JJW Hotels and Resorts, the former owners of the historic Berners Hotel, London, are being sued for more than £5m by a building company which has been left out of pocket for the demolition and building work it undertook.
The legal action relates to a £26m project at the property, which was due to reopen last year with 176 refurbished bedrooms, a new bar and restaurant, and ballroom.
Berners went into administration in August 2010 and has since been sold to Marriott International. It is now undergoing further renovation work and will open under the new Edition brand within two years.
Building contractor Shepherd had agreed to carry out demolition, structural alterations, extensions and fitting-out work at the hotel for an agreed price of more than £26m in 2008, but says interim payments were not made as they fell due.
After the builder won an initial judgment in February 2010 for £1.18m, which remains unpaid, it agreed a deal with JJW in May 2010, in which Berners would pay £4.5m, in three instalments, in full and final settlement of all claims, says a High Court writ.
Despite JJW guaranteeing that Berners would make the payment, the money remains outstanding. Now Shepherd is suing JJW for payment of £4.5m, plus VAT and interest, taking the total amount to more than £5m.
Berners Hotel - the past and the future
Originally built in 1835 as five residential houses, the properties were converted to a hotel around 1900. Its name comes from Josias Berners, who bought the land on which the hotel stands for £970 in 1654.
JJW Hotels and Resorts, a Guernsey based company owned by Mohamed Bin Issa Al Jaber, bought the hotel in 2001 and closed it in 2006 to undertake the refurbishment work. When the company later bought the Eton Collection of seven luxury boutique-style hotels, it was mooted that Berners would become the eighth hotel to join the portfolio.
Both the Eton Collection and Berners went into administration last year, with the Eton Collection being bought by the US-based Westmont Hospitality Group and Marriott snapping up Berners for a figure believed to be in excess of £60m.
Marriott is working with American hotelier and designer Ian Schrager to create an Edition hotel at Berners. The first Edition opened in Hawaii in 2010.
By Janet Harmer
E-mail your comments to Janet Harmer here.
If you have something to say on this story or anything else join the debate at Table Talk - Caterer's new networking forum. Go to www.caterersearch.com/tabletalk
Looking for a new job? Find your next job here with Caterersearch.com jobs