Victoria’s wealthiest woman Naomi Milgrom has won a legal battle in the state’s appeals tribunal, which approved her contentious plan to demolish two heritage-protected houses and expand the grounds of her sprawling Middle Park mansion.

In a blow to neighbouring residents and the local council, the Victorian Civil and Administrative Tribunal has allowed the Sussan Group owner to remove the protected Edwardian houses to make way for a greenhouse, garden and pergola.

Naomi Milgrom

"We’re not allowed to paint our fence a different colour, but she’s allowed to knock down two buildings. This is preposterous," said neighbour Anne Browne, who opposed the plan in VCAT.

Ms Browne, who has lived in Middle Park for 14 years, said VCAT had been hijacked by wealthy property owners with access to expensive legal advice and heritage consultants.