Labour's national executive committee ruled last month that members who had joined the party since January 12 would not be eligible to vote, a decision which local media reported would exclude as many as 130,000 new members, unless they paid a further 25 pounds ($32) to register as a party supporter.
Lawyers for the five accused the party's National Executive Committee (NEC) of unlawfully "freezing" them and many others out of the contest even though they had "paid their dues".
Labour's ruling NEC initially decided anyone who joined the party after January 12 would be barred in a bod to prevent "entryism" but that decision has now been overturned.
The court action affects nearly 130,000 Labour supporters who were affected by the freeze.
He said they should be given ballot papers and have their £25 supporters fee - which they had paid on top of their membership fees in order to vote in the contest - refunded.
The five new Labour members that brought the legal challenge said that the ban amounted to a breach of contract, arguing that they had a right to vote.
The Labour Party leader will be hoping for similar scenes to Liverpool last week when over 5,000 gathered in support of his re-election bid.
Left-leaning candidates have swept the boards in elections to Labour's ruling body, in a major boost for leader Jeremy Corbyn.
GETTY The Tories argue the current system is unfair
It is unclear what proportion of these new members are likely to back the leader, but there is a widely held assumption on both sides of the battle that most were likely to be pro-Corbyn.
Miss Evangelou, 41, a fitness instructor from Enfield, Middlesex, said outside court: "I am disgusted that they are trying to take my vote away, and the votes of people like me".
But Mr Hickinbottom granted the right of appeal - and a Labour spokesman said the party would "defend vigorously the decisions of the NEC".
The Labour Party was given permission to appeal to the Court of Appeal which it has now done. In reality, the party is operating in the form of two rival factions which are now more interested in defeating each other than providing credible opposition to an increasingly comfortable Tory government.
On Monday, six NEC seats were up for grabs for representatives from constituency Labour parties - all of which were won by members of the Grassroots Alliance, which is backed by Momentum, Mr Corbyn's network of supporters.
Mr Cragg told Mr Justice Hickinbottom, the High Court judge, that members who had recently joined - or anyone looking at the Labour pary rulebook - would have concluded, having joined the party, there was nothing to stop them from voting.
The Labour Party could take the High Court ruling to the Court of Appeal and if it does, a hearing could take place later this week.
Coun Robert Sharp is the vice-chairman of the Loughborough CLP said around 100 people came to hear MR Smith outline his future vision for Labour.