In a ruling which Mr Justice Keene acknowledged as being of great importance to local authorities, East Sussex was told it had not been entitled to take into account the scarcity of its resources when deciding what constituted a suitable education for 15-year-old Beth Tandy.
The judge acknowledged that the cutback in Beth's home tuition from five to three hours each week had been 'effectively dictated' by a£3 million shortfall in funding. But he ruled the council's action impermissible and said it had made no alternative provision for the loss of two hours per week.
He said: 'The council cannot on financial grounds provide something which falls short of a suitable education.
He said East Sussex manager of pupil services Bernadine Bacon had proceeded on 'an erroneous basis', misunderstanding the 'emphatic' words of a top ME specialist that Beth was too sick to attend school and even had difficulty leaving the house.
He said: 'It is difficult to see how the figure of three hours was arrived at.
'I am satisfied that the decision was irrational and not a proper exercise of powers conferred upon the council.'
The judge ruled that the council's funding problems, while 'not wholly irrelevant', could not be taken into account under the Education Act 1993.
The council was not precluded from providing Beth's needs as cheaply as possible but the education provided had to be 'suitable'.
However, the judge gave leave for the council to appeal and said his decision raised 'an important point of law of widespread interest'.
East Sussex will decide whether to appeal within the next few days.
A spokesman said: 'We are unable to comment at this stage because we need to study the judgment which is long and complicated and involves very important and topical issues of law.
'The judge recognised this in granting us leave to appeal and we will be considering the possibility of appealing with our lawyers in the coming days.'