Water Connection Dual Occupancy Sub division

I am building two units on the same block in Victoria.

The unit 1 is facing the street with the mains water and unit 2 is behind.

The Water Authority has asked both meters to be street facing the mains which is unit 1 to make it easy for them to read and Unit 2's water supply can pass through unit 1.

The builder is challenging the water authority and doesn't accept the configuration, saying it would not pass the building inspection and a new water supply must be built in the lane way out the back of Unit 2 so the water supply is entirely separate.

It doesn't make sense to me that the Water Authority would ask for a configuration that the building inspector would not accept.

Has anybody been challenged by the builder or builiding inspector about this type of dual occupancy water connection? Does the Water Authority get this stuff wrong?

The water authority is like any other business.. Changes and variations cost buyers extra.
Building inspectors here (WA) are at the bottom of the pecking order very limited power/authority