The Secretary of State for Education has backed Richmond Council over the introduction of a Catholic school.
The announcement from Michael Gove came with the judicial review, brought forward by Richmond Inclusive Schools Campaign (Risc) and the British Humanist Association (BHA), looming.
They argue the council failed to comply with new legislation that requires an authority to invite proposals for an academy if a new school is needed.
The council said it did consider its obligations under the new legislation properly and that its decisions were lawful.
Gove agreed with the council and has applied to take part in the proceedings as an interested party.
He said when a local authority is considering a proposal for a new school it is not under a duty to invite proposals for an academy before lawfully being able to approve the proposal.
BHA said an authority could therefore choose to ignore its requirement to invite free school proposals, and instead arrange to open voluntary aided religious schools unchallenged.
The group said councils could also agree with religious organisations to use this loophole to get around 50 per cent exclusivity admissions rules applied to free schools.
BHA chief executive Andrew Copson said: “The coalition agreement commits the Government to ‘work with faith groups to enable more faith schools and facilitate inclusive admissions policies in as many of these schools as possible’.
“It is surprising to see Michael Gove take such direct action in a contrary direction and against his own free school policy in a way that will increase discrimination in the state school system.”
In May the council’s cabinet agreed the Clifden Site should be used for a five-form Catholic secondary school and a one form Catholic primary school, and approved proposals for two new voluntary aided schools from the Diocese of Westminster.
Councillor Lord True, leader of the council, said: "I am pleased that the Department for Education has confirmed its earlier advice that the council was entitled to approve the proposals.
“Every day this legal campaign continues, the borough will incur legal costs which may not be fully recovered from the claimants. It is also causing a great deal of uncertainty for a large number of parents across the borough who have already started applying for places for their children at either of the schools, schools which many of them have asked for, for years."
Lord True directly addressed the chairman of Risc, Jeremy Rodell, in his statement.
Lord True said: “It is high time Mr Rodell showed some appreciation of the worries of those parents. In the light of this development, he should now tell his national leaders in the BHA to stop using Richmond children as playthings in their ideological campaign to stop church schools.
“Mr Rodell and the BHA should respect the outcome of local democratic debate and send their lawyers home.”
Mr Rodell said: “People can draw their own conclusions from the aggressive tone of Lord True’s statement. Unfortunately, much of what he says is simply untrue or misleading.
“The impression is that he does not really care whether the council has acted unlawfully or not, provided he gets his own way.
“We have no plans to abandon the case. It is the council that has failed to compromise.”