But the appealtribunal said the original panel, in Bury St Edmunds, had followed "an erroneous approach" in cutting the amount of compensation owed and had not "precisely" identified what was confidential about the information passed on or to whom it was confidential.
Mr Justice Langstaff, president of the appealtribunal, also criticised the original panel for the way it dealt with issues of Mrs Hill's freedom of expression under Article 10 of the Human Rights Act.
The information tribunal - a panel of three headed by Judge John Angel - is considering the government's appeal following a two-day hearing in central London.