Shrewsbury & Atcham and Congleton BCs claimed that communities and local government secretary Hazel Blears was acting illegally by proceeding with unitary bids in contravention of previous legislation and despite opposition in each area.
Leave to appeal
The judge's ruling - which has left the two councils facing legal costs estimated at more than£400,000 - does not signal the end of the battle. Mr Justice Underhill granted the councils leave to challenge his ruling in the Court of Appeal.
He said: "I am not so confident that I am right that I could conscientiously say there was no reasonable prospect of success of appeal."
Shropshire CC leader Malcolm Pate (Con) said it was now full speed ahead for all the councils in the county for a smooth transition to a unitary.
Cllr Pate said: "I welcome Mr Justice Underhill's dismissal of all three grounds in the judicial review. What I don't welcome is the huge and costly distraction this unnecessary action has been. Today's judgment entirely vindicates the way in which we carefully followed the process set out by the government."
Healey welcomes decision
Communities and local government minister John Healey estimated if the nine proposed unitaries in England go ahead it could generate more than£150m savings a year.
Mr Healey added: "We welcome this clear decision, which removes any doubt about the ability of the secretary of state to proceed as she has done.
"If we proceed with the nine proposals which we have said we are minded to implement, on the basis of councils' current estimates this will save over£150 million annually, giving councils opportunities for improved services and lower council taxes."
Judgment guide to other bids' fates
Other councils with unitary bids - including Durham CC - have been awaiting the court's decision with interest as a guide to their own bids' fates.
Durham deputy leader Clive Robson (Lab) said : "This landmark ruling has implications for the other legal challenges being considered in other parts of the country.
"I realise that my district council colleagues with be disappointed with the decision, but given the similarity between this case and the one they have proposed - coupled with the fact that it has landed local council taxpayers in Shropshire and Cheshire with a legal bill of over£400,000 - I hope that they take the time to reflect and weigh up whether it's really worth pursuing their own legal challenge rather than working with us to improve the way local government works."