Four years ago Stronach Property was given local council development approval to build a function centre, public kiosk and car park on the site of an old bowling club in Newcastle's King Edward Park.

But in March last year the council's decision was challenged by the community group, Friends of King Edward Park in the NSW Land and Environment Court.

They argued that, as recreational land, King Edward Park could not legally be used for the purpose of private or commercial development.

On Monday, 14 months after the case first came to court, Justice Terry Sheehan upheld the group's legal argument and overturned the decision.

"The use of land for private functions … such as weddings, is inimical to its use for public recreation, even if it is, at times, open to the public," Justice Sheehan said.

"It is contemplated that the public will be excluded from the function centre in this case, and from other parts of the land generally. The development is therefore not a commercial facility that provides for public recreation."

The NSW Greens said Justice Sheehan's decision has significant implications for similar development proposals across the state, including those at Paddington Bowling Club and the Talus Reserve development at St Leonards.

"This is significant implications beyond the King Edward Park," Greens Upper House MP, David Shoebridge said.

"It has implications for sites in Sydney and for coastal reserve on the north and south coast.

"The court here is acting to protect the public interest in crown lands. And in doing so setting an important precedent."