When completed, it will also have a basement area called "Downtown" with provision for an indoor swimming pool, bowling lane, gym and movie theatre.
In her letter upholding the complaint, Ombudsman Wakem said the council should have made neighbours Nigel and Barbara Corkill and Dr Diane Somerset aware the plans submitted in 2007 were different from those submitted in 2005.
Mrs Wakem said the neighbours should have been made aware of the "obvious ambiguity in the letter" to them based on the council's advice to the Gallaghers to submit new plans because of the scale of the changes.
The Herald understands the dispute centred on the building of a retaining wall up to 4m high along a shared driveway.
Mr Corkill, who was one of the complainants, said the neighbours were not in a position to comment because they were still resolving issues with the council.
The Gallaghers' project manager, Paul Barnett, said if anyone was at fault it was the council as Sir William and Lady Judi had followed the processes and rules "to a tee".
He said they had spent thousands of dollars appeasing the neighbours, who had benefited from a new driveway, new front gardens and improved services at no cost to them.
Lady Judi said: "I'm dreadfully upset about this whole thing. We have tried extremely hard to appease these neighbours and they've cost us a lot of money and a lot of delay."
The Ombudsman said the council had written to the complainants "acknowledging deficiencies in the process" and apologising unreservedly, so she made no formal recommendations.
Sir William, who was knighted in the 2011 New Year's Honours List, is chief executive of Gallagher Group, a company started by his father, Bill, inventor of the electric fence.
He is a big-time benefactor of many charities and sporting groups.
