Conflict problem for Chow bros’ lawyer

BUSINESSDESK: Counsel for the Chow brothers, Justin Toebes, may have a conflict of interest representing both the Wellington brothel owners and Portfolio NZ, a joint venture at the heart of a dispute with the Chows’ jilted ex-architects.

In the High Court in Wellington today, Justice Ronald Young said if the dispute between Flax Design and John and Michael Chow continues, Toebes’ representation of Portfolio could create a potential conflict, as the vehicle was to issue share capital to the architects as part of the joint venture.

“The litigation is essentially between the people from Flax and the Chows – Portfolio is a kind of hollow entity that’s got some money sitting there,” Justice Young said.

Aligning the interests of the Chows with Portfolio could create a “clear conflict” in the trial process, the justice said.

Justice Young said he would consider the issue of future costs for Portfolio, but would not grant any relief for legal fees relating to past orders against the Chows.

Toebes said the easiest way to proceed for Portfolio was to appoint a liquidator because it was “clearly insolvent,” but Justice Young said the hearing wasn’t the forum to make that kind of order.

Portfolio was set up in May last year for Flax Design to provide exclusive architectural services to the Chows. Flax was to pay three instalments totalling $123,000 for a third-share in the venture, and had paid almost $89,000 before the deal was terminated by the Chows, who are adding property development to their sex industry interests.

The parties agreed to meet after today’s hearing to create greater clarity around Flax Design’s claim against the Chows, and Justice Young recommended the plaintiff’s counsel, Kevin Sullivan, better define the nature of the joint venture.

Timetabling will follow once statements of claim and defence are narrowed, Justice Young said.

Last year, the Chows were ordered to repay $137,000 taken out of Portfolio the same day the vehicle had its assets frozen by an earlier court order. In that hearing, Flax Design’s counsel said his client was seeking $937,000 in damages over the breakdown in the relationship.