The full bench of the Federal Court has upheld an earlier decision which found three-year-old Tharunicaa was not given procedural fairness when her application for a protection visa was assessed.
A Tamil family-of-four from the small Queensland town of Biloela, who have spent almost three years in immigration detention, will remain in Australia for the immediate future after an appeal by the federal government and lawyers for the family was dismissed.
Priya and Nades Murugappan and their two Australian-born daughters, Kopika, five, and Tharunicaa, three, have been the only family detained on Christmas Island since August 2019 after an urgent court injunction blocked their deportation to Sri Lanka.
Federal Court Justice Mark Moshinsky ruled in April last year that Tharunicaa was not given procedural fairness when her application for a protection visa was assessed and ordered the government to pay more than $200,000 in costs.
The ruling was appealed by the federal government, while lawyers acting for the family also issued a cross-appeal against a second ground which was dismissed by Justice Moshinsky.
The full bench of the Federal Court dismissed both of the appeals on Tuesday, ordering both parties to pay costs.
The decision upheld Justice Moshinsky's dismissal of the family's claims that a valid application for asylum had been made for Tharunicaa in September 2019, but supported their second ground that she was not "afforded procedural fairness" in her bid for protection.
Carina Ford, a lawyer acting on behalf of the family, told SBS News she was "relieved" by the decision, but added that the family's future was still uncertain unless the government changed their position.
Immigration law prevents "unauthorised maritime arrivals", and their children, from applying for Australian visas while onshore, but Immigration and Home Affairs ministers have the power to use discretion to allow people in Tharunicaa's position to remain in the country.
Ms Ford said the legal team would now determine whether to seek leave to appeal the latest ruling in the High Court and, if needed, would apply for an injunction to keep the family in Australia while the legal process is ongoing.
This process could take up to six months, Ms Ford said.
"It is unlikely they will be removed immediately," she said. "They can't be in any event, because the decision requires a fair process to be undertaken in relation to that removal, which was didn't occur before."
There is no automatic right of appeal from the full bench of the Federal Court, meaning if either party wishes to appeal the case further they must first seek special leave from the High Court.
Lawyers and supporters of the family are calling for the government to release the family from detention on Christmas Island and allow them to live in the community while the long-running legal battle continues.
"It does require a change in the direction of the government to consider them for release into the community while the further processes continue," Ms Ford said.
"It's now been nearly three years they've been detained for, it's a long period, and they are the only children left in [Australian immigration] detention."
Tuesday's ruling is the latest development in the protracted battle to keep the family in Australia, after they were removed from the rural Queensland community of Biloela in March 2018 when their four-year bridging visa expired.
Simone Cameron, a friend of the family and one of the organisers of the Home to Bilo campaign, which has long-fought for the family's return to Biloela, told SBS News the latest decision "feels like Groundhog Day".
"To me, what it looks like what happens for the family, is they are still stuck in this never-ending limbo of detention," she said.
"We've had dozens of days in court, Priya and Nades don't sleep for nights before the decision is handed down, they have some very traumatic memories of the government's multiple attempts to forcibly removed them from the country ... and that's always looming."
Nades and Priya arrived in Australia by boat separately in 2012 and 2013. Both have claimed different reasons for seeking asylum from Sri Lanka; Priya reported being forced to watch her former husband be burnt alive, while Nades said he is in fear for his life due to his links to the banned Liberation Tigers of Tamil Eelam.
The Department of Home Affairs has repeatedly insisted the family does not meet the criteria for a protection visa.
Aran Mylvaganam, from the Tamil Refugee Council, said the family's treatment was due to the government's failure to recognise the ongoing persecution of Tamils, an ethnic minority in Sri Lanka.
"Sri Lanka is a dangerous place for Tamils, especially now," he said. "The situation is really bad, we've seen increased attacks on not only the Tamil community, but the Muslim community as well.
"We're calling on the Australian government to recognise that persecution and let Tamils stay in Australia."
In August 2019 the government attempted to deport the family from immigration detention in Melbourne before a last-minute Federal Court injunction forced the plane carrying the family to land in Darwin.
From there they were moved to the recently re-opened immigration centre on Christmas Island, a remote Australian territory located approximately 350 kilometres off the Indonesian coast.
They live in a separate facility to hundreds of detainees who are awaiting deportation due to criminal convictions.
The family are unable to leave the detention complex without being escorted by guards, including when the children are taken to school on the island.
Kopika and Tharunicaa are also not permitted to visit friends or invite them over to their one-bedroom cabin, where the family shares a bed.
Following the decision on Tuesday, the family thanked the Australian community for the love and support they have been shown.
"We are very grateful. It helps us stay strong. We just want to go back to Biloela," they said in a statement. "We need our little girls to be safe. Every day, they ask 'when can we go home?'"
A Department of Home Affairs spokesperson said they were considering the implications of the decision and reiterated that "no one who attempts illegal maritime travel to Australia will be settled".
"The family’s claims to engage Australia’s protection obligations have been comprehensively assessed on a number of occasions by the Department of Home Affairs, various merits review bodies and appealed through multiple courts including the Federal Court to the High Court," they said.
"At no time has any member of the family been found to be owed protection."