Ig­nore virus and re­open: Lizard Is­land’s Chi­nese land­lord

The Australian - - FRONT PAGE - JAMIE WALKER AS­SO­CIATE EDI­TOR

A Hong Kong-based Chi­nese com­pany is threat­en­ing to move on the op­er­a­tor of one of Aus­tralia’s most fa­mous five-star re­sorts af­ter it closed down to com­ply with COVID-19 re­stric­tions.

The op­er­a­tor, Delaware North, is ac­cused of break­ing a $2m-ayear sub­lease to run the lux­ury get­away on north Queens­land’s Lizard Is­land and faces pun­ish­ing fi­nan­cial dam­ages un­less the re­sort is im­me­di­ately re­opened.

The “flab­ber­gast­ing” de­mands are spelled out in a lawyer’s let­ter from the is­land’s pri­mary lease­holder, Hong Kong’s SEA Hold­ings group, which in­sists the Great Bar­rier Reef re­treat should have stayed open in de­fi­ance of the in­fec­tion risk and travel bans.

Hav­ing shut down the re­sort six weeks ago, Delaware North has now been told by SEA Hold­ings it is in breach of con­tract and could po­ten­tially lose its sub­lease if the re­sort does not re­open. This is an im­pos­si­ble re­quest when Aus­tralia’s in­ter­na­tional bor­ders are sealed, and Queens­land has banned travel from in­ter­state and overnight hol­i­day stays.

As well, the north­ern sec­tion of Cape York Penin­sula has been de­clared a biose­cu­rity zone to pro­tect the vul­ner­a­ble in­dige­nous pop­u­la­tion — mak­ing for few if any tak­ers for the $2000 to $5000-a-night rates that come with Lizard Is­land’s sta­tus as a play­ground for the rich and fa­mous.

The Queens­land gov­ern­ment is ex­am­in­ing the terms of SEA Hold­ings’s lu­cra­tive 1997 lease on the scenic, coral-ringed is­land 240km north­east of Cairns to rein in the com­pany.

Tourism Min­is­ter Kate Jones told The Aus­tralian: “I am call­ing on the pri­mary lease­holder to do the right thing and show some con­sid­er­a­tion dur­ing this tough time. It’s … un-Aus­tralian not to pro­vide some sup­port right now.”

The in­ter­na­tional prop­erty con­glom­er­ate con­trolled by Hong Kong-Chi­nese busi­ness iden­tity Lu Wing-chi and son Lam­bert Lu is adamant the re­sort must re­open “with­out de­lay”.

In an April 23 ul­ti­ma­tum to Delaware North’s so­lic­i­tor, the com­pany’s Bris­bane law firm, Clif­ford Chance, said: “Given that your client has breached clause 4.5 of the sub­lease by clos­ing the Lizard Is­land re­sort with­out our client’s con­sent, it is also re­quired … to in­dem­nify our client against all ac­tions, claims, de­mands, losses, dam­ages, costs and ex­penses which the lessor may sus­tain or for which the lessor may be or be­come li­able.

“This in­cludes, amongst other things, losses suf­fered by our client un­der its loan fa­cil­ity as a con­se­quence of your client’s breach of the sub­lease and the le­gal fees it has in­curred as a con­se­quence of your client’s ac­tions.

“Our client’s rights in this re­gard are fully re­served … Our client does not con­sent to your client’s clo­sure of the Lizard Is­land re­sort. Please con­firm that your client will re­open the Lizard Is­land re­sort with­out de­lay and that it will com­ply with its obligation­s un­der

the sub­lease in full, in­clud­ing pay­ment of rent.” Nei­ther Delaware North Aus­tralia man­ag­ing di­rec­tor Gary Brown nor its Bris­bane lawyer, Jonathan Why­bird, would com­ment.

SEA Hold­ings said it had ini­tially re­sponded in “good faith” by agree­ing to the re­sort’s clo­sure but this was re­jected by Delaware North in a se­ries of ex­changes that cul­mi­nated in the April 23 let­ter. “We have re­peat­edly urged Delaware North to fol­low the op­er­at­ing guide­lines from rel­e­vant de­part­ments as well as con­sid­er­ing safety mea­sures im­ple­mented by other op­er­at­ing re­sorts/ho­tels,” a spokesman said by email.

