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NZ: Brothel brothers bomb out on High Court bid (Auckland)

Publish Date: 18 Jun 2011
By: Fiona Rotherham

DEMOLISHED: Michael Chow surveys the remains of the demolished Palace Hotel in Auckland. It was being converted to a brothel but was found to be unstable and knocked down. Photo/John Selkirk

Wellington-based sex trade entrepreneurs the Chow brothers have failed in a High Court bid to obtain interim orders stopping construction company Clearwater from enforcing a decision ordering them to pay money owed for building work done on the now-demolished Palace Hotel in Auckland.

The brothers had planned to turn the 124-year-old heritage building in central Auckland into a brothel in time for the Rugby World Cup but the Auckland Council ordered the building demolished last November midway through renovation after it was found to be unstable.

No charges have been laid over the collapse. The brothers have now revived their plans for a super-brothel on the site, saying they will build a Penthouse Club to be opened in early 2013.

At issue in the High Court case is the fifth progress payment due to Clearwater under a contract it entered into with Chow Group to carry out building works on the Palace Hotel. After the Chows refused to pay up, an adjudicator ordered them to pay $837,645 and approved a charging order over the land, under section 29 of the Construction Contracts Act.

The Chows applied for a judicial review of the decision which is still to be heard but also sought interim orders restraining Clearwater from acting on the adjudicator's ruling.

In an affadavit to the court, Chow's corporate counsel Derek Tait argued the group had ''serious concerns that in the 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 would be unable to repay the money outlined in the ruling if it was reversed under judicial review.

In response, Clearwater filed affidavits from one of its directors, Michael Sullivan and Andrew Chambers, a senior ANZ National Bank manager, saying the company had been engaged in the construction industry for more than 22 years  and was solvent and able to pay its debts. The company's works in the past three years included two projects with a combined contract value of around $90 million.

In a written judgement Justice Rodney Hansen said there was nothing in the information provided to indicate Clearwater had ''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''.

He, therefore, rejected the application.

Copyright © 2011 Fairfax New Zealand Limited