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Accountant demands €3.5 million fee for Jerma Hotel sale

The contract between the parties stipulated that the consultancy fee was to be 5% of the hotel sale: the value of the land, the share transfer to the buyer, and the remaining profit.

matthew_agius
Matthew Agius
27 January 2015, 7:26am
Derelict: the Jerma Palace hotel in Marsaskala
Derelict: the Jerma Palace hotel in Marsaskala
An accountant who demanded €3.5 million for his services to construction developers Peter and Geoffrey Montebello of JPM Brothers, was granted a precautionary warrant in court to stop the sale of the Jerma Palace Hotel and the surrounding land.

The accountant, Charles Sciriha, of Management Support Services, filed the claim against JefPet Limited, a company owned by Geoffrey and Peter Montebello, who purchased the Jerma Palace Hotel in 2007 from Libyan investment vehicle Lafico.

Sciriha is claiming that the amount represents outstanding fees for consultancy services and representation for the Montebellos in various negotiations, including the sale of the land previously occupied by the Jerma Palace Hotel.

Sciriha was engaged in 2009 on a consultancy, entitling him to a percentage of the sale proceeds and profits if two projects JPM Brothers had undertaken with another company, Gemxija Crown Limited, went ahead.

He said that in spite of having fulfilled his contractual duties, once negotiations on the Jerma sale reached an advanced stage, the Montebellos terminated his contract, claiming that he had abandoned his responsibilities – an allegation Sciriha strongly denies.

The contract between the parties stipulated that the consultancy fee was to be 5% of the hotel sale: the value of the land, the share transfer to the buyer, and the remaining profit.

The Montebellos replied that the €3,525,000 demanded by Sciriha was incorrect, and that the fee would be paid upon the conclusion of the sale of property, the signing of a promise of sale agreement, or the sale of the defendant’s shares in the company. None of those events had taken place.

They also said that the contract gave them the right to terminate the agreement with six months’ notice. “In fact over a year has passed since the date of that contract and therefore, whichever angle you look at it, the contract had been terminated,” JefPet said.

JefPet added that compensation had to be calculated on the basis of time and works carried out, not the percentages claimed.

Under cross-examination, Sciriha denied suggestions that the €3.5 million fee claimed was a “success fee”, adding that the termination clause invoked by the defence envisaged a worst case scenario and not the termination of the contract to the detriment of his rights.

On his part, Geoffrey Montebello said that although there had been no problems or complaints about Sciriha’s consultancy, problems had only cropped up when they disagreed with Sciriha’s suggestion that they further increase his percentage. “We do want to pay him, as long as the fee is as it is supposed to be,” Montebello told the court.

Ms Justice Padovani Grima said that the warrant of prohibitory injunction was necessary to avoid one party “twisting the arm” of the other party into acquiescence, and found that Sciriha had “amply demonstrated a prima facie right.”.

She also held that the warrant was clearly necessary to safeguard a right, due to the impending judicial sales by auction of JefPet Ltd’s and Gemxija Crown’s assets which – were the warrant not to be issued and the assets be sold – would leave Sciriha with nothing to be paid with.

The land on which the Jerma Palace Hotel was built originally belonged to the Franciscan Conventuals and Ivan Burridge, and was sold to San Tumas Holdings, which in turn sold it to the Libyan Lafico in 1976. Corinthia used to manage the hotel through a management agreement.

The hotel was never developed since closing down in the 2000s and then sold to JPM Brothers. At some point in 2009, the Tumas and Gasan groups were seeking advice on transforming the Jerma Palace Hotel into a potential ‘Portomaso of the south’, when JPM Brothers were hoping for an urgent sale of the property to settle outstanding loans with banks and creditors.

matthew_agius
Court reporter Matthew Agius is a Legal Procurator and Commissioner for Oaths. Prior to re...