Sun, sand and suits: The story of Malindi

 With the perfect combination of sun, sand and sea, Malindi makes for the ultimate tourist destination.

Must-see sites include the Gede Ruins, Marafa Depression, Malindi Marine National Park (the oldest marine park in Kenya) and the Vasco da Gama Pillar. These, coupled with the azure waters and white sandy beaches, make it one of the most attractive tourist destinations in the Coast region, with strong potential for development due to large chunks of land that offer opportunity for investment.

Land prices are fairly reasonable compared with Mombasa and Nairobi. These are perhaps some of the reasons foreign investors, mainly Italians, have opted to put their money there.

But behind the beautiful sandy beaches lies a problem. Some of the owners of the luxury hotels that dot the shoreline are engaged in endless court battles. 

So, in Malindi, it has become imperative that before you buy property, you must first visit court registries in the town and in Mombasa, just to be sure it does not come with a court case.

At least six Italians are engaged in a fierce battle over the management of Johari Villas, situated about 600 metres from the Malindi Marine National Park. In July, the High Court in Malindi issued a directive stopping the shareholders from interfering with the villas until the dispute is resolved.

Italian investors

The case was filed by Italian investors Eugenio Fioravanti, De Martino Melake and five others. They have sued Mr Francesco Lepri and Mr Devis Ruzzini – also Italians.

 Justice Reuben Nyakundi also allowed Mr Fioravanti and Mr Melake to continue with their derivative case against Mr Lepri and Mr Ruzzini, whom they have accused of mismanaging and neglecting the villas. The board of directors of the property has also been restrained from intimidating the two and four other Kenyans during their meetings. The court notes that the issues raised by the parties in the suit can only be resolved after a full hearing.

Mr Melake and Mr Fioravanti filed the case together with Kenyans John Waimiri, Emma Muthoni and Robert Achoki and two other Italians, Carla Tarzalli and Alem Dirar. Mr Fioravanti and Mr Melake accuse their compatriots of being negligent, committing illegalities, and default and breach of duty, to the detriment of the shareholders. They claim the respondents are unable to effectively discharged their management duties as they live in Italy, too far to be available directly or with reach to address shareholder concerns.

They are accusing Mr Lepri and Mr Ruzzini of illegally and irregularly surrendering their duties to third parties – Global Services and Management Company and Sunny Management and Consulting Ltd – which have assumed the role of the board of directors, which is meant for them.

Procurement procedures

The two lament that bidding and procurement procedures were not followed and that Sunny Management and Consulting Ltd, to whom all managerial duties have been illegally surrendered, was single-sourced.

Through their advocate Elius Mutuma, the two claim Mr Lepri and Mr Ruzzini have been involved in wanton waste of corporate assets and finance through meaningless, unwarranted and irregular procurement and outsourcing of management services from expensive service providers, while sidelining the shareholders, by conducting the AGM in Italian, to the detriment of non-Italian shareholders. Mr Lepri and Mr Ruzzini have denied the allegations. They say, through their advocate Donald Kipkorir,  that the plaintiffs did not attach their material leases in the court documents, thus denying the court the opportunity to examine their obligations and duties on the property and as such, cannot prove propriety claims.

"The fact that the defendants are foreigners is irrelevant, as there is no law stopping foreigners from being directors of a company in Kenya," said Mr Kipkorir.

In another case, an Italian investor, Giovanni De Caro has missed an opportunity to be the receiver-manager of Poliscino Oasis Village, a luxury hotel, also in dispute. The court in August this year declined to appoint him to the position on grounds that he has been sued over the same property.

Environment and Land Court Judge James Olola argued that granting this request is tantamount to helping him steal a match upon the complainants who have sued him.

Receiver-manager

"Mr De Caro has been sued herein by the plaintiffs and he certainly cannot be acceptable to be allowed to run and manage the same premises for which he has been sued," said the judge.

Mr De Caro has been sued by Panini Brunella and more than six others —Italians and Kenyans — over the management and control of the property.

Mr De Caro had moved to the court seeking to be appointed the receiver-manager on account that he is the head lessor of all leases where the suit property stands and is the only person with the legal and contractual rights to manage them.

Mr Alexander Kingoro, one of the persons who have sued him, says Mr De Caro is not the owner of the property and that he only owns four apartments there.

