It's billed as a "Tesla town" – a $2 billion eco-development set to grace the banks of the Yarra in Alphington.

But the building of this new, solar-powered suburb could be delayed by what's shaping up to be a protracted Supreme Court legal dispute over an asbestos clean-up that could cost more than $40 million.

The parcel of riverside land was once completely owned by packaging company Amcor. It is now riddled with asbestos and other chemicals as a result of more than 80 years of paper manufacturing on the site.

Together with a joint venture partner, developer Glenvill is paying Amcor $120 million for the land on which it plans to build 2500 homes.

When it agreed to buy the land from Amcor, Glenvill knew there was asbestos at the site.

But the developer claims Amcor didn't reveal the extent of it, and is now suing the company.

Amcor, though, is pointing the finger at its environmental engineer and is counter-suing them for not detecting all the asbestos.

​The clean-up was meant to cost no more than $14 million under the terms of an agreement between Amcor and Glenvill, but it has already cost $20 million and could cost up to $25 million more.

The dispute has now landed in the Supreme Court.

Barrister Daniel Aghion, who represents Glenvill, told the court last week that Amcor had simply stopped paying for the decontamination work.

"We're removing contamination that Amcor put there," Mr Aghion said.

"We're not getting paid and we don't have a proper appreciation of why."

Glenvill is set to make a fortune from developing housing over a decade on the site once clean-up and demolition is complete.

But if it doesn't get paid soon, it has warned, that work may grind to a halt.

Hundreds of buyers have already put down deposits on the two-thirds of uncontaminated land across the development.

Buyers are keen to get a slice of the action in a suburb where a typical house sold for $918,000 five years ago. Today houses average $1.5 million.

The first of the 2500 homes being built at the site will come fitted with Tesla battery packs, inverters and solar panels.

On Monday, the site was a hive of activity as art lovers queued to see works and installations by artist Rone in a house that Glenvill will soon demolish for the development.

Clearing and demolition works are still pressing ahead on much of the 16.5 hectare site.

Such is the scale of development on the land that Glenvill is building a four-level sales display block that, on an ordinary site, would be its own standalone housing project.

While much contamination has been cleaned up, the worst pockets remain next to the Yarra River, where for decades chemicals seeped into the soil and water from paper and cardboard manufacturing.

Fairfax Media approached Amcor for comment on the dispute, and to ask what contamination it had left behind. A spokeswoman for the company said: "It is not appropriate for us to comment on matters subject to legal process."

Supreme Court Justice Kim Hargrave told all of the parties at last week's hearing that it would be good to avoid a protracted legal dispute over the site.

That appears unlikely.