The Supreme Court of Appeal has overturned a decision which ruled the State Government was unable to rip up Newcastle's rail line.

The community group Save Our Rail originally won the case last year, but the Hunter Development Corporation has won an appeal, with Save Our Rail ordered to pay costs.

But the fate of the rail line had already been sealed despite today's outcome after legislation was passed last month in State Parliament to remove the tracks.

Save Our Rail president Joan Dawson said the appeal could have been withdrawn saving time and money.

"However they chose instead to not do the honourable thing," she said.

"The honourable thing would have been withdraw the appeal and accept the ruling that what was made by Justice Adams.

"Instead they have actually chosen to drive a stake through the heart of the community of Newcastle."

Ms Dawson said it is unclear at this stage how much the group will have to pay.

"Certainly we will be sitting down and looking at all of that," she said.

"And look we don't have much money, we don't have much in Save Our Rail.

"We only depend on donations from our memberships and selling little badges.

"I guess we'll be selling quite a few."