DEVELOPER George Fendyk has suffered a major setback in his plans to develop a caravan park incorporating the The Castle house on the Beechworth Mayday Hills estate.
He was supremely confident the planning tribunal would decide in his favour based on council staff being in support of the caravan park.
But a decision not to have legal representation at VCAT has backfired.
"I was really naive because I thought VCAT was designed for people like me," Mr Fendyk said.
"I needed a lawyer to dot the i's and cross the t's. I stuffed up.
"I thought I had the opinion of council planning staff on my side and 450 people who have signed a petition wanting to see this all go ahead."
Mr Fendyk bought the home from the 1997 movie with plans to make it an office for the caravan park.
But, the council voted 5-2 against the proposal on grounds including it would adversely affect the significance of Mayday Hills, adversely impact existing uses and affect the amenity and vibe of the surrounding area.
The successful motion was moved by Beechworth-based mayor Jenny O'Connor, seconded by Cr Larry Goldsworthy and supported by councillors Barb Murdoch, Sophie Price and Diane Shepheard.
Cr Bernard Gaffney, who was mayor at the time, and Cr James Trenery backed Mr Fendyk's plan.
"We have got seven councillors who are expected to represent the interests of the shire including towns like Beechworth and do what the people of those places want," Mr Fendyk said.
"The town is missing out on tourism, accommodation and people spending money here.
"The Castle has lost its meaning and is just going to be a house only now by the looks of things.
"It's another tourism icon that is going to disappear down the drain."
Cr O'Connor defended council's support for tourism across the shire.
"Council is open to a range of opportunities that can enhance and develop the tourism offerings in Beechworth and in all of its towns, that meet appropriate visitor markets and are well presented," she said.
"Mr Fendyk has the right to submit a new application."