Duci Annalisa, Grimaudo Giuseppina, Nerino Vavassori & 15 others v Zubedi Beach Properties & South Port Properties Limited [2017] KEELC 3427 (KLR)

Full Case Text

REPUBLIC OF KENYA

IN THE ENVIRONMENT AND LAND COURT

AT MALINDI

ELC CASE NO. 186 OF 2015

1. DUCI ANNALISA

2. GRIMAUDO GIUSEPPINA

3. NERINO VAVASSORI & 15 OTHERS………………PLAINTIFFS

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ZUBEDI BEACH PROPERTIES……………………1ST DEFENDANT

SOUTH PORT PROPERTIES LIMITED………….2ND DEFENDANT

JUDGMENT

1. On 15th October 2015, 18 Plaintiffs styling themselves as the Owners of Villas and/or apartments at Harbour Key Cottages in Coral Key, Malindi, filed this Suit against the 2 Defendant Companies. The Plaint, later amended on 5th September 2016 prays for Judgment against the Defendants jointly and severally for:

(a) The sum of Kshs 260,676. 48 as against the 1st Defendant for the year 2015

(b) The sum of Kshs 290,920. 18 as against the 1st Defendant for the year 2016

(d) The sum of Kshs 1,745,521. 08 as against the 2nd Defendant for the year 2016

(e) A permanent injunction restraining (the) Defendants whether (sic) by themselves, their servants, agents or representatives from selling, alienating, transferring, charging or in any manner pledging as security or in any manner dealing with all those properties(villas) registered and known as Cottage Nos. 11, 12, 13, 14, 16, 17 and 25 on Land Portion No. 9699(Original number 1863/1) Malindi, Grant Number CR. 28254/1

(f) Costs of the suit and interest.

2. The Original Plaint was accompanied by a Verifying Affidavit sworn by Ms Duci Annalisa, the First Plaintiff herein on 15th October 2015. Annexed to the Verifying Affidavit as a bundle marked “DA1” were copies of Letters of Authority authorizing the First Plaintiff to sign, swear affidavits, testify and prosecute and/or defend the interests of the 17 other Plaintiffs in this case.

3. It is the Plaintiffs’ contention as per the Plaint that the 1st Defendant Zubedi Beach Properties Ltd is registered as proprietor or Leasee of all that parcel of land known as Portion number 9699(Original Number 1863/1) Malindi being the land comprised in the Certificate of Title registered in the Land Titles Registry at Mombasa as CR 28254/1. Pursuant to a sub-lease dated 24th September 1998, the 2nd Defendant M/s South Port Properties Ltd is also registered as proprietor as sub-leasee from the 1st Defendant of all those Villas Nos. 11, 12, 13, 16, 17 and 25 constructed upon the said land.

4. The Plaintiffs are holders of various sub-leases entitling them to ownership of a number of separate and distinct Villas erected on the aforesaid Portion of Land belonging to the 1st Defendant. As at the time of taking up the sub-leases with the 1st Defendant it was agreed that, among other things, the 1st Defendant would provide a number of services such as provision of security, cleaning and garbage collection as well as taking out insurance for the suit premises. Despite the Plaintiffs honouring their obligations under the sub-lease, the 1st Defendant had failed and/or refused to honour their bargain as a result whereof the Plaintiffs had jointly and/or severally suffered loss. It was accordingly the Plaintiff’s prayer that Judgement be entered against the Defendants as shown at Paragraph 1 above.

5. It would appear that the initial efforts to Serve the Defendants with the plaint and Summons to Enter Appearance were unsuccessful. Accordingly, by an application filed herein on 26/10/2015, the Plaintiffs moved the court seeking the following orders:

(i) That leave be granted to the Applicant to Serve Summons to Enter Appearance on the 1st Defendant by Substituted Service by means of an advertisement in any of the Daily Newspapers.

(ii) That leave be granted to the Applicants to effect Service of Notice of Summons upon the 2nd Respondent South Port Properties Ltd, by way of Service of Summons in a foreign country.

