Chow Auckland strip club dispute continues

00:56, Aug 14 2014

An interior decorating firm that fitted out the Chow brothers' Auckland strip clubs is one step closer to getting more than $300,000 owed to it after the collapse of one of the Chows' companies.

Vision Interiors has won leave to apply for one of the Chows' companies, PHVS Project, to be put back on the Register of Companies and have new liquidators appointed, according to Justice Mark Woolford's judgment released today.

This was the latest in a string of court battles for the controversial Wellington adult entertainment entrepreneurs, John and Michael Chow, as they bid to take over the Auckland sex industry.

PHVS Project was set up to refurbish their Mermaids and Penthouse bars and brothels in Auckland's Gore St and Karangahape Rd. PHVS contracted commercial outfitter Vision Interiors to renovate the clubs, but the relationship between the two companies deteriorated and the directors ended up in a dispute.

PHVS refused in May 2013 to pay the builders' outstanding invoices or persevere with existing contractual work, according to an Employment Relations Authority decision.

PHVS said it was unable to pay its debt to Vision and other minor creditors and put itself into voluntary liquidation, owing Vision more than $300,000. That included about $200,000 in chattels left in the clubs, such as beds, stereo equipment, mirrors and washing machines.


The loss of work from the Chows and the unpaid debt forced Vision to lay off its one employee, the decision said.

As for PHVS, liquidators Gerry Rea Partners filed a final report in February, offering creditors 5.96 cents for every dollar owed. Vision would get back about $18,000, leaving the builders $282,000 out of pocket.

But the Vision directors believed there were other ways to get what they are owed and were not happy with the way the liquidators dealt with PHVS.

They mounted a legal challenge to have the final liquidators' report removed and for new liquidators to be appointed.

Justice Woolford's decision does not mean Vision has won its overall battle yet but it is one step closer, with the ability to bring its case before the court.

Vision's lawyer, Angela Hansen, told the High Court at the end of last month that the way the liquidation was concluded was "wrong, unreasonable and a breach of good faith".

It had been rushed and did not give Vision a chance to voice its concerns about how the process was handled, she said.

Vision's directors Edward Fernley and Andrew More believed there were further avenues the liquidators could explore to get back more of their money.

PHVS had previously offered Vision $170,000 to settle the debt, Hansen said, which suggested the Chows' company had access to further funds.

The liquidators from Gerry Rea Partners opposed Vision's application, calling it an "inflammatory attack brought about by a disgruntled creditor", Hansen said.

After last month's court hearing, Gerry Rea Partners liquidator Simon Dalton said he was offended at the suggestion he had not done his job correctly.

"We believed we fulfilled our duties, simple as that."

Dalton said if Vision was successful it would set a precedent for other "disgruntled" creditors.

The liquidators had acted in the best interests of the creditors in a "straightforward" liquidation, Dalton said.

In today's decision Justice Woolford said Vision had established an arguable case that the liquidator's final report was filed "prematurely and thereby unreasonably".

November 2010: As the Chows renovate the former Palace Hotel to turn it into a brothel, structural damage forces the Auckland Council to demolish the building. The brothers are ordered to contribute $250,000 to the council's costs.

January 2014: Rival strip-club owner Jacqui Le Prou, of Calendar Girls, challenges the Chows' liquor licence by alleging the brothers were regularly intoxicated at work and would intimidate women working at their club.

March 2014: Chows drop plans for a 15-floor super-brothel, across the road from SkyCity casino, saying they were tired of dealing with licensing challenges.