Shares in Peel Holdings, the scheme's developer, fell 31p to 312p after the court agreed with eight Greater Manchester councils that Michael Howard, the then environment secretary, did not give adequate reasons for granting planning permission in March 1993.
The decision to block the Dumplington shopping centre in Trafford Park adds weight to a government campaign to inject life into town centres at the expense of edge-of-town schemes, which are increasingly believed to have a high cost, both environmentally and in terms of their impact on neighbouring towns.
Earlier this week, David Curry, local government and planning minister, said restrictions on town-centre parking would be eased in order to help provide adequate short-stay parking for food shopping.
He also told an environment select committee that proposals for Britain's biggest shopping centre, Blue Water Park in Kent, would not gain approval if they were submitted now.
The eight Manchester councils teamed up to fight Peel's proposals, which they felt would affect town-centre trade in Manchester, Bury, Bolton, Oldham, Rochdale, Stockport, Tameside and Wigan.
Peel said the centre, scheduled to open in 1997 with 129 shops, two supermarkets, restaurants and leisure facilities, would create 6,000 jobs.
Two planning guidance notes last year made clear the Government's desire to maintain the viability of towns and reduce the impact of cars on the environment.
Peel said yesterday it was surprised and extremely disappointed by the ruling. It intends to appeal to the House of Lords but fears the decision could delay the scheme by up to a year.
David Kaiserman, of Manchester City Council, part of the consortium that first challenged the planning approval in the High Court last October, said: 'This judgment lets John Gummer off the hook. Dumplington was a damaging and unnecessary proposal which was completely out of line with government policy.'
The defeat is the latest setback for Peel's chairman, John Whittaker, who acquired control of the 300- acre site earmarked for the Dumplington scheme only after a 10-year struggle to buy its owner, the Manchester Ship Canal Company.