Chow brothers stave off liquidation threat

John and Michael Chow of the Chow Group. File photo

Wellington property developers and brothel owners Chow Group have agreed to pay $875,000 for an unpaid bill to stave off liquidation in their stoush with engineering firm Clearwater Construction.

In the High Court in Wellington, Judge Stephen Kos granted an adjournment to enable Michael and John Chow to pay the bill, and made an order freezing funds in their lawyer's trust account with the sole exception of paying Clearwater Construction.

The delay gives the Chows until Thursday next week to settle the bill, though they plan to appeal last month's ruling upholding a building disputes determination, according to their counsel, Justin Toebes.

Early in the proceeding, Judge Kos said he was inclined to order liquidation if the bill wasn't settled, saying Clearwater should not be burdened with the risk of proceedings.

"It's simply a question of who bears the credit risk," Kos said.

The judge took a dim view of Chow Group's delays, which included not filing a claim early in the dispute, transferring a property subject to an order to another company and withdrawing a later application, saying "it's a pretty sorry catalogue of events."

That led to negotiations between Toebes and Clearwater counsel Lewis Turner to reach an agreement and avoid an order for liquidation, with the Chows topping up the trust account holding $850,000 by a further $25,000.

"It's absolutely fundamental that there's no record a liquidator has been appointed, that would be an intolerable prejudice they (the Chows) could not accept," Toebes said.

The decision means Clearwater Construction will hold the funds in dispute, and if Chow Group is successful in its appeal, it will have recourse to try and recover the cash.

Last month, Chow Group unsuccessfully sought to throw out the building dispute adjudication that led to the liquidation proceeding. They had refused to pay the fifth instalment to Clearwater for work on Auckland's Palace Hotel.

The building was torn down by order of the Auckland Council in November when it began to collapse during work to construct a high-rise brothel opposite SkyCity Casino.

Chow Group escaped prosecution when a city council report found there wasn't sufficient evidence to find the specific cause of the building's failure.