6. The application dated 15/10/15 was placed before the Honourable Justice Angote on 26/10/15 and was allowed as prayed. The 1st Defendant was accordingly required to enter appearance within 21 days from the date of the advertisement while the 2nd Defendant was to enter appearance within 30 days, from the date of Service. It is evident from the Affidavit of Service filed herein on 8th March 2016 sworn by Morris Ngonyo that on 11th November 2015 an advert was placed in the Daily Nation Newspaper requiring the 1st Defendant to enter appearance within 21 days from the date of the advert. It is further apparent from the Affidavit of Service sworn by Pauline Mwikali and filed herein on 8/3/2016 that the 2nd Defendant was served by way of Registered Mail through their last known postal address in the Republic of Ireland after the Embassy of Ireland apparently declined to assist in serving them with Summons.

7. In spite of the protracted efforts to Serve the Defendants, none of them has entered appearance to-date and/or filed any defence to the suit herein. Contemporaneous with the Plaint, the Plaintiffs had also filed on 15/10/2015 a Notice of Motion application of the same date seeking orders to restrain the Defendants from selling, alienating, transferring, charging or in any manner dealing with all those properties to which the Plaintiffs had their claim. The said application was allowed on 17/5/2016. Subsequently, the suit was set down for hearing by way of Formal Proof.

8. When the matter came up for Formal Proof on 8/2/2017, the Plaintiffs called two witnesses to testify in support of their case. PW1 DUCI ANNALISA, a resident of Milan Italy and the 1st Plaintiff herein detailed the background of this case. Having indicated that she had the authority of her co-plaintiffs to pursue this matter on their behalf, she testified that Zubedi Beach Properties Ltd, the 1st Defendant herein was the owner of all that parcel of land known as Plot No. 9699 Malindi in which the 1st Defendant had constructed 32 numbered cottages. It was PW1’s case that the 18 Plaintiffs have leased a number of the cottages from the Defendants on certain agreed conditions. The 1st Defendant on the other hand has retained ownership of cottage No. 14 while the 2nd Defendant took up ownership of 6 cottages, namely, Cottage No. 11, 12, 13, 16, 17 and 25. All the 32 cottages shared certain common areas and it was a condition of the sublease that all owners of the cottages would pay certain utility charges inclusive of power, water and garbage collection bills for purpose of maintenance of the cottages. PW1 further testified that it was a term of the said sub-lease agreement that the 1st Defendant would either provide the maintenance services itself and/or hire another company to manage the premises. According to PW1, the 1st Defendant had for the initial three years engaged the services of a company known as Oaks Management Ltd to manage the premises. During this period in time, all the plaintiffs remitted payments for the agreed Services to the said Oaks Management Ltd.

9. PW1 testified further that on or about 30th June 2014, the 1st Defendants’ contract with the said Oaks Management Ltd expired and apparently in the absence of a new contract, they ceased to manage the villas in February 2015. Contrary to their expectations, the 1st Defendant neither appointed a new Manager for the villas nor did it take up the responsibility itself. Fearing that things would get worse, the Plaintiffs teamed up and incorporated their own Management Company by the name Harbour Key Cottages Management Ltd to take care of their concerns and interests. PW1 further stated that as at the time the said Oaks Management Company ceased to operate, they left an outstanding debt and the Plaintiffs were obliged to settle the following:

(a) Kenya Power Outstanding Bill Kshs 287,330,60

(b) Municipal Rates 269,924. 00

(d) Insurance 447,515. 00

Total 1,326,769. 60

10. In addition, PW1 informed the court that following the failure of the Defendants to continue with the management of the suit premises all the owners of the cottages were required to pay a Service Charge in the sum of Kshs 220,797. 48 for the year 2015. In this regard, as at the time of filing of the suit, the 1st Defendant which retains ownership and control of Villa No. 14 was in arrears of Kshs 220,797 for the year 2015 while the 2nd Defendant was in arrears of Kshs 1,324,787. 00 for the six Villas in its name being Nos. 11, 12, 13, 16, 17 and 25 for the year 2015. Finally, it was PW1’s contention that the two Defendants were respectively in arrears of Kshs 39,879. 00 and Kshs 164,031. 00 being their respective portions of outstanding power bills which the Plaintiffs had been forced to pay on their behalf to enable the suit premises to continue being connected to power and other utilities.

