The application from Larksbay New Zealand Trustees Ltd was declined by the Central Otago District Council after a hearing earlier this year.
The decision had been appealed by the applicant to the Environment Court and looks set to go to a hearing.
The applicant was seeking land use consent to establish a 1988sq m residential building platform partially within an outstanding natural landscape and to undertake associated earthworks, services, access and landscaping.
It is located about 1km north of the Cromwell bridge on State Highway 8.
The site is accessed from the highway.
The directors of Larksbay New Zealand Trustees Ltd are Jonathan Flaws, of Auckland, and Brian Lloyd, of Christchurch.
The consent sought to have the dwelling sit beside existing grape vines.
The house would be 3m high in the front, rising to 5.5m at the rear and would be painted brown, green and grey with a matt finish.
All water tanks would be buried or partly obscured and the property had access to a water supply.
Cambrians resident Sir Grahame was a prominent critic of the planned Project Hayes wind farm in Maniototo — which was eventually canned — for its visual impact on the landscape.
But he and wife Fiona, Lady Sydney, were full of praise for the proposed Cromwell development.
"I have immense admiration for their demonstrable love of the Central Otago landscape and its unique character, their commitment to the restoration and appropriate enhancement of that landscape where they can, and their long-term devotion to the highest possible level of aesthetic consideration for any activity within their boundaries," Sir Grahame and Lady Sydney said in their submission.
"These applicants do everything very carefully, very beautifully, and with a keen eye on aspects of legacy and contribution which fly far beyond commercial or monetary considerations.
"It seems sensible and obvious that a dwelling should be permitted close to the viticultural activity to which the immediate surrounding land has been committed.
"The applicants wish to live on the vineyard they own, and it is entirely reasonable — and normal — that they should be allowed to do so."
Sir Grahame and Lady Sydney said "they will treat the land with a respect too seldom shown already in this district".
The house would blend both form and materials and would "sit magnificently in this setting".
"It will be a showpiece of understated, enviable appropriateness to the site, a model for future dreamers and all those who love and appreciate this Central Otago landscape and its character, as we know for certain these applicants do.
"We support ... in the strongest possible manner," they said.
But the praise was not enough and the application was rejected by the council hearings panel.
Panel chairman Cr Neil Gillespie said in the decision there were unacceptable adverse effects on open space and visual amenity values on a prominent hillside.
The establishment of the 1988sq m platform would also set a precedent for further residential development at the four other sites on the slopes.
