UK Traffic Law
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Based on the information you have supplied there are three points you can make in your appeal.
1. There was no regulatory sign indicating this was a disabled bay as required by s.11 of the The Traffic Signs Regulation and General Directions 2002 in particular there was no sign of the type 661A http://www.legislation.gov.uk/uksi/2002/3113/images/uksi_20023113_en_058
2. The disabled bay was not of the type or dimension as required by the TSRGD2002 and in particular did not follow the guidance contained the Traffic Advisory Leaflet 5/95 issued by the Department for Transport.
3. Due to the inadequate signage it would be unfair to pursue this penalty and the Council should exercise its discretion under Reg 4(2)(b)(ii) Civil Enforcement of Parking Contraventions (England) Representations and Appeals Regulations 2007 (SI 2007/3482) to cancel the penalty notice.
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There is no specific legislation which deals specifically with disabled bays for off street parking. However, there is case law which supports the contention that signage has to be adequate. The best place to find these are on the PATAS website as attached http://www.parkingandtrafficappeals.gov.uk/patashome.htm under the sub heading 'key cases'.