I borrowed this guide from a friend's kite school website and took the liberty of translating it for the benefit of my students. I think it's a pretty good summary of the main right of way rules.
In the situation you describe it seems rule#3 applies the best, and possibly rule #1 as well if the kiter on the beach was entering the water. Rule #2 might apply to you as well as you must have sufficient downwind space to maneuver downwind, or in case you crash...
The guy who was kiting closely behind you is clearly in the wrong and had to give you right of way and keep a safer distance to allow enough time for both of you to maneuver around. Also, common sense says that if you are kiting behind someone who is getting close to the beach, chances are the person if front of you will HAVE to turn around, therefore that person must expect to have to turn around before you do.
In terms of preventing this situation I have 6 suggestions:
1-Turn your head around, shout and raise your arm and turn your hand around in circles to signal your intention to turn.
2- If suggestion #1 doesn't lead to any results, LOWER your kite over the beach (if possible) as you get to the beach. This will allow the person behind you to change direction safely without hitting your kite. Bringing your kite to 12 is actually blocking most people from passing you, which almost all beginners do when they get nervous with too many people around. I do understand in your situation lowering the kite over the beach might not have been possible...
3- Always try to have a safe zone downwind
4- If you had enough space downwind you could've downwlooped your kite in a long downwind transition to avoid hitting his kite. Of course this requires more advanced skills, but worked many times for me to avoid tangles.
5- Take some time to educate any person who doesn't seem to understand/respect the right of way rules after your session
6- No matter which spot you go to it always seems kiters are hanging in the same areas while there is plenty more space upwind, downwind and further away from the shore with no one around. As you said, choosing a less busy area to kite is the best way to prevent this in the first place.
Christian