The first judicial review brought by councils doomed by local government reorganisation was heard in the High Court.
Shrewsbury & Atcham and Congleton BCs claim they were already facing problems retaining staff in the wake of communities and local government secretary Hazel Blears' decision to abolish them as part of reorganisation plans.
They say the decision was made unlawfully as the authority to abolish a council is included in legislation yet to be signed-off by Parliament.
Mr Andrew Arden QC, counsel for the boroughs, claimed the councils were already suffering "immediate, real and serious detrimental effects" because of the question mark over their futures, including in contractual arrangements and recruiting and keeping staff.
He also told the judge the department had failed to comply with its "own criteria" in that not enough was done to ensure that the proposals had a "broad cross-section of support".
Richard McManus QC, for Ms Blears, said she could legitimately carry out consultations before Parliament passed the Local government and public involvement in health bill and the secretary of state had power, via the royal prerogative or common law, to consult.
Mr Justice Underhill's verdict may take four weeks to come.