Rank and file members should be making the decisions rather than the prime minister, NSW premier and former federal party president Chris McDiven, argued barrister Scott Robertson on Friday.
He was acting for Sydney businessman Matthew Camenzuli, who is seeking a declaration that the "purported" endorsements of the three federal MPs were not valid.
Three judges of the Court of Appeal reserved their decision after an urgent day-long hearing in the bitter NSW Liberal Party preselection brawl.
It follows a decision by the party's federal executive to appoint a committee made up of Mr Morrison, Mr Perrottet and Ms McDiven so candidates could be selected and endorsed in several NSW seats.
Mr Robertson is challenging their preselection of Immigration Minister Alex Hawke in Mitchell; Environment Minister Sussan Ley in Farrer; and MP Trent Zimmerman in North Sydney.
He referred to the construction of the party's constitution and the committee's powers for "management" of the NSW division.
But he said selection and endorsement of candidates was not a management power, but one for the rank and file membership.
"We say that is not a power that can be taken over," he said
He noted the national importance of the case and its urgency, given the upcoming federal election, due to be held in May.
It is expected to be called very soon, while nominations for candidates close 10 days after writs are issued.
Guy Reynolds SC, for the prime minister and premier, said the claim could not succeed, referring to a High Court decision in another case relating to the rules of a voluntary, unincorporated association.
Any declaratory relief given by the Appeal Court would not be binding or enforceable, he said.
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