High Court Overturns Sh93 Million Compensation for a Hotel in Malindi
In a significant turn of events, the Supreme Court of Kenya has quashed a Sh93 million award to Sea Star Malindi Limited and remanded the case back to the Court of Appeal for reevaluation. The ruling, handed down on [date], centres around the construction of a five-star hotel in Malindi that was demolished by the defunct Kilifi Municipal Council.
The saga began in 1994 when Sea Star Malindi Limited purchased a piece of land with the intention of constructing a hotel. Construction commenced in 1996, with a projected completion within one year. However, the Kenya Wildlife Service (KWS) halted the construction in April 1997, citing encroachment on a protected area.
KWS accused Sea Star Malindi Limited of adversely affecting the delicate ecosystem of the marine park with continued encroachment. The company was alleged to have put up waste disposal facilities on porous coral reefs and to have constructed part of the hotel 100 feet from the high-water mark of the Indian Ocean, which is delineated as part of the marine park. KWS maintained that the construction would have led to irreversible consequences and a complete loss of an essential natural resource.
Despite the KWS order, the construction continued, and the hotel was 40% complete when it was stopped. Sea Star Malindi Limited suffered financial losses due to the inability to complete the construction as projected. Consequently, the company demanded compensation for loss of income starting from December 1, 1997.
In 2023, Justice Millicent Odeny awarded Sh709,828,966 to Sea Star Malindi Limited against the defunct Kilifi Municipal Council for demolishing the hotel that was 90% complete. However, the Supreme Court has now quashed this award, stating that the quantum of damages had not been properly assessed.
The Supreme Court judges are cautious of the possibility of Sea Star Malindi Limited receiving double compensation for the same loss. They have directed the Court of Appeal to carry out an evaluation and determine if KWS is liable and if the award from the Kilifi County Government was enough to avoid double compensation.
The Court of Appeal's interference with the trial judge's discretion, particularly regarding the interest rate awarded, was also questioned. The majority of the Court of Appeal had interfered on the basis that the trial judge did not provide adequate reasoning for awarding interest at commercial rates instead of the court's standard rates.
In light of these concerns, the Supreme Court ruled that the damages award required a fresh and reasoned assessment by the Court of Appeal to ensure proper justification and adherence to judicial standards. The Court also stated that it would be premature and procedurally inappropriate to pronounce itself on consequential matters that can only be properly addressed once liability is conclusively established.
This decision marks a significant step in the long-running dispute between Sea Star Malindi Limited and KWS over the construction of the five-star hotel in Malindi. The case will now return to the Court of Appeal for a fresh evaluation of the damages quantum and the applicable interest rates.
- The Supreme Court's ruling on the Sea Star Malindi Limited case highlights the importance of proper assessment in financial matters, as they have quashed the Sh709 million award earlier given and remanded the case back to the Court of Appeal for reevaluation of the health of the case, especially concerning the impact on the business and finance of Sea Star Malindi Limited.
- The political implications of the Supreme Court ruling are far-reaching, as it encourages an approach that upholds judicial standards in paper (epaper) discussions about the case, ensuring transparency and accountability in matters pertaining to both the environment and business.
