The former landowners of the Dreamland site in Margate, Kent, are fighting a last-ditch battle to overturn a compulsory purchase order issued by Thanet District Council and confirmed by Communities Secretary Eric Pickles in August last year.
The council and the Dreamland Trust want to create a heritage theme park with historical rides, classic sideshows, vintage cafes, restaurants and gardens.
But the former landowner, DreamlandLive, has asked three appeal judges to block the compulsory purchase order (CPO), which enabled the council to take control of the site.
Richard Glover QC, for DreamlandLive, told the judges the CPO should be quashed as the Communities Secretary's conclusion that the heritage amusement park would be "commercially viable" was legally flawed and based on factual errors and misleading advice.
Control of the Dreamland site formally passed to Thanet council after Judge Sycamore, sitting in the High Court in May, upheld Mr Pickles's decision to confirm the CPO.
He accused Judge Sycamore of failing to grapple with any of the issues raised by the Communities Secretary's flawed approach to the question of commercial viability.
Mr Glover said: "Taken collectively, it is plain that the conclusions on commercial viability and durability are not safe."
Errors were made by a public inquiry inspector who recommended to Mr Pickles that the CPO be confirmed, argued Mr Glover.
Both the Communities Secretary and the council are defending the legality of the CPO in a one-day hearing before Lord Justice Goldring, Lord Justice Elias and Sir David Keene.
Dreamland fell into disrepair after it closed in 2003, and this coincided with the decline of Margate as a seaside resort.
Its biggest attraction, a Grade II*-listed scenic railway ride, was damaged in an arson attack in 2008.
Council leader Clive Hart said on hearing that the appeal was to be brought: "The continued legal challenge is nothing short of frustrating.
"With support from the Secretary of State, and the High Court, we are hopeful that the right outcome will be determined at the appeal, and will continue to do all we can to unlock the regeneration of this part of Margate."
The council has £10 million of funding in place for phase one of the redevelopment, which includes restoration of the scenic railway.
DreamlandLive's alternative proposals involve an amusement park on part of the land - and the building of up to 500 homes, arguing that is the best financially-viable option.