The council would not divulge how much the legal action cost ratepayers, but said the VCAT hearing required no additional council resources.

The tribunal's finding was made public this week after the hearing went ahead over signage that was compliant with the Warrnambool Planning Scheme.

In its defence, the council said the VCAT hearing date was set "some months ago", and a short time before the hearing Lyndoch amended its plans for consideration by council but due to tight timeframes the hearing proceeded.

The issue over signage at Lyndoch had been raised during public question time at three different council meetings last year over whether Lyndoch actually had a permit for the work.

In 2021, Lyndoch erected a large illuminated sign without first obtaining planning permission, and after complaints from the public the council advised it to retrospectively apply.

But when council knocked it back, Lyndoch appealed to VCAT.

VCAT senior member Philip Martin said "somewhat confusingly" the council had rejected the permit on the basis it exceeded the three-square-metre rule, despite the current view at the council planning department being the three contentious signs were within the limits.

"It still seems a no-brainer that the wall mounted sign satisfies the maximum area of three square metre requirement for business identification signage," he said

Mr Martin said on ordinary planning merits he was satisfied the three signs were fairly visually muted and would not cause any undue visual jarring or impression of visual clutter in this location.

"...Next time where this council has a legal issue such as this 'maximum signage area' issue to deal with at a VCAT hearing, I would expect council as a model litigant to provide a comprehensive legal submission including a proper discussion of the relevant case law," he said.

"Given this uncertainty and that Warrnambool City Council... presumably has a legal budget and a panel of lawyers, I am very surprised that council did not at an early stage obtain its own legal advice on this issue of whether or not the proposal breached the three-square-metre benchmark."

A council spokesman said it had received a number of complaints from the community about the sign and advised Lyndoch to retrospectively apply for a permit and to turn off the sign's lighting.

"The application was administered through a normal planning process that requires the applicant to provide sufficient information for council to make a decision," the council said.

The issue was first raised at the July 2021 council meeting, and the September 2021 meeting was told it was still awaiting information from Lyndoch to demonstrate its ability to meet the Warrnambool planning scheme.

By the next meeting in October 2021, in response to a public question, it was revealed the permit application by Lyndoch had been denied. Lyndoch then appealed to VCAT.

"Council acknowledges that the outcome ultimately is a sign that complies with planning regulations," the council spokesman said.

In a statement to The Standard, a Lyndoch spokesperson welcomed the decision.

"While Lyndoch Living is pleased the matter is now concluded, our focus is solely on the care of our residents and supporting our staff," the spokesperson said.