The Court of Appeal upheld a ruling of the High Court in December that North West Lancashire Health Authority's decision to refuse treatment for the three was unlawful and it had acted without consideration of what was "the proper treatment of a recognised illness".
Health authorities will now have to assess treatment for transsexuals as if they were suffering from a disease rather than in need of cosmetic surgery.
Lord Justice Auld said in the judgment: "The health authority's policy, in my view, is flawed in two important respects. Firstly it does not in truth treat transsexualism as an illness but as an attitude or state of mind which does not warrant medical treatment."
He said the authority's attitude to transsexuals amounted to a blanket policy against funding treatment for the condition "because it does not believe in such treatment". He said the three suffered from, a rare disorder called "gender identity dysphoria", as they were born with male physical characteristics, but psychologically have a female sexual identity.
It is estimated 5,000 people in the UK have undergone or are currently having treatment for transsexualism. People who want to undergo a sex change take hormones for at least two years before surgery, which costs from pounds 8,000 to pounds 10,000.
Stephen Lodge, the solicitor representing the transsexuals - who were referred to only as A, D and G - said the estimated pounds 200,000 spent on the case could have funded 20 sex-change operations. "We trust the health authority will now reconsider its policy and agree to fund our clients' treatment without further delay," he said.
A, aged 21, D and G, both 50, were refused gender reassignment surgery in 1996 and 1997 after it was decided none of them had shown an "overriding clinical need".
The transsexual known as A said that from the age of 10 other boys seemed to be different. A believes the sex-change operation is essential to ending years of misery and regards her male physique as a "deformity". A said: "I don't want to go through surgery but I have to because if I don't, I will probably go mad."
Campaigners for transsexual rights welcomed the ruling as "long overdue". Christine Burns, of Press for Change, a pressure group for transsexuals, said: "It at last shows common sense in realising this is a medical condition for which this is the only treatment that works."
David Edmundson, chief executive of North West Lancashire Health Authority, said it was "naturally disappointed" with the judgment. "We have always had sympathy for the applicants, but that has always been constrained by the funds available and our priorities."Reuse content