Sir Peter Jackson's plans to build a world-class film museum in Shelly Bay were scuppered when Sir Ngatata Love's partner sought $750,000 in consultancy fees to help secure the land.

Months before the Port Nicholson Block Settlement Trust gained the right to buy the former air force base on the Miramar Peninsula from the Crown, Jackson wrote to Sir Ngatata outlining a plan to create a permanent home for his vast array of Lord of the Rings props.

"I have always thought that Shelly Bay would be an ideal site for a state-of-the-art exhibition building of international standard," Jackson wrote in March 2008.

He added that he was concerned about commercial exploitation of coastal Wellington and he would be "honoured" to discuss the plans personally with Sir Ngatata. Discussions over the following months were expanded to include a digital training school on the site.

But the plans were abandoned after Sir Ngatata's partner, Lorraine Skiffington, approached Matt Dravitzki, general manager of Jackson's Wingnut Films, seeking up to $750,000 plus GST - including $250,000 up front.

In return, Ms Skiffington, a lawyer, undertook to conduct work including securing the acquisition of the land, and composing a master plan and publicity plan.

Under the proposal, Jackson and partner Fran Walsh would pay Ms Skiffington $250,000 on execution of the agreement. Further funds would be paid on monthly invoices following receipt of tax invoices.

Services were to be capped to a maximum of $750,000, plus GST.

A source close to Jackson called the consultancy proposal "a serious turnoff" for the director.

Days later, Ms Skiffington pursued Mr Dravitzki for progress on the agreement, as Sir Ngatata was about to have a meeting with Wellington City Council chief executive Garry Poole about the plan.

"He [Sir Ngatata] and I resonate with their core values," she said. "Now that the [deed of] settlement has been signed, we cannot delay."

Jackson and Walsh were unimpressed when they were shown the consultancy deal draft - and refused to sign.

Mr Dravitzki confirmed last week that Ms Skiffington's proposed consultancy deal had scuppered the Shelly Bay museum plan.

"We chose not to sign when presented with the proposed services agreement from Lorraine Skiffington," he told The Dominion Post. "The museum project is not on our agenda."

The Serious Fraud Office is investigating the Wellington Tenths Trust, of which Sir Ngatata was chairman until he stood down last month, over possibly unlawful payments and transactions.

Sir Ngatata was also chairman of the Port Nicholson trust, but has stood down while the investigation is conducted.

The investigation is understood to include a payment of more than $1 million into an account jointly held by Ms Skiffington and Sir Ngatata, which came from Auckland property developer Redwood. It won the contract to build what is now the headquarters of the Department of the Prime Minister and Cabinet on Tenths Trust land.

The payments came to light during the trial of two Wellington accountants of whom Ms Skiffington was a client. Both were jailed for eight years for fraud.

Ms Skiffington and Sir Ngatata have refused to comment on the investigation.

There is no evidence that money changed hands during discussions of the Shelly Bay museum plans and nor is there any suggestion of wrongdoing on the part of Jackson and Walsh.

Documents obtained by The Dominion Post show Kerry Knight, a partner at Equinox, which funded Redwood's development projects, wrote to Sir Ngatata in early June 2008 about Shelly Bay, with "a very brief plan of what we think is needed . . . to basically tie up the project".

This included entering a "heads of agreement" with Jackson, and using it to negotiate with Wellington City Council.

"It is naturally assumed that you will agree to initially work with Redwood while going through the phases above," Mr Knight wrote.

This week he said Redwood and Equinox hoped to be part of the Shelly Bay development and spent "a lot of time" on a master plan that was presented to the Tenths Trust.

However, after due diligence, Redwood recommended that the Tenths Trust and Port Nicholson Block Settlement Trust "use a Wellington developer because of the scope, nature, locality, sensitivity and timing of the development".

Soon after that, the global financial crisis began, and the Tenths Trust said it did not want to be involved in such a "large combined development", Mr Knight said.

The Port Nicholson trust holds its annual meeting today.