Taylor challenged the new regulations in January. While the court was considering its decision the Police Minister's hasty amendments were passed into law.
Justice Brewer said that the law change meant his judgment had no utility - prisoners were still banned from smoking. But he said that there was public interest in the court determining whether the regulations were found to be invalid.
Mrs Tolley said that the amendments to legislation meant prisoners would not be able to seek compensation if they had been penalised for possessing tobacco. But she confirmed that inmates would be able to get their disciplinary record corrected.
Green Party corrections spokesman David Clendon said prisoners could be blocked from rehabilitation if they had been disciplined, so the court's ruling had a significant effect for some inmates.
Corrections chief executive Ray Smith said that the smoking ban had created healthier, cleaner prisons and had led to a significant drop in fires within prison buildings.
Justice Brewer said he agreed with the previous High Court ruling that banning tobacco was not consistent with the Corrections Act, which required penalties to be humane.
"Forcing prisoners into nicotine withdrawal is not humane."
Mrs Tolley responded: "You could argue that actually committing a crime against individuals is also inhumane."