In a matter widely seen as a text case for other councils opposing their mergers, Woollahra Council is appealing a decision by the Land and Environment Court to dismiss the council's challenge to its proposed merger with Waverley and Randwick councils.

That appeal was heard before NSW Chief Justice Tom Bathurst, President of the Court of Appeal Margaret Beazley, and Court of Appeal judge Julie Ward on Monday.

Christopher Birch, SC, put forward a number of grounds on which the council alleged the decision of the Chief Justice of the Land and Environment Court, Brian Preston, was flawed.

Dr Birch submitted that Judge Preston erred in finding that Rob Lang, in charge of recommending whether or not to merge the councils, did not "privilege" proposal documents prepared by accountancy firm KPMG over other submissions made by the community.

Dr Birch also argued that Dr Lang failed to properly dissect the attitudes of the community to the merger. Dr Birch, for instance, cited affidavits from attendants at public meetings organised to discuss the merger who said Dr Lang had said he was not there to ask questions, but to listen.

But Woollahra's arguments faced tough questioning on Monday. Chief Justice Bathurst said the analysis about whether the KPMG analysis was privileged over other inputs risked running over them with a fine tooth comb.

Justice Ward queried what was wrong with Dr Lang not asking questions but listening during public meetings. Under the Local Government Act, the state government is allowed to merge councils, but the legal arguments are about whether it followed the Act's processes in doing so.

Noel Hutley, SC, appeared for the Local Government Minister, Paul Toole.