A High Court judge says the Wanganui District Council cannot be dismissed as a "busy body litigant" in its fight against Stewart Murray Wilson.
The serial sex offender was released a week ago under orders to live in a house on grounds of Whanganui Prison.
Last week, the council lost a judicial review challenging the decision-making involved with choosing Whanganui as Wilson's new home town.
In the full High Court judgment released on Thursday, Justice Young ruled that the claim was not frivolous or vexatious, but threw it out saying that prison authorities considered all relevant information in making their decision.
Whanganui mayor Annette Main says the council will now seek legal advice on whether to appeal against the dismissal.