Supreme Court quashes Sh93 million award to a Malindi hotel

**Supreme Court judges order a fresh reevaluation to determine the liability and other consequential issues in the matter.** [File, Standard]

The Supreme Court has quashed Sh93 million award to Sea Star Malindi Limited for stopping the construction of a five-star hotel by Kenya Wildlife Service (KWS) in 1997.

The structure was later demolished by the defunct Kilifi Municipal Council in 2005, claiming it encroached on a protected area.

Justices Martha Koome, Philomena Mwilu, Mohammed Ibrahim, Smokin Wanjala, Isaac Lenaola, and Willis Ouko ordered a fresh reevaluation to determine the liability and other consequential issues.

The Apex court judges said their decision was cautious of the possibility of Sea Star Malindi Limited receiving double compensation for the same loss.

Sea Star Malindi Limited sued KWS and the defunct Kilifi Municipal Council for demolishing a hotel that was 90 per cent complete.

The High Court awarded the firm Sh93 million in compensation against KWS for stopping the construction of the hotel and Sh709,828,966 against the defunct municipality for the demolitions.

However, the apex court directed the Court of Appeal to carry out an evaluation and determine if KWS is liable and if the award from Kilifi County Government was enough to avoid double compensation.

“The approach we have taken is still cautious of the possibility of the respondent receiving double
compensation for the same loss,” said Justice Koome.

On April 12, 2024, the Court of Appeal awarded Sea Star Malindi Limited Sh93 million against KWS for stopping the construction of the hotel that was 40 per cent complete.

Aggrieved, KWS filed an appeal at the Supreme Court seeking to quash the awards.

Subsequently, on October 4, 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 per cent complete. The construction continued after the High Court ordered KWS to stop interfering with the project.

In their judgEment, the SC said it would be premature and procedurally inappropriate to pronounce itself on consequential matters that can only be properly addressed once liability is conclusively established.

“Consequently, we find it more appropriate to remit the matter back to the Court of Appeal to
"Re-evaluate the evidence tendered before the trial court as against the parties’ pleadings in determining the question of liability and other consequential reliefs,” said Justice Koome.

According to Sea Star Malindi Limited, it bought a piece of land in 1994, which is adjacent to the Malindi Marine National Reserve and Park, with the intention of erecting a hotel thereon.

The company obtained approval of its building plans from the Municipal Council of Malindi on August 15, 1996, and commenced construction with a projected completion within one year.

However, KWS stopped the construction in April 1997 when it was about 40 per cent complete, citing encroachment on a protected area.

The company said it suffered heavy financial losses since it was unable to complete the construction of the hotel as projected and repay the loan of Sh70,000,000 which it took at an interest rate of 35 per cent per annum to finance the construction.

It demanded compensation for loss of income of Sh7.5 million per month from December 1, 1997, when the hotel would have been completed.

KWS maintained that part of the construction had encroached on a protected area, 100 feet from the high-water mark of the Indian Ocean, which is delineated as part of the marine park.

KWS accused the company of putting up waste disposal facilities, including a septic tank on porous coral reefs, and continued encroachment on the protected area, thereby adversely affecting the delicate ecosystem of the marine park.

KWS said that if the construction had been allowed to continue, it would have led to irreversible consequences and a complete loss of an essential natural resource.