The forces behind developers Virtical and Core Asset Development have lost in their attempt to sue the prior owner of the historic Hotel Australasia over supposedly contracted works not completed.
The heritage-listed Hotel was built 1904, located in the idyllic precinct of Eden, on the NSW south coast.
After serving the community for more than a century, it closed and was shuttered around 2012.
In the late twenty-teens Bega Valley Shire Council purchased the faded community eyesore for $535K. The building needed a lot of work, and in May 2020 Council on-sold it to Karneil – an entity owned by south coast builder Neil Rankin and a partner – for $150K.
Property and legal manager for the council, Rickee Marshall, offered that the low price would help shape a new future for Eden, bringing investment to rescue an iconic local landmark.
Rankin painstakingly restored the building’s original Federation façade, before selling the property and opportunity to Core Asset Development (CAD), led by Mark Toma and John Palasty, and their new entity Eden Australasia P/L, for $1.65 million, in March 2022.
Just two months later, Eden Australasia launched a civil case against Karneil in the NSW District Court, alleging the previous owners had breached their contract by not completing agreed works on the veranda, facade and roof.
The claim stated the incoming owners were out of pocket for the works and sought around $178K plus costs.
CAD was at the time also preparing its $100-million Sapphire of Eden project, on the old Eden Fishermen’s Club site, due to feature a 5-star hotel of 78 rooms, four five-storey residential towers, and assorted amenities.
But toward the end of 2022 work stopped on Sapphire and refurbishment of the Australasia, which was anticipated to have already opened, as CAD found disputes with council over DA approval times and associated roadworks.
CAD senior adviser John Palasty pronounced that plans for the 5-star hotel had been scrapped, to be replaced by more residential apartments, quoted as being due to “the incompetence of this council in processing applications”.
Mayor Russell Fitzpatrick hit back, explaining that council had been inundated with development applications since the Black Summer fires and that this was affecting processing times. He described such an attack on the integrity of staff, due to factors outside their control, as “downright appalling”.
Fitzpatrick also claimed Palasty repeatedly undertook unapproved works at Hotel Australasia.
“And he has blatantly ignored orders to cease unapproved works,” said the Mayor.
Despite the conflicts, after more than a decade in the dark, Hotel Australasia resumed trade with a grand reopening on 17 December (2022).
When CAD first looked at the property 18 months prior there were still dirt floors, and much work needed to be done.
The company reportedly spent around another $3.5 million on the renovation, expanding trading spaces and introducing elements such as a new distillery, producing vodka and gin, and opening eight assorted accommodation rooms. The result was a stunning sympathetic transformation of the beloved period hotel.
CAD marketing and operations manager Hanna Marshall remarked it had been a “huge undertaking” to get it to the point of re-opening.
Nearly two years since trade resumed, the case against Karneil appeared before the District Court last month, with the defendant rejecting the allegations, arguing works were completed in compliance with the contract. Rankin provided photographic evidence supporting that the work was done as specified by the settlement day.
In response Eden Australasia offered that Karneil would be in breach of clause 53.1 of the contract even if it had performed the works, if it had then failed to pay for materials or sub-contractors.
On 29 August Judge Susanne Cole spoke of the failed relationship between Palasty and Rankin after the settlement, which it was said mostly related to a “difference of views as to what work Karneil was liable to perform and pay”.
By Cole’s reckoning Karneil’s obligations were limited to specific works outlined in the contract, and that CAD had failed to prove that it “paid any amount that Karneil ought to have paid in relation to the performance of the work required”.
The judge stated that the burden of proof was on the plaintiff, Eden Australasia, and it had failed to meet this benchmark. The claim was dismissed.
