Barry and Jillian Bentley went to court over plans to build 72 new homes in Grotton, claiming increased traffic would endanger local children, including their eight-year-old son, David.
Their solicitor, Michael Pitt, was jubilant after Mr Justice Latham overturned Oldham MBC's August 1995 grant of planning permission for the controversial project.
The judge ruled that Oldham's director of environmental services had given 'wrong' legal advice to the council committee which took the decision, and this had affected the outcome.
'This is the culmination of a lot of very hard work by a lot of people. The Grotton Action Group has supported the Bentleys throughout and I am very pleased for them as well.
'I'm sorry if this causes problems for the council and for the developers. That was not the intention. All the Bentleys want is to get the traffic issues properly addressed'.
On August 2 last year developers, Roland Bardsley (Builders) Ltd, were granted planning permission to construct 72 new homes at Thornlea Fold, Grotton. Four homes have already been built, three of which have been sold.
The Bentleys claim the development will result in far more traffic using narrow Under Lane than it can properly take, putting the safety of local children in jeopardy.
The judge said the council had accepted that wrong advice had been given by its director of environmental services, but claimed that the decision to grant planning permission would have been the same in any event.
But he ruled: 'Not only was Mr Coop's (the director of environmental services) reasoning wrong, but in my view, his advice was wrong. The decision in question was therefore flawed'.
The judge expressed his 'strong disapproval' of the fact that the Bentleys' case had not come to court sooner, before the development got under way.
But his decision did not effect the four homes which have already been built. 'I can see no prejudice either to the developer or to those who have committed to the purchase of the houses'.
The judge upheld the Bentleys' judicial review challenge, quashed the planning permission, and ordered the council to pay the majority of the action's heavy legal costs.
Both council and developers were refused leave to appeal, but may still approach the court of appeal directly for leave.