Sefton Metropolitan Borough Council says the inspector erred in law and now Mr Justice Julian Knowles has opened the way for a full appeal against his decision.
In December 2019, Jerry Doherty applied for planning consent to convert a disused pony paddock off Spurriers Lane into six traveller caravan pitches.
The council refused, saying the development would be "by definition harmful" to the green belt, also causing a loss of openness and encroachment into the countryside.
Despite that, Doherty proceeded to create a hardstanding area and changed the use of the site to residential by siting a number of caravans on it.
The council responded by issuing two enforcement notices, requiring him to return the site to its former state.
However, he appealed to the inspector who, in April this year, upheld his challenge to both notices and the refusal of planning permission.
In his decision, the inspector found that the development would cause "a significant loss of openness".
He also said it would have "a limited adverse impact on one of the green belt purposes which seeks to safeguard the countryside from encroachment."
In addition, the inspector gave weight to the fact that the unauthorised development had been carried out "intentionally".
However, he went on to rule that harm to the green belt was "clearly outweighed" by the pressing personal circumstances of the extended family living on the site.
He focused in particular on the needs of children living there and described the encampment as "sustainably located."
He pointed to the lack of alternative suitable sites to which the family could move and noted the likelihood that any such sites would also be in the green belt.
The inspector concluded: "Together, these considerations amount to the very special circumstances necessary to justify the development."
Ruling on the council's challenge to that outcome, Mr Justice Knowles said the inspector had given "clear and readily understandable reasons" for his decision.
It was, however, arguable that he failed to give the "required minimum weight" to countryside encroachment and the harm the development caused to openness.
The judge added: "The real heart of this case is whether the inspector applied the relevant policy correctly in light of the harm to the green belt which he undoubtedly found the development would cause."
Having successfully jumped the first hurdle in the case, the council's appeal against the inspector's decision will now receive a full hearing at a later date.
Sefton Metropolitan Borough Council v Secretary of State for Housing, Communities and Local Government. Case Number: CO/2050/2020