Neighbours have lost a High Court battle to stop an £800,000 home being demolished and replaced with flats.

The campaigners, who are worried their homes will be overshadowed by the development, have been ordered to pay £25,000 in costs.

Lucille Sugarman now has the go-ahead to bulldoze Ruston in Withdean Avenue, Brighton.

Her neighbours today spoke of their disappointment at the decision, which comes at the end of a two-year legal battle involving three court hearings.

Richard Porter said: "It really makes me see red. Another neighbour, Teresa Wall, is worst affected. She will be so overshadowed she will need her lights on from midday onwards."

Ms Wall, who lives in nearby Lions Gardens, took Brighton and Hove City Council to a judicial review in November 2004 after it agreed planning permission for the eight flats in March that year.

In a landmark case, the judge ruled in Ms Wall's favour because the council did not comply with amended legal criteria and give reasons for granting permission.

Shortly afterwards, the council reconvened and granted permission for the development in accordance with the legal criteria. Ms Wall tried to mount a second challenge but was told last May the council had no case to answer.

In June last year, a local historian contacted Mr Porter to tell him about historical restrictive covenants on the land, originally part of the Curwin estate at Preston Park.

Lawyers discovered more recent covenants were drawn up in 1953, prohibiting anything other than "a single detached dwelling with or without garage" on the land.

However, Mr Justice Peter Smith ruled the covenants are no longer enforceable.

The court heard the estate was originally owned by Kathleen Hart, who purchased a cottage with a large garden and orchard just off Withdean Avenue in 1953.

She kept the cottage for herself but sold off the rest of the land, drawing up a number of covenants banning certain developments.

Mark Hallowed, representing Ms Sugarman, successfully argued the covenants were no longer legally binding as Mrs Hart had since sold off the land and property.

Mr Porter said neighbours, together with Brighton Lions Housing Society, which rents Ms Wall her home, were shocked at the decision and the court's bill for costs of £25,000.

Mr Porter said: "We all feel angry and shear disbelief."

He said Ms Wall had defended the case with legal aid and the residents and Brighton Lions had informed the court in September they could not afford to go ahead with the defence case.

Mr Porter said: "Our solicitors are looking into why we have been asked to pay so much. We could appeal it but then we risk incurring greater costs."

Ms Wall, who did not wish to comment, has until March 22 to ask for permission to appeal.

Lawrence McDonald, a senior solicitor at Land Law Commercial Solicitors in Cheshire, which represented Mrs Sugarman, said: "Mrs Sugarman is glad that this case, which was forced upon her by the actions of others, has now ended. She hopes that the decision of the local council and the courts will now be respected."