In December last year, the then housing secretary James Brokeshire refused a planning appeal for the development, at Peel Hall, Warrington, after agreeing with a planning inspector that it was "very difficult to see how the scheme can be regarded as deliverable" because of site ownership issues.
Following developer Satnam Millennium Limited’s appeal against that decision, Judge Sir Duncan Ouseley yesterday described a crucial part of Brokenshire's ruling as "something of a muddle".
He had, the judge ruled, wrongly focused on whether the development would be "deliverable" even if permission were granted.
Sir Duncan told the court: "In general, the question of whether a proposal can be implemented is irrelevant to the decision whether to grant permission.
"There is no legal requirement that planning permission be refused unless a developer commits itself to implementing a proposal."
Doubts about the scheme's deliverability were therefore "not a material consideration which should have weighed in the balance," the judge ruled.
Satnam also argued that the planning inspector had given an "appearance of bias" at the public inquiry and during a site visit.
The developer pointed to the inspector's unrecorded conversations with members of the public who turned up to object to the project.
But Sir Duncan ruled: "I accept the inspector's evidence that he did not talk about the merits of the case with residents.
"Nothing which happened during the inquiry sessions could warrant any fair-minded observer alleging, let alone concluding, that there was a real possibility of bias.
"I cannot see that a degree of chattiness, or avoidance of the appearance of being rude, such as others may adopt, is indicative of a possibility of bias."
Satnam's challenge was nevertheless upheld and Mr Brokenshire's decision was overturned.
The planning application will now go back to the current housing secretary Robert Jenrick for fresh consideration in the light of the judge's ruling.