MANILA - ARMED men were in control of a resort on the Philippine island of Boracay on Thursday, holding the Australian owner and his family captive amid a property dispute, the owner told AFP.

In a telephone interview, Mr Greg Hutchinson said about a dozen men brandishing automatic weapons entered the grounds of the SandCastles resort around 10.00 pm on Wednesday, forcing staff and guests to flee.

'We were in our third floor apartment when they barged in wearing ski masks and forced our guests and staff to leave,' Mr Hutchinson said.

The Australian embassy in Manila said the family had been in touch to say 'they were being prevented from leaving the resort it owns by a group of armed men.' The embassy said it had been in touch with Mr Hutchinson and his family as well as local police but declined to comment further.

Mr Hutchinson said electricity and telephone connections to his apartment, which is next to the resort, have been cut and the emergency exit blocked with a 50-kilogram industrial gas cylinder.

'It's terrifying for my wife, Viveca, and five-year-old twins,' Mr Hutchinson said.

Mr Hutchinson opened SandCastles in 1989 before Boracay grew as a holiday destination.

Boracay police chief Colonel Arnold Ardiente told AFP he had offered Hutchinson and his family safe passage out of the resort but they refused to leave and were waiting for their lawyer.

'It is a civil dispute,' he said, denying there were any armed thugs on the premises.

'Police and security guards had been at the resort all night,' he added.

Mr Hutchinson disputed Chief Ardiente's claim, saying that if the armed men were security guards, 'why are they not in uniform and why are they wearing ski masks?'

He said his lawyer could not make it to Boracay as ferry services had been cancelled due to poor weather.

'Despite a guarantee to let us go, the back door is still blocked and we don't trust the police,' Mr Hutchinson's wife Viveca told AFP.

The dispute is over a 30-year lease the Hutchinsons signed in 1989 with the owner of the land.

The owner is the sister of the local mayor, Ceciron Cawaling.

'Although we have a legal document that says we have a 30-year lease she is simply ignoring the law and thinks she can barge in with her goons and take it back,' Mr Hutchinson said.