The NSW Supreme Court on Friday found the state-run Barangaroo Delivery Authority had breached its contracts with the two companies by failing to negotiate with them in good faith about plans to develop nearby Central Barangaroo.

Crown and Lendlease feared the proposed development, which is being built by a Grocon-led consortium, would block views of the Sydney Opera House and Harbour Bridge from their buildings.

Justice Robert McDougall said in his decision that the drastic transformation of the prominent waterfront site on the eastern side of Darling Harbour in recent years had sparked competition for "that most characteristic of Sydney fixations: harbour views".

His findings mean negotiations between the authority and the companies must continue with the aim of retaining views from Crown's $2 billion casino tower and Lendlease's planned high-rise apartments.

Crown and Lendlease launched legal action against the authority in August in a bid to protect "sight lines" to the city landmarks from their developments at Barangaroo South.

The costly legal battle exposed more than two years of backroom discussions between Mr Packer's advisers at the big end of town and the highest levels of the state government.

The companies argued clauses in their contracts with the authority required the BDA to negotiate with them in good faith about proposed departures from the initial plan for Central Barangaroo which they say guaranteed them views to the harbour.

But the BDA argued the relevant clauses in the contracts were focused on good faith negotiations, which balanced its desire to optimise development at the site, and did not guarantee those "sight lines" would be retained.

Justice McDougall found the authority had breached its contracts with the companies because it had considered various bids to develop Central Barangaroo "without first discussing, and negotiating, with Crown and Lendlease, ways to retain the sight lines that [their buildings] would otherwise enjoy to the Harbour Bridge and Sydney Opera House".

He said the companies acknowledged in their contracts that optimisation of development at Central Barangaroo was of critical importance to the government, while the authority acknowledged retention of harbour views was vital to Crown and Lendlease.

The court agreed with Crown and Lendlease's position that "although retention of sight lines was not guaranteed, the negotiations must nevertheless start from the position of retention".

Justice McDougall also upheld the companies' argument that negotiations between the parties should have started with Grocon's initial bids to develop the site.

"Postponing the negotiations until the very end - when the formal application for planning approval is to be lodged - would largely eliminate the benefits of good faith negotiation because by that point the authority would have closed its mind to alternative proposals."

He said there was "no doubt" the judgment would be challenged in the Court of Appeal.

In a statement, a BDA spokesman said the authority had "at all times sought to protect the public interest" and was disappointed with the outcome. It will consider an appeal.

NSW Opposition leader Michael Daley accused the government of a "massive blunder in planning" and said the decision showed "public interest being defeated by a private commercial interest".

"Sight lines from the Crown development now take precedence over all public considerations on Barangaroo."

Crown declined to comment. A Lendlease spokesman said in a statement that the company was "pleased the court delivered a decision agreeing with our perspective".

"We were very reluctant to take legal action, but after nearly three years of stalled negotiations felt strongly that we had no option."

The companies sought court orders that the authority be stopped from proceeding with the Grocon development bids until it engaged in good faith discussions and negotiations.

Justice McDougall will make orders in the case on Monday.