11. PW2 VALENTINA BERTONCELLI also testified in support of the Plaintiffs case. She told this court that she runs Global Services & Management Ltd, the company that was appointed by the Plaintiffs’ Harbour Key Cottages Management Ltd to run the suit premises after the 1st Defendant failed to renew the services of Oaks Management Ltd in February 2015. According to her, she takes care of all expenses needed to run the Common areas and utilities like security, power and water. All the cottages at the premises are supposed to pay for these charges but the two Defendants have not been paying anything since she took over in February 2015. It was her testimony that in terms of Service Charge, each cottage pays more than Ksh 200,000 a month and some cottages owned by the Defendants are in arrears for payment of power. By coming to court, the Plaintiffs were seeking to recover the amount of money paid on behalf of the defendants on the utilities and management services. It was her testimony that the monies were paid after Kenya Power and Malindi Water & Sewage Co moved to the premises with the intention to disconnect electricity and water.

THE ISSUES FOR CONSIDERATION

12. Arising from the foregoing, I think three issues present themselves for determination by this court.

(i) What were the terms of the contract between the Plaintiffs and the 1st Defendant? Was there a breach thereof?

(ii) What is the nature of the relationship between the Plaintiffs and the 2nd Defendant?

(iii) Are the various sums of money demanded by the Plaintiffs due and owing from the Defendants jointly and/or severally?

The Contract and whether or Not there was a breach

13. In their List of Documents, the Plaintiffs have attached a Certificate of Incorporation issued by the Registrar of Companies indicating that the 1st Defendant M/s Zubedi Beach Properties Limited was incorporated on 18th March 1986. By a Certificate of title issued on 11th April 1996, the 1st Defendant is registered as proprietor as Lesee from the Government of all that parcel of land situated in Malindi Municipality Kilifi County measuring approximately 1. 223 hectares. It is evident from the various leeses executed between the Plaintiffs and the 1st Defendant that as at 16th December 1996, the 1st Defendant had developed a hotel block and a residential estate on the said land comprising of 32 executive residential cottages, Common Swimming Pools together with gardens and other amenities and christened it “the Coral Key Resort.”

14. The 1st Defendant then proceeded to grant sub-leases of the cottages on the Coral Key Resort to the Plaintiffs and other persons. It was the Plaintiffs evidence in court that the 1st Defendant retained exclusive ownership of Villa No. 14 while the 2nd Defendant leased six villas being Vila Nos. 11, 12, 13, 16, 17 and 25. A perusal of a copy of the Sub-lease to the 1st Plaintiff dated 16/12/1996 annexed to the Plaintiffs’ List of Documents reveals that the Plaintiffs were required to pay what was described as Service Rent. The said Rent was calculated on the basis of a “Portion of the Costs, expenses outgoings and matters mentioned in Part 1 of the Fourth Schedule to the sub-lease (referred to as “Service expenses”) as the area of the leased premises have to the total build up area of buildings already erected or to be erected in future from time to time.” The said Service expenses were to be estimated by the 1st Defendant itself in the absence of such an agent at the beginning of every year. The actual amounts payable was to be determined after the 1st Defendant or its managing agent had ascertained the correct amounts payable from the responsible authorities upon which a reconciliation of the accounts would be done.

15. A look at Part 1 of the Fourth Schedule to the sub-lease indicates that the service expenses included expenses of maintaining, repairing, redecorating and renewing:

(a) The roofs, main structure, gutters and rain water pipes of the common parts of the Coral Key Resort.

(b) The water pipes, drains and electric cables and wires serving the Resort.

16. In addition, the expenses included those of lighting and cleaning all the common parts of the Resort as well as all land rent, rates and taxes, insurance costs and other outgoings payable in respect of the Resort. The fees and disbursements paid to any managing agent appointed by the 1st Defendant also formed part of the expenses.

