The decision appears to conflict with the wishes of John Patten, the Secretary of State for Education, who is a Catholic and has said that such arrangements are 'undesirable and inappropriate.'
Lord Justice Kennedy rejected an application from a mother that Lancashire County Council discriminated against her son by refusing him a place at an over-subscribed local authority secondary school opposite his home.
The decision could affect other Roman Catholic and Anglican pupils, the two churches said last night. It follows protests last week that Lancashire council is flouting new government guidelines by allocating pupils to another secondary school by lottery.
The judge said the policy of putting Catholics at the bottom of the list sounded discriminatory and unsustainable, but was not unreasonable in view of the authority's admissions problems.
Later, Dr Michael Ramsden, senior legal worker at the Lancashire Free Legal Action Centre, said the policy breached the European Convention on Human Rights, which outlawed discrimination on religious grounds. The mother, Louise Foster, plans to take the case to the Court of Appeal.
Dr Ramsden said: 'It is dreadful that if you are Roman Catholic then you are faced with such discrimination.'
Mrs Foster, from Blackpool, challenged the council's policy after her, son James, 10, was refused a place at Highfield High School. She wanted him to attend the non- denominational school because of its academic record, because it was very near her home and because she had been taught there.
Highfield was over-subscribed so the council applied its policy of giving priority to children who had been at non-denominational primary schools and offered James a place at St Mary's Roman Catholic High School.
Lord Justice Kennedy, sitting with Mr Justice Alliott, said Lancashire had an unusually high number of Catholic and Church of England voluntary-aided schools and 20 per cent of pupils attended Catholic secondary schools.
He said the council pointed to the restrictions on the number of non-Catholics admitted to Catholic secondary schools to justify its policy. It said that if significant numbers of Catholic pupils were admitted to county schools 'then non-Catholic pupils could find that there were no places available for them in the locality', leading to parental discontent.
Senior figures in the Roman Catholic education community said that, while they supported human rights, they felt the council's attitude was reasonable in view of their own policy of giving Catholics priority in admissions to Catholic schools and encouraging Catholic parents to send their children there. They believed Lancashire's policy was very rare.
A spokesman for the Department for Education said: 'The Secretary of State has made it clear that in his view the arrangements that give Roman Catholic children the lowest priority in the event that a non-Catholic secondary school is over-subscribed are undesirable and inappropriate.'
Mr Patten had taken note of the court's judgment that in the particular circumstances of this case such a policy was not unreasonable and would want to consider its implications carefully.