They argued they had taken all reasonable steps to prevent the risk of an attack.
Prosecuting lawyer Jasper Rhodes, who represented the Tauranga City Council, argued the defendants should have instructed the other adults to monitor the dog.
Judge Thomas Ingram rejected that and dismissed the charge.
"I don't accept the law specifically requires dog owners to directly instruct other adults that they must exercise control over the dog on basis that it may have a likelihood of attacking children," he said.
There was no direct evidence the defendants had failed in their duty in terms of the steps taken to safeguard their visitors, he said.
Charlie's father, Henry Pokai, told the Bay of Plenty Times he was "absolutely gobsmacked" by the ruling.
"Judge Ingram has sent a clear message to the owners of dogs which attack people that all they need to do is say they had a few other adults present and the prosecution case will be thrown out," he said.
"This sets a precedent and could mean every dog-attack prosecution case taken by any council goes down the gurgler."
Mr Pokai said the decision could provide a defence opening to the owners of dogs which attacked the little girl in Murupara this week.
He said he would speak to his lawyer about the possibility of an appeal.
"While Charlie is a happy, spirited little boy, his scars could remain with him for life, and still needs hospital treatment every couple of months and regular facial massages."
Ms Devereaux, who lives in Rotorua with her family, said she was disappointed that she did not get the chance to tell her side of the story at the hearing.
Outside court, Ms Julian said the decision to defend the charge had no bearing on how they felt about what happened to Charlie and the impact on him and his family.
The dog was destroyed after the couple surrendered it late last year.
The dog had no history of attacking people, Ms Julian said.
Tauranga City Council's animal services team leader Brent Lincoln was not discounting the council lodging an appeal.