17. Evidently the contract envisaged that the development known as the Coral Key Resort would require certain shared services especially in the areas referred to in the contract as the “Common areas”. It would appear from the wording of the contract and the testimony of the two witnesses herein that these services were an absolute necessity for the comfort and well-being of the owners of the cottages as well as other residents of the Coral Key Resort hence the requirement that the 1st Defendant would appoint a Managing agent and/or carry out the responsibilities referred thereto itself.

18. Both PW1 and PW2 testified before this court that at the beginning of the contract, the 1st Defendant had in compliance with the agreement appointed a company known as Oaks Management Ltd to perform the stipulated functions. It was clear from their testimony that the management contract expired on 30/6/2014 and the 1st Defendant failed, refused and/or neglected to appoint another firm to carry out the duties. A look at a copy of the contract between the 1st Defendant and the said Oak’s Management Ltd attached to the Plaintiff’s List of Documents indeed confirms that the management contract expired on the said 30/6/2014.

19. In her testimony, PW1 told this court that in the absence of a managing agent and/or the 1st Defendant stepping in they had been threatened with power and water disconnection as there was no one to take care of the same and to ensure the security and well-being of the Coral Key Resort and its occupants. The failure by the 1st Defendant to appoint a new managing agent and/or take over the responsibility itself was therefore a major drawback on the terms of the contract signed between the Plaintiffs and the 1st Defendant.

20. A perusal of Clause 6 of the Lease Agreement on the 1st Defendant’s Covenant with the Plaintiffs reveals that the 1st Defendant was required to ensure that the Plaintiffs “peaceably and quietly hold and enjoy the leased premises…..without any interruption or disturbance from the 1st Defendant or any person or persons rightfully claiming under or in trust for the 1st Defendant,” as long as the Plaintiffs honoured their part of the obligations. Indeed, it was a term of the contract under clause 6(c) that subject to contribution and payment, the 1st Defendant would maintain repair, redecorate and renew

(i) All Common Parts in the Resort

(ii) The boundary walls fences, gutters and rainwater pipes

(iii) The water pipes, drains and electric cables

(iv) The Swimming Pool and

(v) The Common grounds and gardens

21. In addition, it was the business of the 1st Defendant to ensure under Clause 6(b) of the contract that every person to whom a cottage was leased would be bound by similar terms as the Plaintiffs and that such a person would observe the covenants thereunder. Clause 6(d) placed an obligation on the 1st Defendant to ensure and keep insured the Swimming Pool and all Common Parts while clause 6(e) required them so far as practicable to provide for the lighting of and to keep the common parts of the Resort and the Swimming Pool in good condition and order. The 1st Defendant’s Covenants under the Lease were in my view, critical to the Plaintiffs’ peaceful and dignified enjoyment of the leased cottages and the 1st Defendant’s breach thereof was indeed enough ground for the Plaintiffs to repudiate the leasehold arrangement.

The Relationship between the Plaintiffs and the 2nd Defendant.

22. Having determined the relationship between the Plaintiffs and the 1st Defendant, it is equally important to explore the nature of the Plaintiffs relationship with the 2nd Defendants. The 2nd Defendant is described by the Plaintiffs as a limited Liability company incorporated in the Republic of Ireland and having its registered offices in both Ireland and Kenya. From the Certificate of Title annexed to the Plaintiffs list of Documents, it is apparent that vide a sub-lease dated 24th September 1998, the 2nd Defendant was registered as the Owner of all those villas known as villa Nos. 11, 12, 13, 16, 17 and 25 situated at the Coral Key Resort. The Plaintiffs contend that while the terms and conditions of all the Sub-leases from the 1st Defendant are similar for all cottage owners, the 2nd Defendant has failed to meet their obligations as a result whereof the Plaintiffs have been forced as at 1st July 2016 to clear on behalf of the 2nd Defendants an outstanding Service Charge bill of Ksh 1,488,815 for the year 2015 and Kshs 1,745. 521. 08 for the year 2016 and the same continue to accrue every year. It is also contended that the 2nd Defendants have failed to pay for their portion of power and other Service expenses due under their contract with the 1st Defendant.

