They were forced off the site as a result with fewer rights than gypsies, left with "no place to run, no place to hide".
The couple, who cannot be named for legal reasons, have had to move house four times in six months. They say North Wales Police unlawfully leaked their records and are seeking the legal right to keep their identities secret from the public.
The case was heard yesterday in the High Court by the Lord Chief Justice, Lord Bingham, sitting with Mr Justice Buxton. Presiley Baxendale QC, for the police, argued that their action amounted to "taking steps to prevent crime". She said police had feared an influx of children into the North Wales caravan site as the holiday season began.
Paedophilia has been a sensitive issue in the area since the murder two years ago of seven-year-old Sophie Hook.
In the case heard yesterday, the couple had originally tried to set up home in Blyth, Northumbria, after being released from prison.
Thwarted there, they moved to Colwyn Bay but were discovered by the press and then moved on to the caravan site. On the 27 March this year, the police informed the site owner of their identity.
Stephen Solley QC, for the couple, said that this was a "step too far - unjustifiable, unreasonable and unlawful".
He said as a result the couple had "come close to answering the ancient definition of outlaws ... devoid of the benefit of law or kings" - in modern parlance they had "nowhere to run, nowhere to hide."
The barrister said it had been "foolhardy" to reveal the identity of the couple in this way in that it could have led to vigilante attacks and the police did not follow them to check on their safety. The lawyer said the police had acted outside their powers. "They had to use the caravan owner to do what they wanted to do themselves. They knew they were treading on dodgy ground."
He asked why the police had not put the couple under surveillance or instead informed more suitable people. "There is nothing wrong in principle with informing head teachers or people in that sort of position."
But Ms Baxendale said the case had been "carefully considered at senior level after multi-disciplinary discussions". She said the police's motive had been to prevent crime because the couple had presented a "grave risk to the public".
She denied that the police had been motivated by a Not In My Back Yard - Nimby - attitude with both police and other agencies trying to settle the couple in the area rather than making them move out.
Judgement was reserved.
A group of parents fighting to keep a convicted paedophile away from their children yesterday won the first round of their legal battle.
People Power Liverpool had asked a county court judge in the city to grant an injunction banning Graham Seddon, 43, from approaching youngsters. The judge granted an interim injunction until 4.30pm on Thursday.Reuse content