The ability of the NSW government to start removing rail lines from central Newcastle on Boxing Day is expected to be determined in the NSW Supreme Court on Wednesday morning.

Justice Michael Adams said he hoped to deliver his verdict in the morning, after advocacy group Save Our Rail sought an injunction in the court to prevent the rail line's removal.

Save-our-rail protesters take to the streets in Newcastle. Credit:Jonathan Carroll

The interlocutory hearing on Tuesday heard that the government had already begun transferring some rail infrastructure in Newcastle - such as signals, lights and boomgates - to a new owner, the Hunter Development Corporation.

The transfer, by compulsory acquisition, is being used as a means of avoiding the Transport Administration Act 1988, which prevents a rail owner from disposing of a rail line except by act of parliament.