Next step in Chow brothel battle

John (left) and Michael Chow want to open a brothel on the Palace Hotel site. Photo / Paul Estcourt

Wellington brothel owners the Chow brothers are embroiled in a legal fight over the final payment for work on the collapsed Palace Hotel job in central Auckland.

Chow Group's case against Clearwater Construction went to the High Court at Auckland for mention yesterday but is yet to get a substantive hearing.

John and Michael Chow want to open a high-rise brothel on the site of the 124-year-old Palace Hotel, which was demolished in November after it began to collapse.

In May, Auckland-headquartered Clearwater won a building disputes adjudication that Chow Group must pay it $837,645.36, the fifth progress payment for the Palace. Adjudicator John Walton also approved the issue of a charging order over the land under a section of the Construction Contracts Act 2002.

That order leaves the Chows locked down, technically unable to sell or transfer the Palace site, which is opposite SkyCity. Charging orders usually expire after two years but can be renewed if Clearwater goes back to court.

The Chows are demanding a judicial review of Walton's ruling so they can escape the payment and free the land from Clearwater's clutches.

Yesterday, the Chows' case went before Justice Christopher Toogood for mention but the matter has yet to be heard in full.

On June 9, Justice Rodney Hansen issued an oral judgment in the first step of the case, declining an application for interim orders to stop Clearwater enforcing Walton's ruling.

The Chows' application challenged Clearwater's solvency and claimed errors of law in Walton's determination.

Chow lawyer Derek Tait said Clearwater would be unable to pay the money back if the Chows won and the case was reversed.

Tait also indicated Clearwater would be sued for damages over the hotel's collapse.

"Chow Group has serious concerns that in light of the large damages claim that will be brought against Clearwater, the publicity around the collapse of the Palace Hotel and the present economic climate (in which most construction companies are struggling financially), Clearwater will be unable to repay the amount prima facie payable under the determination when it is ordered to make that repayment (which may be years away)."

But Michael Sullivan, a Clearwater director, and Andrew Chambers, a senior manager of ANZ National Bank, swore affidavits about the business.

Sullivan said Clearwater had been operating for more than 22 years, was solvent and able to pay its debts.

The judge said there was nothing in the information provided "to convey the merest hint of financial difficulties. On the contrary, the balances appear to me to fairly reflect the operations of a substantial and successful construction company".

PALACE CASE

November 18: Palace Hotel comes down. Chows refused to pay builders' final bill.

May 11: Chows ordered to pay Clearwater.

June 9: Chows' application for interim orders to stop ruling declined.

Yesterday: Case back in court for mention, has yet to go to full hearing.