Heritage conservation group National Trust lost in its court battle against the redevelopment of the historic Windsor Hotel of Melbourne.

Justice Robert Osborn of the Supreme Court upheld the Victorian Civil and Administrative Tribunal (VCAT) decision that the redevelopment project was exempt from requiring a heritage overlay permit as long as the development remained within the hotel boundary.

The non-profit organization lawyers argued the hotel is part of the Bourke Street Precinct; therefore, the $260 million project required further planning permits to protect the heritage value of the surrounding area.

National Trust Victoria chief Martin Purslow said, “We have done what we needed to do, to hold the system to account on behalf of the public... It is clearly political issue now as to whether this thing should be allowed at the top end of town.”

Purslow has questioned whether the Heritage Act is capable to protect buildings that Victorians value.

Melbourne's Windsor was established in 1883 and remains as Australia's last grand hotel. In 2005, the Halim Family purchased the hotel from the Oberoi Group.

The redevelopment proposal includes returning the original facade and refurbishing of the Grand Ballroom, staircase, Spring Street restaurant, and the south wing suites. A slender tower will rise behind the hotel.