The NSW government has to cough up damages to two businesses affected by the delayed construction of the Sydney light rail, with more court claims expected to follow.
Transport for NSW was sued by two businesses claiming nuisance during the construction of the light rail project, which closed vehicular traffic to much of George Street in the CBD.
The case mainly revolved around the adequacy of the government's planning and the time taken to complete the project.
The NSW Supreme Court on Wednesday found the project substantially and unreasonably interfered with the two businesses.
"They had been promised minimal disruption and a staged process of construction, which would have seen them exposed to the construction activities for months, rather than years," Justice Richard Cavanagh wrote.
TfNSW's initial projections were "optimistic and not soundly based".
The CBD light rail was initially forecast to cost $1.6 billion, only to jump to $2.1 billion by 2015 and $3.1 billion in 2020.
Aware the light rail project would have a significant impact on local businesses, the state developed a strategy to build it in stages but that failed.
"Business owners were subject to extensive construction activities for periods far in excess of that originally anticipated," Justice Cavanagh said on Wednesday.
"It was the business owners who bore the consequence of the decision. The defendant created that state of affairs."
The ruling means Transport for NSW is liable for the losses sustained by CBD business Hunt Leather and Kensington restaurants and coffee cart owned by Ancio Investments.
The two firms' case succeeded because they were small businesses highly susceptible to the effects of construction, without the resources to mitigate the impact.
A spokesman for Transport Minister Jo Haylen lay the blame firmly at the previous coalition government.
"This decision occurred because of the former Liberal government's mismanagement of what was meant to be one of their signature transport projects," he said.
"That mismanagement had a real impact on the businesses and residents along the light rail corridor.
"(The Department of) Transport is considering the judgment so something like this doesn't happen again."
Hunt Leather CEO Sophie Hunt and Ancio director Nicholas Zisti's individual claims were dismissed.
The closure of George Street to vehicle traffic, changed parking restrictions, and any established impact that had on visitor numbers would not be enough to prove nuisance on their own.
The matter returns to court in August to finalise damages paid to Hunt Leather and Ancio and begin determinations for other businesses who may join the class action.