Mr Kingoro and his counterparts are accusing Mr De Caro of failing, refusing and neglecting to pay service charge for the property.

The court also declined to allow an application by nine others, also embroiled in the dispute, in which they asked that Geeska Enterprise Solutions Ltd be appointed the receiver-manager of the property.

In another case, Italian Steffano Uccelli and Kenyan Isaac Rodrot are fighting for the ownership of the Sh1.2 billion Salama Beach Hotel with German investor Jurgen Hans Langer and his wife Zahra Langer.

The ownership dispute of the five-star hotel has been litigated in Kenyan courts for the past 10 years. Mr Rodrot and Mr Uccelli have now been charged with fraudulently taking over the hotel from Mr Langer. This may further prolong the ownership dispute.

But the High Court has since stopped their prosecution in the criminal matter until the petition they have filed against their trial is concluded.

Documents filed in court show that the dispute stemmed from a judgment issued in Milan in favour of Mr Langer, who then came to Kenya to enforce it, thereby taking ownership of the hotel. Mr Langer had won a court case against a company that owned the Salama Beach Hotel.

The hotel has over the years managed a high-end holiday resort known as Temple Point Resort.

Papers filed in court indicate that the takeover of the hotel was approved by directors of Ventaglio International SA in Italy. Ventaglio owned Salama Beach Hotel.

Prior to the arrival of Mr Langer with the Milan order, court documents indicate that the hotel was under the control and management of Mr Rodrot and Mr Uccelli, who have maintained that they are shareholders in the resort. The two produced documents suggesting they were not merely directors of the hotel, but also shareholders with ownership rights.

As at 2009 when the Germans first sought to enforce their rights in respect to the hotel, they claimed their company Accredo AG had in its favour a claim for 825,000 euros (Sh104 million) plus interest, but this was reduced to 525,000 euros (Sh66 million) in the final award made in 2013 following appeals in Italy.

Cleared debts

After taking over the hotel in 2010, Mr Langer says he invested in excess of Sh500 million to renovate the hotel, pay employees' salaries, tax arrears and cleared debts.

This investment, they say, was made on the basis of rights granted to them by Ventaglio International SA and rectified through a court process with full knowledge of Mr Rodrot and Mr Uccelli in their then true roles as general manager and director of the hotel.

"We made further investments in the hotel over the years and our overall investment is in excess of Sh2 billion," says Mr Langer in court documents.

Mr Langer has been unable to overturn two court judgments issued in favour of Mr Rodrot and Mr Uccelli, but the arrest of the two and their subsequent arraignment in court for fraud could give the German a glimmer of hope as he has always lamented that forged documents had been used to edge him out of the ownership of the property.

He claims that the two used the questionable documents to dupe law enforcement agencies and obtained favourable orders giving them access and control of Temple Point Resort (formally known as Salama Beach Hotel) thus unlawfully depriving him and his companies of his rightful interest and investment.

The Director of Public Prosecutions has charged Mr Uccelli and Mr Rodrot with several offences, including conspiracy to defraud Mr Langer of the hotel and stealing 840,000 euros (Sh106 million) from Accredo AG in 2010.

They are accused of falsely obtaining the registration of directors of the company by pretences, which effectively made them owners of the hotel.

But Mr Rodrot and Mr Uccelli says through their advocate Joseph Munyithya that their prosecution is illegal and has breached their constitutional rights to ownership of the property.

They have sued the DPP, Inspector General of Police Hilary Mutyambai and Attorney-General Kariuki Kihara.

In a petition to stop their prosecution, the two say that they had been lawfully put in possession of the hotel in February this year in light of their previous victory in the ownership dispute.

"DPP to purport to charge the petitioners in 2020, more than 10 years after the complaints and after numerous civil proceedings between us and Mr Langer can only be a consequence of a consideration of exterior matters, which are against the principles of Constitution," they say.

The criminal case notwithstanding, two court decisions have, however, favoured Mr Rodrot and Mr Uccelli, as far as ownership, management and control of the hotel is concerned.

The German investor maintains that the two have never been shareholders or owners of the hotel and that ownership documents in their possession regarding proprietorship of the hotel were obtained fraudulently while the two were employees there.

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