Priya and Nades Murugappan and Australian-born daughters Kopika and Tharnicaa, five and three, have been in detention on Christmas Island since August 2019 after an urgent injunction put a hold on their deportation.
On Tuesday morning the full bench of the Federal Court rejected an appeal by the federal government over an earlier ruling by Justice Mark Mochinsky, which found Tharnicaa was denied procedural fairness in making a protection visa application that would have allowed her to remain in Australia.
But their legal battle is not over yet.
In a statement, the family's lawyer Carina Ford said they would seek a further injunction on the family's deportation unless the government provides an undertaking not to remove them.
She said they believe the decision justifies the family's release from detention, noting several ministers have always had the discretion to free them from detention while their legal matters are resolved.
"The family should be released immediately from detention and we hope this will occur," she said.
Mr and Mrs Murugappan said they were grateful for the support and love they've been shown.
"It helps us stay strong. We just want to go back to Biloela," they said.
"We need our little girls to be safe. Every day they ask 'when can we go home?'."
Justice Mochinsky's ruling included an order that the federal government cover more than $200,000 in legal costs, after he determined then Immigration Minister David Coleman had lifted a bar to consider a visa application in 2019 but no decision was made.
An assessment by an immigration department official in August found it unlikely Australia's protection obligations would apply to the family.
"The applicant was not notified that the August 2019 assessment was being conducted and was not invited to comment in relation to any aspect of the assessment," Justice Moshinsky said.
Justice Richard White handed down the full bench's ruling on the appeal on Tuesday morning, dismissing the federal government's case and knocking back a cross-appeal brought by the family on a second ground for relief.
They backed Justice Mochinsky's reasons and found there was no appealable error in his decision.
The full bench accepted that there was no legal obligation to inform Tharnicaa or her family of the minister's decision, but added it was an ordinary expectation of good public administration that people be informed reasonably promptly.
"Ordinary human decency indicates that detainees should be informed of the position as soon as practicable," they said.
Mr and Mrs Murugappan fear persecution if returned to Sri Lanka.
The family's lawyers are now considering a High Court appeal on their failed ground, but with no automatic right they must first be granted special leave.
AAP. Main image: Supplied.