Dave Haseldine, owner of Bradley's Spanish Bar, had applied for extended hours but Westminster refused to give him a hearing as his bar is in the "designated stress" area.
This was created by the council as it believes the area is saturated already with premises that serve alcohol late into the night and it is highly unlikely to grant extended hours or new licences in these areas.
WCC had claimed success over its controversial licensing policy after 28 licensing appeals were withdrawn by operators following consultation at the beginning of March. This came after news that four appeals against the decision taken by the council's Licensing Sub-Committee were all lost.
Mr Haseldine appealed but withdrew after a range of cases went in favour of the council but Westminster called for him to pay costs of £1,034.
However, a judge in Westminster Magistrates Court did not rule in the council's favour and said that he should have been given a right to a public hearing.
Mr Haseldine told The Publican: "I decided to fight it and I have just won. Other people have been just paying up."
But Peter Large, deputy director of legal services at WCC, said: "We are disappointed that we were not awarded costs on this particular occasion, but we note that the court expressed its sympathy for the invidious position the council is in when appeals are withdrawn late in the day.
"We find that the court does award costs in our favour in most such cases.
"It is a problem for the court as well as for Westminster when appeals are withdrawn at the last minute, because it results in a waste of court time, and delays the hearing of other appeals.
"We would urge all licensees who have an outstanding appeal which they wish to discuss with us to do so as soon as possible - it will save them money, and allow the cases which do need to be argued in court to get there quicker."