In his judgment, Environment Court judge Fred McElrea said the development was an "over intensive use of the site" and would lead to adverse environmental effects and conflict with provisions in Auckland City's district plan.
Mr Lee said the century-old combined wastewater and stormwater system in the area had capacity for present levels of wastewater in dry weather, but not in wet weather when there were more than 52 overflows and discharges of sewage into the Waitemata Harbour a year.
Holding tanks could largely cope with extra stormwater from 70 apartments and three shops, Mr Lee said, but more and a greater concentration of wastewater pollutants would flow into the harbour.
Plans by Watercare for a central interceptor to avert wastewater overflows in the area were still nine years away, Mr Lee said.
Therefore, he said, the development did not meet the "adequate infrastructure" provision in the Housing Accords and Special Housing Areas Act.
Watercare infrastructure planning manager David Blow said "special housing area" developments, such as Kelmarna Ave, could proceed because holding tanks held back stormwater in wet weather and the combined pipe could cope with extra wastewater.
"It's on that basis that we advised the development committee of Auckland that by and large we have no objection to these (central city proposals) being considered special housing areas," Mr Blow said.
Previous proposal - refused consent
• Tavern
• Retail
• 14 office units
• 4 townhouses
• 4 apartments
• 56 carparks on one level
• 3 storeys
• Did not build to every boundary
• Open planted area
Current proposal
• 3 shops
• 70 apartments
• 98 carparks on two levels
• 4 storeys
• Bigger, bulkier, greater site coverage