Hopetoun Tea Rooms owner sues Block Arcade management over business expansion that went wrong

THE iconic Hopetoun Tea Rooms have been a Collins St institution for decades, but its owners have fallen out with Block Arcade management over a long-awaited expansion. See what went wrong.

The owners of Hopetoun Tea Rooms fear they will lose the business amid a bitter dispute. Picture: Alex Coppel.

OWNERS of a Melbourne dining institution fear they will lose it in a bitter dispute over a failed expansion.

The Hopetoun Tea Rooms, which have graced the Block Arcade since 1892, had planned to set up a new 200-seat tea room in the arcade’s basement, while keeping the original shop.

The new tea room and a retail store were supposed to open last October. But the basement space is still empty.

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Owner Kelly Koutoumanos and husband Kon say the expansion was encouraged by Block managing director Grant Cohen, whose family — founders of the Godfreys vacuum cleaning empire — have substantially refurbished the heritage Collins St arcade since buying it for about $80 million in 2014.

But according to documents filed in the Victorian Civil and Administrative Tribunal, the relationship soured amid claims of an unauthorised concrete pour and of uncon­scionable conduct involving a loan agreement.

Block Arcade managing director Grant Cohen has been embroiled in the bitter dispute. Picture: Mark Wilson

The Koutoumanoses allege the works in June 2016 damaged the 600sq m basement, making it unusable for trading, and the problem has been too expensive to fix using other contractors.

The couple claim they have paid $211,243 rent for nothing, and builder costs.

A statement of claim by Mrs Koutoumanos’ company, Finetea, accused Block Arcade of using undue pressure and unfair tactics to force Hopetoun to use a certain builder “against its wishes”.

It was further alleged that a Cohen family company, Winchelada, engaged in unconscionable conduct “to coerce” Finetea into signing a $2 million loan agreement, after banks refused finance.

Last week, the Koutoumanoses went to VCAT for an interim injunction to stop Winchelada from enforcing the loan deal in the event of payment defaults.

The iconic eatery has drawn a crowd since 1892. Picture: Alex Coppel.

In her affidavit, Mrs Koutoumanos said Mr Cohen had “destroyed the project”, and if the loan agreement were enforced “I will lose my existing business and everything Kon and I have worked for over the last seven years”.

She is seeking compensation, damages, and a declaration the loan deal is void.

Jonathan Kramersch of HWL Ebsworth Lawyers, for the Block Arcade, told the Herald Sun each allegation would be vigorously defended. He said the Koutoumanoses had leased the basement and begun works before securing finance.

“That’s what’s led to the dispute,” he said.

He said the existing Hopetoun Tea Rooms were not affected by the dispute. “It’s business as usual and is still operating very well,” he said.

A hearing for the case has been set for September 8.

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@JMasanauskas