Knight told he must stay in jail
Torrens Knight received 12 life sentences for his part in the Greysteel massacre and the separate killing of four workmen.
His prison release was suspended after he was found guilty of attacking two women in a Coleraine bar in May 2008.
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Hide AdKnight was seeking a judicial review of Secretary of State Shaun Woodward's decision to send him back to jail.
However, on Friday, a High Court judge refused leave to seek a review after rejecting all grounds on which the application was based.
Mr Justice Treacy said: "If the Secretary of State had not suspended the applicant's licence in the teeth of a conviction for very serious offences of violence it would almost certainly have attracted public opprobrium and undermined public confidence."
Knight was sentenced to four months imprisonment last December for assault and disorderly behaviour.
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Hide AdAlthough granted bail pending his appeal, he was kept in jail due to the suspension of his licence.
Mr Woodward ordered his recall to prison due to the new conviction and a determination that he posed a risk to the safety of others.
Knight was found guilty of involvement in an attack on the Rising Sun bar in Greysteel, Derry at Halloween 1993.
Eight people were shot dead when loyalists opened fire inside the pub.
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Hide AdHe was also convicted of the murders of four Catholic builders in Castlerock earlier the same year.
Knight was released on licence in July 2000 under the terms of the Good Friday Agreement.
His lawyers argued the suspension breached his right to liberty and should not have been taken until after an appeal against the assault convictions is heard.
It was stressed that the Sentence Review Commissioners have still to determine whether to revoke the licence.
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Hide AdHis barrister told the court that since being released Knight had "turned over a new leaf" and disassociated himself with those he was previously involved with.
But Mr Justice Treacy rejected arguments based on the relevant law, alleged inconsistencies and unreasonableness.
The judge said: "In my view the secretary of state's decision that these convictions indicated that the applicant had breached the condition of his licence not to become a danger to the public is unimpeachable.
"Whether or not he is in fact a danger to the public will be determined by the Sentence Review Commissioners exercising their powers under the 1998 Act."
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Hide AdHe added that, provided the Secretary of State acts rationally and in good faith, his decision is unassailable.
"It is impossible to even contend that the secretary of state's belief that the applicant had broken his licence condition was irrational."