Mr Justice Harrison said deputy prime minister John Prescott had failed to abide by the government's own planning guidelines when he caused controversy by giving the green light for the Valley Road development in November last year.
Mr Prescott and one of his planning inspectors had failed to properly consider Lewes DC's concerns that the housing scheme would 'seriously
prejudice' its strategy of focusing development away from the already
Developers, Chaucer Estates Ltd and Peacehaven Valley Owners Ltd, will now have to mount a fresh appeal to Mr Prescott if they wish to keep their proposals alive.
The plans were considered by an environment department planning inspector over five days in July last year and there will now almost certainly have to be a second public inquiry.
Peacehaven is ringed to the north by an area officially classified as of outstanding natural beauty and the 18.61 hectare plot earmarked for up to 113 bungalows and houses is said to be the only undeveloped piece of land on the south coast between Worthing and Newhaven.
Lewes DC has always urged that if the development at Valley Road,
Peacehaven, goes ahead its 'strategic plans' for future development in the entire district will be jeopardised.
Mr Justice Harrison said Mr Prescott had identified 'a shortfall' in the supply of housing land in the district of Lewes over the next five years and it was clear land would have to be found for 112 new homes.
But rather than building all the new homes on a single site on the coastal strip, he said it might be possible to find several smaller, inland sites to make up the deficit.
The planning inspector, he said, had judged the scale of the Valley Road development against the site's allocation in the existing local plan for 500 homes.
But the Valley Road development, if built, would make up 20 percent of the housing land allocation in the entire Lewes district and would be twice the size of any other housing proposal in the area, he added.
The planning inspector had described the development as a 'modest and welcome contribution' to the district's housing land supply.
But the judge said neither he nor Mr Prescott had taken account of Government guidelines that planning permissions should not be granted where they would predetermine or prejudice strategic consideration of the location and scale of housing developments.
The planning permission was overturned and Lewes District Council was awarded its legal costs.