The seven-year-old was ante-post favourite for the JLT Novices' Chase but he has been suffering from pus in a foot.
Pauling had been hoping it would clear up in time for him to press on in pursuit of a second successive Festival triumph.
But the Gloucestershire handler said: "He's still not 100 per cent on his foot and at this stage we are not going to be able to get final work into him.
"There is no easy way about it. It's a very sad day for us to rule him out but it's the right thing to do by the horse.
"The last thing we want to do is kick on and cause another injury.
"Aintree is very much in mind. I was at the vets this morning and, all being well, we'll be back on in four or five days' time, and if that is the case, we'll be driving on for Aintree."
Willoughby Court's owners Paul and Clare Rooney were also dealt a blow earlier in the week when Harry Fry's Supreme Novices' Hurdle fancy If The Cap Fits was ruled out of the Festival.
Pauling said: "It's the second horse they've lost for the meeting in a week and another fancied horse in a Grade One.
"I can't say enough how brilliant they are to work with and Jason Maguire (racing manager) has been fantastic.
"They've taken it well as a team and that makes the job a lot easier."
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