Westminster City Council has won the right to mount a full High Court battle to block what it claims is an unlawful change of use from a once high-end hotel to include hostel activities.
Mr Justice Lewis ruled that it has an "arguable" case in its claim that the inspector was wrong to find that there has been no material change of use at the premises.
The council claims that the use has changed from a hotel to a mixed use hotel and hostel, resulting in the loss of residential amenity by way of increase noise and disturbance and contrary to its development plan for the area.
It claims that the inspector's decision that no such breach of planning control had occurred was contrary to her own findings on the evidence and irrational.
Saira Sheikh argued on its behalf that the inspector's conclusion that the alleged mixed use had not occurred was "flawed in law".
She said: "Having regard to the evidence and her own assessment of the characteristics of the use at the property, the only rational conclusion was that there was a mixed hostel use."
The council claims that the introduction of bunk beds, shared facilities and very low levels of servicing has resulted in a significant increase in the number of guests being able to stay at the property, with the possibility of eight individuals sharing a room. This, it says, has led to unacceptable noise levels internally which impact on the local neighbouring residents.
The council claims that residents have experienced large numbers of youths arriving and leaving en-masse and causing noise and disturbance and crowds queuing outside the property and the streets at all times of the day and night.
Ruling that there should be a full hearing, the judge said: "It seems to me there needs to be proper and full argument on the question of whether there had been a change that amounted to a material change of use."
On the Equity Point's website, it said: "It wasn't easy to find the ideal building for our hotel in London. It took over two years of research to find a building that could satisfy your needs. In a building that was designed and built as a hotel, Equity Point has applied all of its experience to its renovation by introducing all the elements common to the Equity Point Group hotels, with special attention to new technologies, community areas and the comfort of one of the sector's leading facilities.
"The Georgian style building, with its characteristic entrance flanked by white columns and typical windows of this architectural style, has 68 en suite rooms distributed over seven floors, which offer our guests the choice of many different types of completely renovated rooms: from doubles to eight-bed rooms."