Bris­bane busi­ness­man Steve Wil­son, who has a sep­a­rate sub­lease to build a $20m res­i­dence that will be man­aged by the re­sort, de­scribed as “flab­ber­gast­ing” the as­ser­tion that Delaware North had breached its lease con­di­tions by ceas­ing op­er­a­tion.

“I am not aware of all the tos and fros that have gone on be­tween SEA and Delaware, but I do know there is a threat to close the re­sort and that would fly in the face of ev­ery­thing that is go­ing on in the world at the mo­ment, and it would fly in the face of any Team Aus­tralia am­bi­tion,” he said.

“I just can’t un­der­stand why you would want to do that.

“You should be pulling to­gether to help ten­ants to suc­ceed and grow their mar­ket, not talk­ing about ter­mi­nat­ing.”

Lizard Is­land has cer­tainly proved to be a handy earner for the Hong Kong lessee.

SEA Hold­ings se­cured the rights from the Queens­land gov­ern­ment 23 years ago for $16m but charges Delaware North an­nual rent of more than $2m to op­er­ate the five-star re­sort.

The US-based hos­pi­tal­ity ser­vices provider has a grow­ing foot­print in Aus­tralia, count­ing the

King’s Canyon re­sort in the North­ern Ter­ri­tory as well as con­ces­sions at Mel­bourne and Olympic Park and the Syd­ney Cricket Ground in its ex­pand­ing port­fo­lio.

The dis­pute with SEA Hold­ings erupted af­ter the re­sort closed on March 29 with a no­tional re­open­ing date in June. Delaware North sought rent re­lief, in line with the manda­tory code of con­duct put in place by Scott Mor­ri­son to cover com­mer­cial leas­ing dur­ing the COVID-19 pe­riod. The op­er­a­tor cited safety and en­vi­ron­men­tal re­quire­ments in shut­ter­ing the Lizard Is­land fa­cil­ity – re­built af­ter Cy­clone Yasi razed the site in 2011, at a cost of $45m.

SEA Hold­ings’s lawyers pushed back, ar­gu­ing there were no “law­ful di­rec­tives” re­quir­ing re­sorts or ho­tels to cease trad­ing. Dis­put­ing this, Ms Jones said on Thurs­day travel re­stric­tions and other anti-COVID mea­sures ef­fec­tively cost Lizard Is­land its well-heeled cus­tomer base.

In the 23 April let­ter, Clif­ford Chance lawyers re­jected Delaware North’s as­ser­tion that so­cial-dis­tanc­ing re­quire­ments had made it im­pos­si­ble to fly guests to the re­sort by sea­plane. Point­ing to taxi and rideshare ser­vices, the law firm said the Queens­land gov­ern­ment al­lowed them to op­er­ate with one pas­sen­ger or a group from the same house­hold seated in the back seat with ac­cess to hand sani­tiser.

“In the cir­cum­stances there is noth­ing to pre­clude your clients from re­ly­ing on this guide­line when pro­vid­ing sea­plane ser­vices to pa­trons of Lizard Is­land re­sort,” its let­ter said. “We are also in­structed that sea­planes are not the only prac­ti­cal way to the re­sort and it is still pos­si­ble to ac­cess the re­sort by ves­sel.”

The law firm in­sisted there had been no re­quire­ment to close the op­er­a­tion un­der Queens­land work health and safety law, as cited by Delaware North.

Ex­press­ing its “dis­ap­point­ment” with Delaware North, SEA Hold­ings said it had been a longterm in­vestor in Aus­tralia and pro­moter of Queens­land Tourism; its re­la­tion­ship with the pre­vi­ous re­sort op­er­a­tor, GPT Group, had been “per­fect”.

A green sea tur­tle swims in the wa­ters off Lizard Is­land

An aerial view of Lizard Is­land, in­ter­na­tion­ally renowned as a play­ground for the rich and fa­mous

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