23. While the contract between the 1st Defendant and the 2nd Defendant is not annexed to the Plaintiff’s List of Documents, it is clear from the various interests registered on the 1st Defendant’s Certificate of Title No. 9699(Original No. 1863/1) that M/s Southport Properties Ltd, the 2nd Defendant herein is shown therein as having secured leases to Villa Nos. 11, 12, 13, 16, 17 and 25 at the Coral Key Resort. As we have seen hereinabove, these cottages share certain common areas and utilities which require to be serviced by all the owners.

24. Clause 5 of the Lease dated 16th December 1996 between the 1st Plaintiff and the 1st Defendant as annexed in the Plaintiffs List of Documents provides as follows:

5. The Lessee hereby Covenants with the Lessor and with the Owners of the Other Cottages comprised in the Coral Key Resort as follows:

(i)………………………………………………………………………….

(ii)………………………………………………………………………….

(iii)To contribute to such Portion of the costs, expenses, outgoings and matters mentioned in Part I of the Fourth Schedule hereto as the area of the leased premises have to the total built up area of buildings erected or to be erected in future from time to time….”

25. It is therefore clear to me that in bringing this suit as against the 2nd Defendant, the Plaintiffs herein are relying on Clause 5(iii) which imports the contract between themselves and the 1st Defendant into the contract signed between the 1st and 2nd Defendant to the extent that all occupants and/or owners of the cottages are bound to pay for costs, expenses and other outgoings. Part 1 of the Fourth Schedule to the sub-lease as we have seen above details all expenses payable for the common parts of the Resort such as lighting and cleaning, land rates, taxes, insurance premiums and other expenses for maintaining and repairing the gardens and swimming pools at the Resort. In an arrangement analogous to that of a tenancy is common under the Sectional Properties Act, the Plaintiffs jointly incorporated a company to help them control, manage and administer the Common Property including payment of any insurance premiums and land rent. The payments were made inclusive of the portions occupied by the 2nd Defendant’s cottages. Accordingly, it is my finding that there was an implied contract between the Plaintiffs and the 2nd Defendants that justify their bringing this claim against the 2nd Defendant.

26. The Plaintiffs testified that the 1st Defendant and their Managing Agents M/s Oaks Management Ltd left an outstanding debt after they literally disappeared from the scene and left the Plaintiffs to carry on on their own. The owners or Sub-lessees of the cottages were therefore forced to organize themselves to salvage their situation. Accordingly, they used the same sub-lease document they had executed with the 1st Defendant to calculate and apportion the amount every owner of a cottage would contribute to pay for the outstanding dues. I have scrutinized the various demands made upon the Resort by various utility providers and the tabulation of the amount every cottage was to pay in the Plaintiffs’ List of Documents and I am satisfied that the distribution and apportionment was just and fair as the amounts were basically shared equally across the 32 cottages.

27. Indeed according to Vallentina Bertoncelli(DW2) who currently manages the premises, it is imperative for her to provide or render the Services required that all the owners of the villas have to pay their portions in full. In the absence of the 1st and 2nd Defendants and their neglect to pay dues for the cottages under their control, the Plaintiffs have been forced to chip in to avoid a situation where various utility providers would disconnect services such as power and water to the Coral Key Resort thereby causing hardships to all the other occupants of the cottages.

Are the Sums Claimed Due and Owing from Defendants?

28. In their said List of documents, the Plaintiffs have annexed various receipts from payments made for land rent, electricity, insurance and other utilities after the same were demanded for by the various responsible authorities. As I have said, they have also attached a tabulation as to how the various sums due were apportioned to the 32 cottages. I am satisfied and I find that the Plaintiffs had a duty to mitigate their losses after the two defendants abdicated their respective responsibilities under the lease. The Plaintiffs were therefore justified to make payments for these utilities as failure to do so would have led to their losing out on their investments. Having made the payments, the Plaintiffs are in my view perfectly in order to demand reimbursements therefor from the Defendants.

29. Accordingly, Judgment is hereby entered for the Plaintiffs against the defendants jointly and severally as prayed in the plaint.

Dated, signed and delivered in Open Court this 17th day of March 2017.

J. O. OLOLA

JUDGE