But an argument about whether the tiles have heritage value could derail a multimillion-dollar development in one of Sydney's most exclusive streets.

The owner of Villa Porto Rosa, on Victoria Street, Camp Cove, wants to demolish the 80-year-old house bought last year for $28 million and replace it with a three-level pile that would have six ensuites, two laundries, four car spaces and a lap pool.

In conflicting heritage reports by prominent architects, the colourful, French-glazed wall tiles and Italian mosaic floor tiles are a key sticking point.

They are thought to have been brought to Australia by Hugh Victor Foy, who built the house about 1928 and lived there until his death in 1943. His role in the department store empire is disputed by some but his grandson, Michael Farrell, said he ran the store for about 40 years.

The president of the Australian Institute of Architects, Howard Tanner, rated the rooms as exceptionally significant in a report in 1998 for the then owner, Beryl Phillips, a member of the Grace family.

"The interior tiles are of unusual taste for the period and for use in Australia, associated with the Foy family's interest in decorative materials," he wrote.

Another leading architect, Andrew Andersons, pointed to similarities between the interior tiles and the exterior of the Mark Foy's building on Elizabeth Street as evidence of the villa's cultural significance. Both buildings were designed by Ross and Rowe, one of Australia's leading architectural practices between the two world wars.

The owner's heritage consultant, Graham Brooks, argued the tiled rooms had no heritage value and, in interior design terms, were more suited to early 20th-century retail arcades and smallgoods shops.

Woollahra Council's development control plan says the building contributes to the heritage of Camp Cove. After considering the reports, a council heritage officer, Louise Thom, backed Mr Brooks's view and recommended approving the demolition.

While the council awaits a new independent report, the owner, Vaughan Blank, has taken the matter to the Land and Environment Court.

The Hollywood director George Miller, who owns three properties in the street, said the villa was a rare remnant of Sydney heritage.

"It's like going to Barcelona and pulling down one of Gaudi's buildings," Miller said.