SQSS and council staff met for five hours on Monday and for several more hours on Tuesday.
The lobby group presented a list of demands, including an end to all further work for the next 10 years unless certain conditions were met.
Over the course of the negotiations, many of those demands were modified, but the two parties still could not agree.
The case went to court this morning after talks between the lobby group and Auckland Council broke down yesterday.
Last year, Auckland Council and Auckland Transport reduced the number of traffic lanes on Queen St and widened the footpaths to allow for social distancing among pedestrians.
They also built raised "tables" out from the footpaths at bus stops, to allow passengers to get on and off the buses.
After the lockdowns had passed, the council retained the temporary street layout, on the basis that it would soon be introducing trials for a new street design.
At the time, the council said it would cost $800,000 to remove the bus passenger tables and other work, and it was better to move forward, rather than go back.
SQSS, however, wanted all that work removed and the street restored to its earlier status. That meant it would have at least four lanes for its entire length, with more on-street parking.
"While the interim injunction request was declined, there was acknowledgement in the judgment that the 'emergency' works installed by Auckland Council in April 2020 are of unacceptable quality, limited functionality and indisputably unappealing aesthetics," said the group in the statement.
"Notwithstanding the result the Society is continuing to work collaboratively with Auckland Council to reach a resolution to the main issue which is the removal of the Emergency Works in the balance of the street."
Goff said the council would continue to work with all stakeholders to progress the works.
"The upgrade will demonstrate to Aucklanders how Queen St can be made more people-friendly and accessible, as outlined in our City Centre Masterplan."
The council acknowledged that there were 10 further challenges from SQSS that were yet to be heard at a substantive hearing and a date hadn't been confirmed.
In the meantime, there is willingness on both sides to continue talking in the interests of finding common ground, the council said.
Work on Queen St would begin on May 10, starting with the pavements being widened with new decking, new street furniture, native planting and a pocket park.
The council's target completion date for the work and the removal of the emergency works is late June.