Judges at the Court of Appeal ruled Jeremy Hunt had breached provisions of the National Health Services Act 2006. It is a serious setback for the Health Secretary because the case involves the first legal testing of a new Government procedure for dealing with failing NHS organisations.
The Court of Appeal's ruling that Health Secretary Jeremy Hunt does not have the power to implement cuts London's Lewisham Hospital was met with cheers from supporters of the popular hospital.
Three judges announced their decision on the second day of a hearing in London.
Lord Dyson, the Master of the Rolls, sitting with Lord Justice Sullivan and Lord Justice Underhill, gave their decision in an appeal brought by the Government over a High Court judge's ruling in July that Hunt's proposed cuts were "unlawful".
The Court of Appeal has ruled that Health Secretary Jeremy Hunt did not have the power to implement cuts at Lewisham Hospital in south east London.
The shadow spokesman for health, Lord Hunt, has said he is "delighted" services in Lewisham have been saved, saying: "Where there good clinical evidence that services that should change or be brought together then of course that should happen.
"But in Lewisham there was no evidence in relation to clinical services, it is and was a good service. So this was an intervention by the Secretary of State merely to get him out of trouble elsewhere."
Trade union Unite described the Government as "NHS vandals" and today's ruling as "a victory for common sense and NHS campaigners up and down the country".
The health minister Lord Howe has said the government is "clearly disappointed" over the High Court's decision to quash a decision to reduce services at Lewisham Hospital.
He told ITV News: "We felt that the arrangement involving Lewisham - which I know are disappointing to the people of that area - were right in the interests of the wider population of south east London".