The share­holder war involving some of SA’s most lux­uri­ous hotels and lodges is head­ing to the Con­sti­tu­tional Court, where a Libyan-backed com­pany will chal­lenge a SCA rul­ing that, des­pite its interests hav­ing been unfairly dis­reg­arded, it must sell its stake and exit the busi­ness.

Ensemble Hotel Hold­ings, owned through a chain of Libyan invest­ment entit­ies, has approached the apex court seek­ing to over­turn the rul­ing com­pel­ling it to sell its stake in Leg­acy Hotels & Resorts.

Leg­acy is led and con­trolled by vet­eran hotelier Bart Dor­res­tein.

The Sunday Times reports that the group owns lux­ury hotels, includ­ing the Leonardo and DAVINCI hotels in Sandton, the Com­modore Hotel at the V&A Water­front, and sev­eral lux­ury bush lodges, includ­ing Kwa Mar­itane.

Ensemble estim­ates that its 39.79% share in Leg­acy is worth about R600m, while entit­ies asso­ci­ated with Dor­res­tein own 60% of the com­pany.

The Michelan­gelo Hotel is wholly owned by Ensemble, but Leg­acy runs it through a man­age­ment agree­ment.

Instead of hav­ing to sell its shares to Leg­acy, Ensemble wants the Constitutional Court to order that Leg­acy be auc­tioned off between the two parties.

If this fails, Ensemble wants the mat­ter sent back to a dif­fer­ently con­sti­tuted panel of the SCA to come up with a just and equit­able rem­edy. 

‘We are not seek­ing to per­petu­ate the dead­lock or avoid a law­ful sep­ar­a­tion. We are ask­ing for a rem­edy that respects the right to a fair hear­ing, pro­tects the value of the invest­ment, and can law­fully be imple­men­ted,’ said Ensemble’s CEO, Ziad Jamal Ali El-Barag.

Accord­ing to the papers, the rela­tion­ship between Ensemble and Leg­acy deteri­or­ated over the years owing to ten­sions and dis­agree­ments over cor­por­ate gov­ernance, con­trol and trans­par­ency.

The Sunday Times notes that in 2021, Leg­acy’s major­ity share­hold­ers sought to trans­fer luc­rat­ive hotel man­age­ment con­tracts from Leg­acy Hotels to a com­pany called Leg­acy Hos­pit­al­ity.

They argued that the sanc­tions imposed on entit­ies in Ensemble’s Libyan own­er­ship chain by the UN Secur­ity Coun­cil in 2011 cre­ated repu­ta­tional issues and affected Leg­acy’s busi­ness neg­at­ively.

In papers, El-Barag says Dor­res­tein and other major­ity share­hold­ers engin­eered the move to shift man­age­ment con­tracts to Leg­acy Hos­pit­al­ity as a tac­tic to muscle Ensemble out of Leg­acy.

He also com­plained that, since he was not a dir­ector of Leg­acy Hos­pit­al­ity, he had no sight of the com­pany’s busi­ness deal­ings, con­tracts and fin­an­cials. He told judges that the main share­hold­ers shut him out of the com­pany by repeatedly and over many months refus­ing to give him fin­an­cial records and other crit­ical inform­a­tion to help him ful­fil his fidu­ciary duties.

By 2022, El-Barag’s rela­tion­ship with Dor­res­tein was so strained that he went to the High Court to demand, among other claims, Leg­acy’s fin­an­cial records and that judges force a cor­por­ate divorce between Ensemble and Dor­res­tein through a private auc­tion of shares for con­trol of Leg­acy.

The Sunday Times notes that Dor­res­tein and his fac­tion filed a coun­ter­claim, arguing that Ensemble’s Libyan links pre­ju­diced Leg­acy and amoun­ted to oppress­ive con­duct that impeded the com­pany from doing busi­ness. In his Constitutional Court affi­davit, El-Barag com­plains that the rem­ed­ies awar­ded by the SCA favour Leg­acy over Ensemble, instead of cor­rect­ing the wrongs com­mit­ted by Leg­acy, as iden­ti­fied by both the High Court and the appeal court.

He ques­tions why Ensemble is being pushed out and he is being forced to resign des­pite find­ings that the major­ity share­holder’s coun­ter­claim failed and the com­pany had unfairly with­held crit­ical fin­an­cial records from him.

‘The judg­ment gives no reason why Ensemble, rather than the major­ity, must be the party forced out,’ said El-Barag.

Full Sunday Times report