr Tooma and former council employee Mr Mulligan, who was not under investigation.” 

He acknowledged there had been “operational failures” in the past but said council had acted on all the performance improvement orders issued over asbestos management.

“The minister has not identified any deficiency in the actions taken by the council to date,” he said.

“However, we remain open to talking with the minister to ensure that we address any of her concerns, while leaving elected democracy in place.” 

Liberal MLC and Katoomba resident, Shayne Mallard, said the Court of Appeal ruling was “an embarrassing loss for Blue Mountains City Council”.

“The Blue Mountains City Council has been more focused on legal tricks than cleaning up asbestos and protecting the community,” he said.

“My concerns about council’s conduct remain - why are they so determined to block external scrutiny of their actions? And what is the cost to ratepayers for this legal folly?”

He called on council to “cease its expensive legal games and release all the currently confidential reports on the asbestos issue for public scrutiny”.

But the mayor responded by saying Mr Mallard's comments are as hapless as those he made in the Upper House.

“Once again he is embarrassingly wrong. The council has voted to release material. All reports are in the possession of both government regulators and we have reported constantly to his minister,” he said.