Cardwell Property, which has changed its name to Williams Corporation, had been negotiating with Meridien to sell the project for more than $50 million.
The contract has been terminated seven days before the expected settlement.
It is the second time a potential sale of the project has fallen through – Gold Coast developer Craig Gore was negotiating to pay more than $23 million for it in 2004.
Mr Williams said yesterday that the parties involved in the latest deal had been unable to reach agreement on technical issues.
In a statement, Meridien director Russell McCart said Keith Williams and his son Ben would continue with plans for the development and he wished them the best.
"We are not upset about the situation," Keith Williams said yesterday. "It was just a matter of slight technicalities in regard to putting some of the details together."
Mr Williams said that two years ago it was decided for family reasons to sell the development but now, two years later, he believes it is the right thing to do to retain it.
Williams Corporation will now reinstate its application for the development of stage two of the project, which would be modified from the original plan.
"We will certainly be trying to pick up lost time in moving very quickly in allot of the development there," Mr Williams said.
He said the group would also look at making allot of improvements on the existing stage one of Port Hinchinbrook.
Port Hinchinbrook first stage was approved in 1994, it's progress had been marred with clashes with environmentalists.
Mr Williams said his son Ben would be taking a more important part in the management of Williams Corporation.