The Labour Party's rules were "misapplied" when its national executive committee (NEC) voted to guarantee Jeremy Corbyn a place on the leadership ballot, the High Court has heard.
Lawyers for Labour donor Michael Foster said on Tuesday that, by bringing his case against the party's general secretary, Iain McNicol - who is being sued in a representative capacity - and Mr Corbyn, Mr Foster was not seeking anything other than a proper application of the rules.
Gavin Millar QC told Mr Justice Foskett it was clear that the meaning given to the rules by the majority on the NEC on July 12 was wrong. It was not a "reasonable" interpretation.
If the judge decided in his favour and granted a declaration that Mr Corbyn must obtain the requisite level of support before his name could go forward, the party would be required to return to the nomination stage and go through it again.
"The claimant has no wish to deny the second defendant (Mr Corbyn) a fair opportunity, which can be achieved in this way, of obtaining the requisite number of nominations."
The NEC took legal advice before voting by a majority of 18 to 14 that Mr Corbyn should automatically go on the ballot paper without needing to obtain the backing of 20% of Labour MPs and MEPs - 51 nominations.
Ballot papers will start to be sent out on August 22 with the result announced at a special conference in Liverpool on September 24.
Mr McNicol announced a leadership election on July 11 but frontrunner Angela Eagle withdrew from the race a week ago, leaving Owen Smith to take on 67-year-old Mr Corbyn, who became leader in September last year.
Mr Corbyn was not in court for the hearing, which is expected to last a day.
Mark Henderson, counsel for Mr McNicol, said the rules were not ambiguous or open to serious doubt.
Potential challengers must attain a 20% threshold of support to enable them to stand against the incumbent leader but there was no basis for interpreting this provision as requiring the incumbent to also attain this threshold.
Martin Westgate QC, for Mr Corbyn, argued that the NEC's conclusion was "plainly right".
He said the court should follow its conclusion as long as it was a reasonable approach to the rule.
"In any case, the conclusion reached by the NEC is entitled to great respect and the court should not interfere with it."
He said Mr Corbyn was elected as leader with the "overwhelming support" of the general membership and of registered and affiliated supporters, gaining 59.5% of the total votes in the first round.
Mr Foster's case was that the party could in effect block Mr Corbyn from being considered as a candidate in any future election for leader, even if he continued to enjoy similar support, and less than a year after he was duly nominated and elected.
"If Mr Foster is right then there will be no election and the present challenger (Mr Smith) will be entitled to be elected as leader unopposed."
Mr Foster's position that the process would have to be re-run failed to recognise the disruption that this would cause, said counsel.
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