"The plan is very clear that the removal of such trees is a permitted activity," the decision said.
Nor was the tree protected by being in a significant ecological area, nor was it individually protected under the Unitary Plan, their decision said.
Mayor Phil Goff previously told the Herald the council's hands were tied due to changes under the previous government to the Resource Management Act, which removed blanket protections of trees in urban areas.
But those fighting to save the tree say the council had made errors in developing its Unitary Plan and not including the property, and AwhiAwhi, in a significant ecological area. It also had the option to list it as a notable tree.
Supporter Steve Abel said the Environment Court decision said the options to save the tree were in making those law and plan changes.
"The council needs to step up," Abel said.
"As a community we will keep doing what we are doing, but it will be very difficult without the council on our side."
During a Planning Committee last week the council committed to establishing a working group to explore options to save the tree.
Abel said a third option was for the council to work with the developer to find a solution.
"The mayor, councillors, really just need to get on the phone and sort it out."
This could include through a design that left the tree standing, the council purchasing the piece of land and adding it to a reserve with two other kauri on the roadside, or even purchasing the seeds and ensuring tree was saved.
After the tree was ringbarked in 2015, tāngata whenua applied rongoā, traditional Māori medicine, to the affected area and it made a remarkable recovery.
It also showed no symptoms of kauri dieback, despite the disease ravaging trees in surrounding areas.
"Scientists and mana whenua say there are real opportunities for some important research to be done on Awhiawhi, which could help save the tree species which is under threat. It is a real-life experiement.
"If the council let's this tree be chopped down, and does not take into account mana whenua, the community, scientists, the environment, then what does that say?"