Council prosecutor Clare Stanley said the dogs were not of a breed normally identified as a working dog.
In evidence to the court last week, South Wairarapa District Council bylaw officer Andrew McEwan said they had asked Phelps to provide proof of the dogs' work status or proof of microchipping.
"We sent letters on March 13 and March 26 asking him to supply microchipping certificates ... two other letters followed but he did not respond."
He told the court he had received a trespass notice not to go on to the Phelps' addresses in Greytown and Featherston.
Under cross examination by defence lawyer Jock Blathwayt, Mr McEwan said the dogs had been registered by Phelps as working dogs for five years until council realised they were not of working dog breed.
"The amount of dogs that were being registered as working dogs for the property; 23 was too excessive."
Giving evidence Phelps said the dogs had been working sheep on their 48ha property since they owned them.
"They assist in the moving of the stock ... Some people might see them as lap dogs."
During cross examination, Phelps said they were trained by him to help round up the sheep and bring them up in the shearing shed.
"We would not take them to dog trials but they assist with the stock. We class them as working dogs."
He also said his partner breeds pekingese and while all the dogs slept and were fed in their own kennels they were allowed inside the house.
Phelps provided photographs to the court showing the small dogs on his bike and with sheep in the background.
Judge Tompkins said that in the 2000 or so years in the history of the pekingese breed they had never been used as working dogs.
He said Phelps' claims were "nonsensical and artificial" because of the breed's "diminished" size and physical constraints.
Outside court Ms Phillips declared the "law is an ass".
She said it was wrong because rural dogs registered with Masterton and Carterton councils were classed as working dogs.
However, the Times-Age confirmed with Masterton District Council dog control that any rural dog not a working dog must be microchipped as per the law.
Ms Phillips indicated they would appeal the decision.
Ms Phillips is a registered member of the New Zealand Kennel Club and president of the Wairarapa Kennel Association.
NZKC secretary Peter Dunne told the Times-Age members were required to abide by dog control laws and while most complied those who didn't could have their membership of the club suspended.
Phelps is due back in court on July 21 for sentencing.