The council bowed to industry objections and agreed to take the proposal back to the drawing board, but by sticking to his guns Mr Reilly has forced the appeal to progress to its next stage.
Progressive, which owns Countdown, applied to have Mr Reilly's appeal thrown out saying it was "frivolous, vexatious and an abuse of process".
In a nine-page decision released on Wednesday, however, Judge KD Kelly of the Alcohol Regulatory and Licensing Authority (ARLA) refused the supermarket giant's strike-out application.
As a result the appeal will go ahead on December 13-15 at the Turner Centre in Kerikeri.
In its application Progressive stated Mr Reilly's appeal was absurd because whether he won or lost the matter would eventually have to go back to the council, which was the proper place to put his views about off-licence hours.
Progressive claimed Mr Reilly was "trifling with ARLA's processes", and his appeal only served to give him an audience with ARLA while imposing extra cost and delays on the other parties.
Judge Kelly, however, said the fact both sides wanted the proposed off-licence hours sent back to the council for reconsideration was not sufficient grounds for throwing out Mr Reilly's appeal.
If he did strike out Mr Reilly's appeal he would effectively be favouring the other side before any evidence had been heard. Mr Reilly's appeal would not cause an inordinate delay, nor was it irrelevant or unintelligible, Judge Kelly added.
Mr Reilly said he was pleased with the judge's decision, saying it showed his argument had merit.
"If the industry didn't feel their profits were threatened they'd let it go," he said.
A Countdown spokesman said the company was grateful for ARLA's decision because it had clarified a point of law, so all parties could now take the next steps in the process.
''As we have so far, we will continue to engage constructively with the council and community on the Far North District Council's local alcohol policy.''
There was never any intention to offend Mr Reilly or question his right to have his say, he said. Progressive's application was supported by its rival Foodstuffs, which owns Pak'nSave and New World.