David and Barbara Yzendoorn installed the container - dressed as a house and complete with furniture, fence and a letterbox - last June after neighbours objected to their resource consent application to build an eight-metre-high housing duplex.
The couple, who bought the 1716sq m gully section in St Petersburg Estate in 2017, needed resource consent to build because the site was rezoned Natural Open Space in 2012.
Last year, a Significant Natural Area (SNA) was proposed for the land, which features vegetation.
When residents complained about the container, dubbed "ugly" by one neighbour, Hamilton City Council classified it a building and issued an abatement notice requiring it be removed.
However, the couple appealed to the Environment Court and it was confirmed as public art.
"When is a shipping container not a shipping container? That is the pertinent question," the court said in its judgment last month.
Judge Melinda Dickey found the shipping container qualified as public art and was not impacting on the amenity or safe use and appreciation of the environment.
"We do not accept that the adverse effects of noise generation, anti-social behaviour, traffic risk and impacts on health and wellbeing rise to the level of offensive or objectionable.
"The residents' primary issue with the installation is its visual impact. They clearly regard it as detracting from their and the wider neighbourhood's amenity.
"While it cannot be said to be aesthetically pleasing, we find on an objective basis that its effects do not rise to being offensive or objectionable."
"Common sense tells us that the structure on this site is a shipping container, first and foremost," Ketle said.
"The court's decision to disregard this fundamental element is disappointing for the community and shows us that our definition is open to interpretations that may lead to outcomes the community does not want."
Hamilton City councillor and the Yzendoorn's architectural designer, Andrew Bydder, called the installation great art because it "communicated a multi-layered story in a beautiful way".
"Not visually beautiful, because it is undeniably an eyesore, but intellectually beautiful."
He said the art conveyed the owners' five-year struggle to do what they wanted with their own land.
"Now the council is trying to say the site should not be used for public art. That is the whole point. The site is not public. Let the owners have their private land back and the artwork will be moved somewhere private too."
Bydder said the couple were considering installing more art, including a public toilet, which he said was a permitted activity under a Natural Open Space zone.
David Yzendoorn said he and his wife were frustrated at the resource consent process.
The consent was denied by an independent commissioner in January and Yzendoorn had also appealed that decision to the Environment Court.
He estimated his costs so far had ballooned to about $250,000, which included a $150,000 bill from the council to process the consent application.
Bydder confirmed the couple had so far refused to pay $120,000 of that.
Neighbour Bill Botherway said he believed the shipping container was a "one-finger" salute by the owner to council.
Botherway, whose home overlooks the container, did not believe it was public art.
Another resident, who did not want to be named, called the container "ugly" and said it was a traffic hazard because it caught the attention of motorists and pedestrians on a steep, one-way section of Petersburg Drive and there had already been several near-misses.
Kettle said the council had offered the Yzendoorns a compromise which included a single-level dwelling.
The council spent $40,000 of ratepayer money fighting the installation and had decided not to appeal the Environment Court's decision.
