Two people took the council to the Victorian Civil and Administrative Tribunal after it failed to make a decision over land at 75 Panorama Road, Lockwood South.

They wanted to subdivide an 8093 square metre block in two but the council failed to make a decision within a prescribed amount of time.

The council later told VCAT that if it had made a decision it would have been to knock the subdivision plan back.

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That was because the land was zoned for land use under the Greater Bendigo planning scheme.

The case was strange because the farming zone was wedged between two separate areas that the council had set aside for "low density residential" development, VCAT senior member Ian Potts said

It was also unusual because most of the land in the area was being used for rural residential living, including other parts of the areas originally set aside for farming, he added.

"It is clearly an area where rural residential living is the dominant and only land use."

The council did not dispute that but did argue that VCAT should decide whether subdividing the land would lead to an acceptable outcome, and what kinds of decisions it should make in circumstances like it.

Greater Bendigo's council had not been able to find a VCAT precedent that fitted the circumstances of the Lockwood land but pointed to a series of previous cases where the tribunal had decided other small lot subdivisions should be knocked back.

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Mr Potts found himself agreeing with an argument that VCAT tribunals generally don't support when considering whether to allow subdivisions in rural areas: "the horse has already bolted".

"I would observe that it appears likely that in the context of this proposal, that is an entirely apt descriptor," he said.

The whole point of zoning land for farm use was to make sure prime agricultural land was not lost because it had been turned into fragments too small to use, Mr Potts said.

"Allowing this subdivision would result in an acceptable planning outcome in these specific circumstances," Mr Potts said.

He also ordered the council to pay the landowners' legal costs of $1536.10.

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