Nelson Bay Lagoons Estate developer David Vitnell is seeking the money from more than 100 Lagoons property owners for water usage payments over the past nine years, as residents fight a separate battle against Port Stephens Council for water damages in a dispute with a history back to the 1970s.

Mr Vitnell is also in a separate battle with the council over the same water issues, after the council last year conceded it had not complied with a 2006 court order requiring it to stop discharging stormwater from a nearby residential estate on to the Lagoons Estate.

While Mr Vitnell's multi-million dollar damages claim against the council will not return to the Supreme Court until February, 2020, his $400,000 claim against Lagoons Estate residents, and the residents' damages claim against the council, have both progressed in the past week.

On Monday residents filed a response in the NSW Civil and Administrative Tribunal to Mr Vitnell's claim he has paid $400,000 for water usage over the undeveloped third stage of the Lagoons Estate since buying into the estate nearly a decade ago, but "without using a drop of water because I don't even have a tap".

The third stage has remained undeveloped because of repeated flood events caused by the council's failure to stop stormwater over the site. The $400,000 represents his share of nine years of a potential 50 lots on stage three, while Lagoons Estate residents on stages one and two have paid the balance of the annual bills.

"It's untenable for me to be paying for other people's water usage for nine years," Mr Vitnell said.

"But I hold the council mainly to blame because if the court case hadn't dragged on for so long we would have sorted this out years ago."

Lagoons Estate residents spokesperson Ron Ricketts said his group will argue NSW legislation prevents individual metering of development sites until all stages are completed, leaving the residents' committee with no choice but to require Mr Vitnell to pay a substantial portion of the annual bill.

The claim is disputed by Mr Vitnell, who said he initiated the case in the tribunal under the Community Title Management Act. The tribunal has listed a directions hearing on August 9.

Emails seen by the Newcastle Herald show Mr Ricketts first asked Hunter Water about separate metering of the Lagoons Estate in September, 2010, shortly after Mr Vitnell bought the stage three lot and indicated he was "very keen to have these separate meters installed".

Separate meters would have levied water bills on individual lot owners and deferred bills to Mr Vitnell until after he developed stage three.

But Hunter Water responded that "unfortunately as this development is staged, we would be unable to go ahead with trialling sub-metering".

"Staged developments present difficulty in metering and pricing as the entire development is still hooked into the one master meter. Once the developer has finished construction we would be able to revisit this request," the water utility said.

In a subsequent email in 2010 Hunter Water advised "unfortunately at this time, our policy on metering on staged developments is firm", but said a new multi-occupancy development policy and process" was being developed.

Mr Vitnell said his case would include advice from Hunter Water in 2014 about how separate metering of the Lagoons Estate could be achieved.

Mr Ricketts said residents and Mr Vitnell were united in their view Port Stephens Council was primarily responsible for the Lagoons Estate saga, which former mayor and current councillor John Nell estimated could cost ratepayers $15 million.

But residents would fight Mr Vitnell on the retrospective water bills claim which he said had caused "toxic feelings" for some owners.

At a meeting with Port Stephens mayor Ryan Palmer, general manager Wayne Wallis and other on July 10 Lagoons residents rejected council attempts to establish an easement over the estate for drainage works to take the stormwater.

The council is required to stop discharging stormwater onto the estate under a 2006 court order reinforced by a second Supreme Court order in 2018. The council declined to comment.

Mr Vitnell and the council return to court in February, 2020 nearly five years after Mr Vitnell initiated legal action alleging work it had carried out failed to comply with a 2006 court order that the council stop diverting stormwater from roads and a nearby estate on to the Lagoons Estate.

In May, 2018 the two sides consented to orders on the eve of a NSW Supreme Court hearing. The council agreed its works had failed to prevent stormwater "in excess of the natural flow" from entering the Lagoons Estate site in 2015, 2016 and 2018.

Justice Nigel Rein's consent orders included that the stormwater "constitutes a continuing nuisance for which the defendant (the council) is responsible".

The orders noted Mr Vitnell agreed not to seek an order for damages in excess of $1.5 million "in consideration of the defendant not contesting liability in nuisance as reflected in these orders".

Mr Vitnell is claiming higher damages after reports showed construction costs for the 50-home stage three of the estate affected by the stormwater issue had significantly increased between 2015 and late 2018.

In response to a question about whether Hunter Water allowed individual meters on staged development sites, a spokesperson said development estates can be individually metered when fully developed.

"This is the most accurate way to ensure that people are correctly billed for their water usage," the spokesperson said.