Court of Appeal judges say a man who was earlier found to have "sexually interfered" with his teenage daughter is owed an apology.
They say "findings of fact" by a High Court judge must be "disregarded".
Social services staff have been told to treat the man and the teenager's mother as "parents against whom no allegations have been made".
Lord Justice McFarlane, Lord Justice David Richards and Lord Justice Peter Jackson have overturned decisions made by Mrs Justice Parker.
They said the "family justice system" had "manifestly failed" to provide a "sound resolution" to the case.
The three appeal court judges outlined their thoughts in a ruling on Wednesday following a Court of Appeal hearing in London in March.
Mrs Justice Parker, who is based in the Family Division of the High Court in London, had analysed the case in 2016 after the girl told a medic "my dad sexually abuses me".
The girl's father denied behaving in any "inappropriate way".
Her mother said she did not believe the allegations.
But Mrs Justice Parker decided that the girl, who was removed from the family home by social services staff with her parents' agreement after making the allegations, had been "sexually interfered with by her father".
The girl's parents appealed and the three appeal judges have upheld their challenge.
Appeal judges said there had been a "failure" to produce an "adequate and supportable determinations" of the allegations made by the girl.
Judges have not identified any of the people involved.
But they indicated that Northamptonshire County Council social workers had welfare responsibilities for the teenager.
"The family justice system has manifestly failed to provide a sound resolution of the serious factual allegations," said Lord Justice McFarlane in the appeal court ruling.
"A formal apology is owed to all who have been affected by the failure of the family justice system to produce an adequate and supportable determination of the important factual allegations in this case."
He said determinations reached by Mrs Justice Parker "must be set aside" and "disregarded" and added: "The parents are to be treated by all agencies and professionals who have dealings with them ... as parents against whom no allegations have been made."
Lord Justice Richards and Lord Justice Jackson said they agreed.
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