"Arguably, she can't be trespassed from her own property," Mitchell said.
Mitchell said Milnes' ex-husband had been due to pick up the couple's daughter but he called her to say he had been drinking and asked her to drop the child to his home instead.
When Milnes arrived at the property, her car keys were taken from her and she asked for them back.
She grew "frustrated" when they were not returned.
The court heard how Milnes allegedly went "rushing" towards the female complainant, who was granted name suppression.
The police were called to the property and Milnes was arrested.
Mitchell invited police prosecutor Sergeant Miranda Barton to withdraw the charge of assault, but she declined.
Judge Barbara Morris asked police to seek legal advice on the issue "of ownership and how that relates to trespass".
The judge said police laid the assault charge on the grounds that there had been an "attempt of applied force" but this was "fairly technical" and police should take another look at this issue as well.
"I ask that police review their material."
Milnes was remanded with bail to continue until a case review hearing on May 23, when her attendance would be excused.
After the hearing Mitchell told the Times-Age that he viewed the polices' case as "deeply flawed".
He said it was "questionable whether a valid trespass notice could be issued" to someone who was a beneficiary of a family trust that owned a property.
"It's legally dubious and in any event, she was invited to the property when her ex-husband stated he was unable to pick up his daughter.
"As far as the assault charge goes, the police summary of facts said that Ms Milnes 'charges at' the female complainant, but there's no allegation that she touched her, or made any threatening behaviour or threatening gestures, or said any threatening words.
"I would describe those charges as frankly ludicrous and they will be absolutely defended if necessary."
