A Bay of Plenty couple have lost their home and are out of pocket by more than $1 million after a company owned by a wealthy hotel-owning family failed to compensate them for damage to a motel they operated.

Brigit and Brian Lawrence are owed $1m plus interest by a company owned by the Pandey family, proprietors of a string of hotels, motels and other properties across the country including Auckland's Pullman, the Mercure on Customs St, and a chunk of the former Westin hotel in the city's Viaduct Harbour.

Another company that owned the motel owes them $800,000 plus interest.

The Lawrences left the Lakewood Rotorua motel after enduring five years of burst water pipes and other plumbing problems due to the property's substandard piping.

Following a legal battle which began almost as soon as the Lawrences took over the operation of Lakewood in 2003, the couple have now had the two companies at the centre of the dispute liquidated.

The liquidators Waterstone Insolvency have found that all properties owned by those companies have been sold, leaving not a cent to pay the Lawrences.

Waterstone said it was interested in the sale of 13 properties in the two-year period leading up to the March liquidations of NZ Properties Holding Limited and Capital Hospitality Holding Limited, the companies which owned the Lakewood Rotorua during the relevant period.

The properties include 55 Customs St East in Auckland which is home to strip club Showgirls.

NZ Properties sold the Showgirls building for $2.6m in July last year to Northbridge Trustee Limited. Prakash Pandey, son of the Pandey group head Charles, filed Northbridge's annual return in October, and the registered offices of one of Northbridge's shareholders is the Pandeys' downtown Auckland headquarters.

Capital Hospitality sold the Lakewood to Risecorp Investment Trustee Limited for $1.5m in May 2011. Risecorp is owned by a number of Pandey family members including Prakash. Five years earlier NZ Properties Holding had sold the property to Capital Hospitality for $3.5m.

Another property, the Haspar Hotel at 93 Greenlane East in Auckland, was sold to Risecorp Investment Trustee for $2.5m in May 2011. It had been bought and sold between NZ Properties and Capital Hospitality for $3.5m in May 2006.

The Lawrences were experienced moteliers when they bought the Lakewood lease in February 2003.

What they were not aware of was that the building had defective plumbing.

Between 2003 and 2008 the motel suffered 51 floods due to the substandard piping.

"This was everywhere, this was under the courtyard, this was in the walls, it was on the outside walls," Brigit Lawrence said. "We just never knew whether there would be a geyser in the courtyard, what we would meet the next day."

The Lawrences worked hard to keep the business going, but in the meantime the landlords put the rent up 43 per cent. Eventually the financial situation became untenable and their financier called the receivers into their company, Lawrence Riverside Limited, in December 2007. They finally ceased trading in March 2008.

Capital Hospitality and NZ Properties admitted breaching their lessor's covenants, but denied liability for the extent of the damages the Lawrences claimed.

Just days before a High Court hearing last November, the two companies said they would not defend the claim, and on December 15 Justice Peter Woodhouse ordered them to pay the Lawrences an aggregate sum of $1.8m for loss of income, loss of capital, legal fees, penalty interest, receivership and court costs, all plus interest.

"We haven't seen a penny," Brigit Lawrence said this week.

"We lost our house... we lost our car, we lost our business, we lost our credibility. We are totally hamstrung by all this until it's cleared up."

Brent Norling of Waterstone Insolvency said while the liquidators could not undo the property transactions, they could seek the difference if it were proved the properties had not been sold for proper value.

The directors of the companies had so far refused to co-operate, he said.

"What we need is to look at some valuations, we need to look at the sale and purchase agreements. We've made requests, all of which haven't been complied with.

"We will begin proceedings to force their hand to provide us the information we need to conduct our investigations."

Grahame Fong, a lawyer for Charles and Prakash Pandey's company CP Group, emailed in response to the Sunday Star-Times' calls to the pair.

Capital Hospitality "is not an entity we own, nor has it ever been", Fong said. The registered address of Capital Hospitality's ultimate owner is the Pandeys' Queen St offices, and Prakash Pandey filed the company's annual return in March.

NZ Properties had no assets and had ceased trading, Fong said. Despite the Woodhouse judgment, he claimed it had "no outstanding obligations to any external parties".

Both companies had elected not to continue defending their positions, on the grounds of cost.

The Lawrences were in breach of their lease and owed a significant amount of rent, he said.

The couple were "fully legally aided" and therefore "financially bullet proof".

"This is reflected in the fact that the case dragged on for many years during which NZ Properties and Capital Holdings made very reasonable offers of settlement, which were rebuffed."

- © Fairfax NZ News