The High Court has set aside the Ministry of Health's decision to cut funding to New Zealand's largest problem gambling service.

Photo: RNZ

The ministry announced in March last year that no contract was being offered to the Problem Gambling Foundation, other than two small contracts for specialised Asian services in Auckland and Canterbury/West Coast.

At the time, the foundation said the ministry told it there was a better offer for the clinical and public health services it provided. The contract was subsequently awarded to the Salvation Army.

A judicial review has thrown out that decision as the ministry did not follow the proper procedures and the tender process was not fair.

Justice Woodhouse has also ordered the ministry to pay the foundation's costs.

The Problem Gambling Foundation said it hoped this would ensure that the ministry adopts a fair process when contracts come up for its next three-year service plan in 2016.

The foundation's chief executive, Graeme Ramsey, said he was glad the judge understood the damage the ministry's decision had done to many communities.

He said there was celebration and relief among its clients after the judge's ruling.

Lawyer Mai Chen, who represented the Problem Gambling Foundation, told Checkpoint that a fair process would be required next time around.

"It does mean that the ministry now has to run a fair tender process where all parties are clear about what the criteria are, and what the process will be, and they get a fair opportunity to tender," she said.

"And also that an evaluation methodology is going to be applied by people who are not biased or conflicted."

In a statement, the ministry said it was taking advice on the decision.

It added that it did not want any services disrupted - and had recently extended its providers' contracts, including the foundation's contract, to 30 June 2016.