The Supreme Court will hear City of Newcastle's appeal next month after a judge ruled the council had unfairly sacked a staffer over her handling of the city's business levy scheme.
The council's former corporate and community planning manager, Jill Gaynor, won an unfair dismissal case in September after she was sacked by City of Newcastle chief executive officer Jeremy Bath in October 2018.
Acting District Court Judge James Curtis ruled that Mr Bath was "plainly wrong" in his reasons for dismissing Ms Gaynor and foreshadowed that she was entitled to be paid the final 11 months of her five-year contract.
He did not make a ruling on costs, which the Newcastle Herald understands have been significant on both sides and will continue to mount during the appeal.
The council's appeal will be heard in the Court of Appeal from March 23.
A City of Newcastle spokesperson said last year that the council and its insurers had received legal advice that it had strong grounds to appeal against the District Court ruling.
"City of Newcastle's action was based on independent legal advice as well as the findings of an independent investigation into special business rates accessed by former business improvement association Newcastle Now," the spokesperson said.
"It is important to note that insurers have covered the city's legal costs to date."
Judge Curtis' ruling raised questions over the council's rationale for reviewing its business improvement associations (BIAs) and excluding Newcastle Now from the scheme.
Mr Bath cut off money to Newcastle Now, the city's largest BIA, in July 2018, claiming it had not been submitting business plans as required under the terms of its 2011 funding deed.
The council then engaged a consultant, Centium Group, to investigate Newcastle Now's funding, which led to the sacking of Ms Gaynor and economic development facilitator Greg Fenwick.
The council said the Centium report had been "prompted by the discovery that around $7 million has been paid to Newcastle Now without a business plan submitted or approved".
The council then restructured the BIA scheme, excluding Newcastle Now and Hamilton Chamber of Commerce from applying for funding, after another report by consultants AECOM referred to "poor financial disclosure relating to BIAs".
But Judge Curtis said Newcastle Now had submitted adequate business plans from 2012 to 2017 and it was "wrong of Mr Bath to suggest otherwise".
Mr Bath had also been "plainly wrong" in accusing Ms Gaynor of wrongfully approving Newcastle Now money be spent on Nobbys Lighthouse.
Judge Curtis also took issue with the Centium report, which had found Newcastle Now's financial reporting was in breach of its agreement.
Mr Bath has referred in the past to Newcastle Now's "inappropriate use" of funds and "discrepancies" in how it has accounted for spending.
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