They argued the lounge, a roofed area ventilated by a wall of louvres, was actually substantially enclosed.
In yesterday's decision, Justice Rodney Hansen found that the calculator conflicted with the intention of the act.
"The simple factual question of whether or not a space is substantially enclosed is replaced by a calculation intended to assess airflow through the space," he said. "That is contrary to the clear scheme and purpose of the statute."
Justice Hansen ordered the ministry and Auckland Regional Public Health Service, that uses the calculator to grant or decline smoking permits, to reconsider the Diamond Lounge's smoking status in accordance with the act.
The calculator was not in accordance with the act.
A Ministry of Health spokesman said the ministry will be carefully reviewing the judgment and any flow-on effects it may have.
"As part of its review the ministry will be looking at its next steps - including considering the long-term implications for workplaces and licensed premises."
In an statement SkyCity's General Counsel Peter Treacy said the judgement had implications for many venues across NZ where the Ministry of Health had used the open areas calculator.
He said Justice Hansen had noted it was not appropriate for the Court to make a finding as to whether or not the Diamond Lounge was or was not an "open area."
Should the Diamond Lounge subsequently be found not to be an open area, SkyCity would work to comply with the law, Mr Treacy said.
