+1
Councils have a duty to maintain signs that form part of their duties in introducing Traffic Orders under Regulation 18 of the The Local Authorities’ Traffic Orders (Procedure) (England and Wales) Regulations 1996.
These Regulations prescribe the procedure to be followed by local authorities in England and Wales for making the main types of traffic and parking orders under the Road Traffic Regulation Act 1984...
So, as Stamfordman says, you have a solid challenge, because the cameras show the vandalised signs, so if they show this, why haven't the council repaired the signs instead of issuing a PCN ?
Only problem is that to test this, you'll inevitably have to take them to London Tribunals as councils just reject every representation, because they know that almost all people then just cough-up to get the discount.