Wollongong Chifley Hotel owners in withheld cash dispute

Harbour Street Development, which until recently owned the 4½-star hotel, allege Silverneedle Hospitality (SNH) replaced an existing Travelex terminal on November 14 with one from Chifley Doveton - another hotel it formerly managed.

The terminal was then allegedly used to redirect money from an attached Doveton bank account into its own operating account without the knowledge of the Wollongong owners.

The two bodies have been in a dispute over operating fees associated with the sale of the hotel, which Harbour Street Development bought and redeveloped four years ago.

The hotel has since been sold.

On November 27, Harbour Street issued a notice terminating the hotel management agreement, demanding that Silverneedle not use the funds held on account and return them immediately.

Silverneedle denies the allegations and says it has been "entirely transparent with the previous owner in regard to the moneys held as manager of the hotel and has endeavoured to honour all terms of the management agreement".

Silverneedle told the Mercury said it was "holding a sum of about $350,000 on account of employee entitlements and deposits in regard to forward bookings at the hotel".

"SNH intends to honour these obligations," it said.

"SNH has paid all creditors possible on behalf of the previous owner and, in accordance with the management agreement, has asked the previous owner to provide funds that it has withdrawn from the hotel operating account for the satisfaction of all claims from its creditors.

"For the avoidance of doubt, SNH has not paid itself any fees due to it by the previous owner."

Travelex, which operates the terminals on instruction from the hotel owner, refused to comment on the issue.

The Doveton terminal is linked to an ANZ bank account. ANZ has not responded to the Mercury's request for comment.

It is understood visitors to the Wollongong hotel between November 14 and 27 would have Doveton Chifley listed on their transactions instead of Wollongong.

Harbour Street Development have referred the matter to NSW Police.

Harbour Street Development's lawyer, Anthony Stanton, said that over the course of the year, the hotel owner and the management company "came to disagree on expenditure of hotel revenue".

Silverneedle took extraordinary actions to gain control of the hotel cash flow, Mr Stanton said.

"I felt these actions were unlawful and I have reported them to the NSW Police," he said.

"Silverneedle advised us that they were setting aside funds to pay trade creditors. I feel bad for local people who have provided goods and services to this business."

Mr Stanton said the $350,000 taken by SNH for accrued leave and advanced deposits were "purposes that benefit only themselves as continuing operator of the hotel".

"They chose to reserve money for these purposes so they would not be out of pocket in the future, at the expense of paying trade creditors who are owed money right now," he said.

Mr Stanton said SNH would have had enough money to pay all creditors if it had not "reserved" money for its own benefit.

Whether employees got paid for future leave entitlements or whether future bookings were honoured was "nothing to do with SNH reserving this money to itself".

"That action is purely for the purpose of SNH's financial benefit, by reserving money for future liabilities."

Former hotel owner George Callianiotis told the Mercury it had been a long four years since the excitement of buying and completing the Ocean View complex, which incorporates the 168-room hotel across the road from WIN Stadium.

The hotel features a restaurant, bar, business centre, gymnasium and swimming pool as well as a range of conference and meeting facilities.

"It is a fantastic property - the hotel component, which we retained ownership of, operated by Constellation under management, employed numerous people and brought money into Wollongong at a time of economic uncertainty," he said.

"Constellation, an Australian-owned and operated company was bought by Silverneedle in 2011, and is headquartered in Singapore and focused on Asian expansion. It is now a very different company than the one I signed up to manage the hotel."

Mr Callianiotis said it was a shame to no longer be a part of the Wollongong hotel which had a "great staff who have done the property proud".

"It's a shame the way it ended. It just never got the growth required on the basis that we funded," he said. "It's a great buy and a lovely property that didn't quite work for us but we wish the new owners every success."