Councillors at Tuesday night's meeting said the council had been "treated with contempt," and issued a $6000 penalty notice to the party.

"There are serious issues with the location of this structure and five reasons to refuse it under the planning (legislation)," Cr Sam Rowland said.

"There are those in the community who follow the rules with development applications...

"It is time-consuming and expensive, but there's an expectation by those who do so that we take action in this matter.

"It's more than an indiscretion, it's a deliberate act and the minimum should be a penalty notice."

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But the owner's consultant, Kate Cartwight of Plan and Co, has branded the council's decision as "astounding".

She has advised her client to appeal the matter in the NSW Land and Environment Court.

At the Tuesday night meeting, planners recommended conditional retrospective approval and the issuing of the penalty notice.

They reported that a neighbour had complained in December 2018 that a large steel-framed shed was being constructed on a corner block at 111 Knowlman Road at Run-O-Waters.

The council had no record of a DA and when officers inspected on February 15, 2019, found roof sheeting in place, wall cladding on three sides and a fourth wall under construction. An office was also being built inside the 20-metre by 12m structure, the report stated.

The applicant, a builder, advised the council that an engineering report would be provided, but officers told him he needed to lodge a DA, as it was not an exempt development.

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But between February 15 and March 28, planners claimed a brick wall was built on the shed's eastern side "in contravention of the advice". On March 28 they issued a stop-work order.

The builder's consultant, Plan and Co Pty Ltd, then told the council in April that work had ceased and a DA would be lodged mid-May.

When it was not forthcoming, planners allowed an extra eight weeks "in the interests of obtaining a fair and reasonable outcome".

When it hadn't been lodged by early July, and with "no contact" from the consultant or owner, the council issued a draft demolition order.

Plan and Co subsequently appealed this and the council granted a further extension for the DA, which was received on July 29.

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Councillors were due to consider this at their September 17 meeting but the applicant requested its withdrawal to provide further reasons why the shed should stay and to investigate remedial work.

At that time, planners had recommended refusal and the issuing of a $6000 penalty notice.

Environment and planning director Scott Martin told Tuesday night's meeting the shed's fourth wall had been constructed by September 17.

He added that the 4m-high structure would not have been approved in its location if a DA had been submitted, but his staff would have also worked with the applicant to find a better site and design.

Planners said the shed's size, height and design had a "dominant appearance and an increased bulk and scale than that of the dwelling".

"With the shed being located in front of the (house), it creates a harsh visual impact when viewed from Knowlman and Pockley Roads," the report stated.

"The addition of proposed landscaping will eventually reduce the visual impact of the shed from the streetscape to a satisfactory level."

Staff recommended conditional approval, with the penalty notice, in the spirit of achieving "a fair and reasonable outcome".

But most councillors were having none of it.

Cr Andrew Banfield said the failure to stop work when advised had shown "blatant disrespect".

"The question I ask [of them] is, what reason will you give us for ignoring a stop-work order?" he said.

He also questioned who would monitor the landscaping conditions to mitigate any visual impacts.

Cr Margaret O'Neill said the council had been treated with "contempt".

"If we approve this, it will open a can of worms for someone else to come along and do the same. I believe it should be pulled down," she said.

But mayor Bob Kirk argued that while advice and orders had been ignored, demolition was a "drastic action by any stretch".

He maintained planners would have found a compromise instead of refusing a DA had it been lodged and that the large lot residential area was characterised by big sheds just as "imposing as this one".

"Yes, there was no DA and work went ahead. It offends me immensely," he said.

"But where people have breached our planning laws in the past, we've never said 'knock it down'.

"The question is, is this more imposing than anything else?"

The mayor cited the Marian College redevelopment and a contested wall at Trapper's Bakery in Sowerby Street as examples where compromises were struck.

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However, his motion to conditionally approve it with a penalty notice was defeated.

Deputy Mayor Alfie Walker said the council had to draw the line somewhere.

"I'm glad to hear that staff wanted to find a fair and reasonable way ahead ... Unfortunately there hasn't been anything fair and reasonable from the applicant," he told the meeting.

"...They've completely ignored it, so as a planning body we're faced with [the question], are we easy to do business with or are we a pushover?

"Some find it easier to ask forgiveness than to ask permission. It raises too many red flags for me..."

Cr Rowland won six colleagues' support for his motion to refuse the shed on five gounds, including that it didn't satisfy LEP and development control plans.

A demolition order will be issued, along with the penalty notice.

Mrs Cartwright said the decision "bordered on flagrant stupidity".

"The shed was constructed without development consent. There is no disputing this fact," she said.

"However, what needs to be made clear is that the shed complies with all of the council's prescribed development standards, evidenced by its own planning department reversing its original decision and recommending approval of the application."

Under questioning by Cr Kirk at the meeting about this aspect, Mr Martin replied this was the consultant's interpretation only.

Mrs Cartwright argued the clauses in the DCP and LEP cited as a basis for refusal related to land subdivision and residential development, and not this building.

"The decision made places the council in an entirely indefensible position," she said.

"I have no doubt that if the councillors had to personally wear the litigation costs for their decisions rather than the ratepayer, they would have made a very different [one]."

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