Conditions precedent compliance and missed opportunities in land development: a cautionary tale

In the world of property development, where millions of dollars and years of planning are at stake, the fine print can make or break a deal. The recent Supreme Court decision in Lendlease Communities (Figtree Hill) Pty Ltd v Mount Gilead Pty Ltd (No 3) [2025] NSWSC 334 illustrates how courts interpret commercial contracts through an objective lens – examining text, context and purpose, particularly where those terms are central to the triggering of consequential contractual rights. The court’s reasoning in the case makes clear that where a commercial contract provides for a sequence of independent but related transactions, precise drafting is paramount to ensure that the failure of one transaction does not stultify the entire arrangement. For developers, landowners and practitioners, the case is a reminder of the high stakes of contractual clarity.

The staged acquisition by Lendlease hits a roadblock

The defendant landowners had once owned a substantial farm in Campbelltown, NSW and had sold off part of that land to Lendlease, which subdivided it into five lots for a residential development. Lendlease now wanted the balance of the original property (Balance Land). A deal was struck and the parties entered into a put and call option deed (Deed) which would see the Balance Land subdivided into Properties 6, 7, 8, 9, and 10, and sold sequentially to Lendlease, each within a fixed purchase window called the Sale Offer Period.

Once the subdivision of the Balance Land was approved by council, the parties could proceed with a staged and sequential acquisition, using the following process for the Balance Land:

• Lendlease could compel the landowners to sell each of the 5 new properties by serving a “Plan of Subdivision (Balance Land)” within a Sale Offer Period. There was no flexibility to extend or renegotiate these deadlines.

• The landowners would use their best endeavours to obtain Council approval of that plan.

• If Lendlease did not exercise its right within the Sale Offer Period, the landowners could compel it to purchase the Balance Land.

That was the plan, at any rate. Lendlease failed at the first hurdle – an appropriate plan was not provided to the Landowners for council approval in time, so Lendlease could not proceed with the purchase within the fixed purchase window of the first property in line, Property 6.

Lendlease subsequently created a Plan of Subdivision (Balance Land) in which the land of Property 6 was redistributed between the other Properties. This plan was then served on the landowners on 12 July 2024 (12 July Plan) with the hope of buying Property 7 as the first property in the staged acquisition process.

However, the landowners did not go along with the 12 July Plan, or the subdivision plan subsequently lodged with Council. The landowner's objection prevented approval by the Council, and the dispute then headed to court.

There were two key issues before the Court.

Was the July 12 Plan a "Plan of Subdivision (Balance Land)"?

The first turned on the Plan of Subdivision (Balance Land). Under the Deed, this was defined to mean:

“(a) a plan of subdivision of the Balance Land … based upon the draft plan contained in Annexure 2 (Annexure 2 Plan), as varied pursuant to clause 7.2." [emphasis added].

Was the Plan of Subdivision (Balance Land) prepared by Lendlease "based upon" the draft plan attached to the deed as Annexure 2 (Annexure 2 Plan) "as varied"?

If Lendlease was right that the 12 July Plan satisfied the requirements for a Plan of Subdivision (Balance Land), the landowners would then be required to use their best endeavours to obtain approval from the Council for that plan.

The phrase “based upon” was central to the Landowners’ submission that the 12 July Plan did not constitute a Plan of Subdivision (Balance Land) within the meaning of the Deed. Justice Stevenson therefore first considered whether the phrase should be interpreted as merely descriptive, as submitted by Lendlease, or as imposing a constraint on the nature of the plan required by the Deed, as submitted by the landowners.

In determining the proper construction of the phrase “based upon”, the Court applied established principles: the rights and obligations of parties under a contract are to be construed objectively, by reference to the text, context (including the contract as a whole and any incorporated documents) and purpose.

Here, the Court found that the more natural reading is that “based upon” functions as a constraint – limiting what may qualify as a Plan of Subdivision (Balance Land). In noting that the 12 July Plan had shrunk Property 6 from 35.6 hectares to 1.41 hectares and reshaped others, Justice Stevenson deemed it was not "based upon" the Annexure 2 Plan.

Moving to the next phrase, “as varied” qualifies the reference to the Annexure 2 Plan. It refers to a permissible variation made under the Deed. The Plan must still be “based upon” the Annexure 2 Plan in its varied form – meaning it must retain a recognisable connection to that original plan. Here, it did not. The power of variation does not permit a plan to be so different that it can no longer be said to be based upon the Annexure 2 Plan. Although this construction may require subjective judgment in comparing plans, the Court rejected the suggestion that it imposes an unworkably vague standard.

What right did Lendlease have to acquire each property?

The second issue was whether Lendlease had lost its right to acquire the remaining properties because it now specified it only intended to acquire Properties 7, 8, 9, and 10, and not Property 6. This turned on what the Deed said in creating the put and call option:

“… [each of the Landowners] irrevocably offers to sell to [Lendlease] each relevant Property (in respect of which the relevant Landowner is an owner) for the Price and on the other terms set out … in this deed”; and

“… [Lendlease] irrevocably offers to buy from the Landowners each Property for the Price and on the other terms set out … in this deed.”

The Landowners contended that Lendlease had lost its right to purchase Properties 7 to 10 under the Deed. Their position was that the Deed “could not be performed … according to its terms,” given that the notice did not pertain to each and every property as required. Additionally, multiple completion dates for various parcels had now already passed. As a result, the landowners argued, their obligations under the Deed were not engaged.

In response, Lendlease argued “each” should be interpreted to mean “any one of” or “any one or more of” the properties. On that construction, Lendlease would be entitled to pick and choose which properties it wished to acquire (for example, Properties 7, 8, 9, and 10, but not Property 6). Lendlease further submitted that any issues regarding completion dates for each staged acquisition could be resolved by interpreting the clauses to be read, for example, as: “11 months after the date on which completion of Contract 6 could have occurred” instead of 11 months after actual completion of the Property 6 contract. This construction, it contended, “requires the least harm to the language and contractual concept to give the options a workable construction consistent with the other terms in [the Deed]”.

Justice Stevenson's view was that this amounted to rewriting the Deed. He held that under the terms of the Deed, Lendlease’s option was to purchase each, meaning each and every one of the relevant properties – not merely any one of them. As Lendlease had expressly excluded Property 6 (as it was originally described) from its notice of intention, it failed to meet the requirement to purchase all properties contemplated under the Deed.