The court on Sunday accepted the police argument that the possibility of community transmission of COVID-19 arising from the CBD rally made Tuesday's planned event too risky.

The NSW Court of Appeal on Monday afternoon rejected a challenge by the organisers which was primarily based on an argument that Justice Mark Ierace did not have the authority to prohibit the rally.

Chief Justice Tom Bathurst, sitting with Justices Andrew Bell and Robert Macfarlan, made no order as to legal costs after noting the challenge was a matter of public importance involving complex legislation.

The court will hand down its reasons as soon as possible..

Organisers previously said that whatever the court outcome they plan to risk arrest and go ahead with the rally before delivering a petition signed by 90,000 people, calling for justice for Indigenous man David Dungay Jr, to state parliament.

Mr Dungay, a diabetic, died after prison officers stormed his Sydney jail cell in 2015 to stop him eating biscuits.

Dominic Toomey SC, for rally organiser Paddy Gibson, unsuccessfully submitted to the Appeal Court that Justice Ierace erred in determining the Supreme Court had jurisdiction to hear the police prohibition application.

The family of Mr Dungay have asked that people attending the rally abide by COVID-19 safety protocols.

Australian Associated Press