The company building the troubled Sydney light rail project has accused the New South Wales Government of misleading it before it signed up for the project, court documents have revealed.

Key points: The Spanish company building Sydney's light rail is locked in a legal battle with the NSW Government

The Spanish company building Sydney's light rail is locked in a legal battle with the NSW Government The $1.1 billion lawsuit relates to power and water infrastructure which was affected by the project

The $1.1 billion lawsuit relates to power and water infrastructure which was affected by the project The project is overbudget and behind schedule

Spanish sub-contractor Acciona Infrastructure Australia has filed proceedings in the Supreme Court against Transport for NSW (TfNSW) for "misleading and deceptive" conduct.

The $1.1 billion lawsuit relates to power infrastructure supplied by Ausgrid.

Acciona wants financial compensation from the State Government and claims it was "induced" by TfNSW to enter a contract to build the CBD light rail on a "false premise".

In documents tendered to the court, the contractor claimed a "critical part and key delivery risk" of the project was how they would deal with underground electricity infrastructure, including those owned by Ausgrid and other water and gas companies.

The company has alleged it was made to believe electricity provider Ausgrid had reviewed and accepted the treatments of its utilities, but it had not.

"Acciona … were prevented from communicating with Ausgrid in relation to how changes to utilities owned by Ausgrid were to be dealt with as part of the project," the documents state.

"Acciona were reliant upon TfNSW to ensure that utility services treatment in relation to Ausgrid was appropriately dealt with."

Light rail construction has had a large impact on Sydney's CBD. ( AAP: Dan Himbrechts )

According to the documents, one particularly important date was February 27, 2015.

On that day, Acciona allege, agreements for the project were finalised with the NSW Government.

However, Acciona claims that after business hours on that same day, Ausgrid sent it a draft document that set out its guidelines, which were significantly different to what was agreed to in the contract.

Ausgrid required more costly work on 106 of its utility pits.

The company said if it had known this, it would not have signed on for the project.

"Acciona would not have executed the D&C [design and construct] contract because to do so in those circumstances was to expose Acciona to significant risk," the documents stated.

'It's a scandal'

Speaking outside court NSW Opposition Leader Luke Foley described the project as a "debacle".

"This is not a stuff up, it's a scandal, a scandal brought to us by the Premier herself," he said.

Mr Foley claimed the project would eventually cost $3 billion.

"The cost has blown out, we're now facing years of uncertainty, the centre of the city looks like a war zone and there's just no end in sight," he said.

"What we were told would be built by April 2018 will now not be built until the 2020s, if ever."

Transport Minister Andrew Constance said the billion-dollar claim was "absurd".

"Transport for New South Wales will vigorously defend their position in the Supreme Court," he said.

"The contract is pretty clear and they've got to stop their go-slow and get back to work and make sure they get on with the job."

He said the Government was looking at "all conceivable options" under the contract to make sure the company delivered.

"We have a contract in place and we are applying that contract.

"There is the ability to issue default notices and obviously seek damages in terms of late delivery."