Hager's lawyer Julian Miles QC has argued police should not have applied for the warrant, as the source material for Dirty Politics was subject to journalistic privilege under the Evidence Act.
Mr Miles told the court police acted unlawfully in deciding to seek a warrant, issuing a warrant, executing the warrant and in the way the search itself was conducted.
Mr Miles said during the 10-hour-long raid on October 2, which involved six officers, Hager's house was turned "upside down".
He said Hager had not committed any offence and at the time of the raid police were treating him as a witness - not a suspect.
He told the court that the actions of police put Hager's reputation as a journalist at risk, and as an investigative journalist he has to promise confidentiality to his sources.
"At the heart of the success of any journalist ... is the ability to promise confidentiality and the ability to deliver that confidentiality. Because the promise is not enough if you can't follow through.
"If police are able to raid journalists and force them to provide the identity of the informant that will have a chilling effect on future informants for the obvious reason."
The hearing before Justice Denis Clifford is set down for three days.
