The college, in Widnes, claimed the council owed it Euro-grants to fund training for jobless young people. But the court heard that Halton had already received the money in its annual budget in 1993.
In an attempt to kickstart training projects, the council had advanced more than Pounds 3 million to the college before receiving the money from Europe, and had then repaid the cash into its own coffers once the Euro-funds arrived.
The Appeal Court ruled the council had no case to answer. A Halton spokesman said governors would consider the judgement and decide whether to take their action further.