The Canberra Liberals have criticised the ACT government's handling of a development application at the centre of a damning Supreme Court judgment, saying taxpayers deserve to know how it "could possibly get it so wrong".

Opposition planning spokesman Mark Parton said the decision to approve, then revoke, permission for the first stage of Capital Recycling Solutions proposed Fyshwick rail freight terminal had "undermined trust in the planning system" and "caused significant problems for all stakeholders."

Capital Recycling Solutions director Adam Perry who has welcomed the Supreme Court's ruling. CREDIT:ELESA KURTZ

The Supreme Court last week ruled the ACT Planning and Land Authority did not have the power to overturn an earlier approval for a concrete slab next to the rail line. The authority's decision was made following an internal review, which determined the application should not have been given the green light because the proposed works were not permitted on the site.

In a damning judgment, Associate Justice Verity McWilliam said the planning system would be "unworkable" and reduced to a "state of anarchy" if government's could revoke existing development approvals. That power must rest with the courts, she said.

The government will not appeal the decision, and has been ordered to pay costs to the waste management firm. The sum of those costs are yet to be determined.

In the wake of the decision, Mr Parton said the government needed to explain its handling of the process.

“There are no winners from the ACT government’s mishandling of the issue," Mr Parton said.

“The Government should explain how it could possibly get this so wrong. I’ll be asking questions about that. The ACT ratepayer is funding this debacle and they have a right to know why."

Capital Recycling Solutions director Adam Perry criticised the government's conduct throughout the saga, particularly the lack of communication surrounding the internal review process.

Mr Perry said the company was poised to strike a deal with the government to secure land crucial to the project when it was informed the approval was being reconsidered. Its option to buy the land was revoked when the approval was overturned.

He claimed it was never made clear why, and on what grounds, the review was undertaken, and said it appeared to be a "unilateral decision made by a couple of individuals".