The tribunal last week rejected a Department of Human Services plan for an "indigenous healing centre" to be built in Augusta Road.

In their decision, VCAT senior member Margaret Baird and member Bill Sibonis said that while "significant weight" had been given to the needs of the indigenous community and the importance of the service, its value did not outweigh the "direct amenity impacts the proposal would have on the abutting residential properties".

"We find the impacts would be difficult to reasonably contain and are potentially more extensive and less low-key than suggested on behalf of the council and permit applicant [DHS]."

The VCAT members agreed that permit conditions proposed by Knox Council would address some amenity issues.

"However, the reality of more limitations on the...building and more works to contain noise and ensure privacy...is to substantially compromise the visual presentation and impede the ability to use the serene and open setting."

The centre was intended to provide support on domestic-violence issues, offering counselling, parenting, youth and behaviour-change programs.

Residents' group spokeswoman Robbie Fincham said she was pleased with the outcome. "We feel it's not just a win for this street but for all residential streets."

She said the proposed centre was "an inappropriate development in a residential street".

Ms Fincham's partner, Trevor Warburton, said the issue had "united the neighbourhood, not only in The Basin but the wider community we've had support from".

Knox councillor John Mortimore said he was very surprised by the VCAT decision and that the healing centre would have been an "incredibly valuable service".

He said the council had "made the right decision at the time", when negotiating the conditions, and the application had been given a lot of consideration.

"It's disappointing that, having gone through all that, we end up with a negative result."

City development director Angelo Kourambas said Knox Council had presented a strong case, but "respectfully accepts" the decision. "An appeal [to the Supreme Court] against a point of law is not proposed."

A spokesman for the Department of Human Services said it was still considering the ruling.

Vote in our poll, top right,on the VCAT ruling.