Developer Commercial Development Projects Limited applied to Leeds City Council for permission for full permission for a mixed-use retail– led scheme in Middleton, a suburb of the city.
The application proposed retail uses, plus leisure and D1 "non-residential institutions" on a 2.4 hectare site at the former Benyon Centre in Middleton Ring Road.
Planning committee members granted permission for the scheme in April this year against the advice of officers.
At the time of the decision, the company had already signed up supermarket chain, Lidl, and home stores business, B&M, as prospective tenants, the court heard. B&M proposed shutting its existing store in the town centre, shifting its business to the new development.
In recommending that planning permission be refused, the council officer said the development would have "a significant adverse impact" on Middleton's central shopping area.
B&M's store there accounted for 42 per cent of the area's trade and there were persistent concerns that the unit would remain vacant for an extended period after B&M moved out.
Committee members, however, granted planning permission after finding that the benefits of the development - including jobs growth - outweighed any impact that it would have on the town centre.
Because the site is adjacent to the centre, they argued, it was an obvious choice to expand the centre to provide an increased range of goods and services to local people.
Asda Stores Limited, which operates a large retail store immediately to the south of the site, challenged the permission on the basis that councillors had misunderstood and misapplied paragraph 90 of the National Planning Policy Framework (NPPF) 2019.
This paragraph states that, where out-of-town centre developments are likely to have an adverse impact on the vitality and viability of central shopping areas, planning permission "should be refused".
Ruling on the case, Mrs Justice Lieven criticised the "confusing" terminology of paragraph 90 and observed that it "seems to set a trap for decision-makers".
Elsewhere, she added: "In my view the NPPF is somewhat confusing in its use of phrases such as 'should be refused'."
However, she found that councillors were "fully aware" of the policy, which had been specifically drawn to their attention, and ruled that they were entitled to depart from it if there were rational reasons for doing so.
Paragraph 90, she said, did not have the force of a "presumption" against out-of-town developments that might harm existing retail centres - a point the claimant's legal team had tried to argue.
There was thus no obligation on councillors to apply a "tilted balance" against the proposals as there would be for other policies in the NPPF. The judge cited, in contrast, the presumption in favour of sustainable development, outlined in paragraphs 11 to 14, where the word "presumption" is specifically used.
Councillors were well aware, and did not dispute, that the development would have a significant adverse effect on the town centre, but had given clear and adequate reasons for departing from the officer's recommendation, she said.