A controversial new north shore apartment tower approved by the NSW Planning Minister, Tony Kelly, in the last days of the Labor government faces a major legal challenge by residents.

At the same time as buyers are being invited to register their interest in the 295 apartments in the planned new 42-storey block in Chatswood, owners in a neighbouring building are pressing ahead with their Federal Court action aimed at halting the developer, Mirvac.

''This building was originally going to be a 21-storey office block. We were shown it on the model, and we all bought apartments in the same development on that basis,'' says Ken Turner, who owns a $2 million penthouse overlooking the site.

''But now it's going to be 42 storeys and it's going to block us, and so many of our neighbours, out. This really stinks.'' Turner, 78, and his wife May, 74, have taken action against Mirvac alleging ''unconscionable conduct''.

Willoughby Council also made representations against the application for a change of use to residential and the extra 21 floors. But the Mirvac chief executive of NSW development, John Carfi, says the proposed office building had become unviable and there was a shortage of apartments in the area.

''But we're in the middle of legal proceedings so I can't comment further,'' he says.

The new tower on Railway Street will have views from the Pacific Ocean to the Blue Mountains and airport, Mr Carfi says.

Chatswood residents challenge Mirvac

The then NSW Labor planning minister Tony Kelly so feared defeat in the Barangaroo Sydney development court challenge he sought "to move the goal posts", a judge has said.

In the Land and Environment Court, Justice Peter Biscoe today said the previous minister's unprecedented actions after a court hearing met the description of "unreasonable conduct".

As a result, he ordered the office of the planning minister, Lend Lease and Barangaroo Delivery Authority (BDA), pay 75 per cent of the legal costs of environmental group Australians for Sustainable Development (AfSD), which initiated the court case.

The order against the minister is for "indemnity costs", rather than the usual standard order which would be for a lesser amount.

AfSD spokeswoman Marcelle Hoff welcomed the costs order and, in a statement, called for new coalition planning minister Brad Hazzard to reverse the amendments made by Mr Kelly.

In March, the judge dismissed AfSD's development challenge after Mr Kelly gazetted orders that diminished the group's case.

But, he noted that were it not for the minister's action, the group would have won.