Heineken heads to court to bar Equity from paying Ngugi Kiuna’s Sh1.7bn award
Photograph of two men toasting with two bottles of Heineken beer. Heineken has moved to the Supreme Court seeking a stay of a decision granting Ngugi Kiuna more than Sh1.7 billion.
Dutch beer maker Heineken has moved to the Supreme Court seeking a stay of a decision granting Ngugi Kiuna more than Sh1.7 billion for terminating a distributorship agreement, arguing that the Kenyan tycoon was likely to compel Equity Bank to release the money.
Heineken East Africa Import Company revealed in court papers that it procured a bank guarantee from Equity Bank while the case was pending at the Court of Appeal and Maxam Limited, Mr Kiuna’s firm was likely to call for the release of the money any time.
This was after the appellate court upheld the multi-million compensation awarded to Maxam after Heineken terminated its distributorship contract in 2016.
“Once the payment is effected, the sum will not be within reach of this Honourable court,” the Dutch beer maker said through senior counsel Fred Ngatia. Mr Ngatia further said it would be impossible to recover the money as Maxam has no known assets capable of being seized and no certainty exists that such assets will be available by the time the Supreme Court determines the appeal.
The deputy registrar of the Supreme Court Nelly Kariuki certified the appeal by Heineken as urgent but declined to grant the stay order as sought.
Ms Kariuki directed Mr Ngatia to serve the documents to Mr Kiuna’s firm by the end of the day and scheduled the matter to be mentioned before her on July 5 for further directions.
In a judgment last month, a bench of three judges of the Court of Appeal upheld a decision of the High Court, directing Heineken to pay Mr Kiuna the amount for terminating the distributorship agreement in January 2016.
Justices Pauline Nyamweya, Abida Ali-Aroni and John Mativo said the words, ‘without prejudice’, contained in the notice of termination created an ambiguity because of the two words cannot be taken to mean a lawful or valid notice of termination under Clause 17 of the distribution agreement signed by the parties.
“Our finding, is that the letter and Notice of Termination dated 27th January 2016 which was issued by Heineken E.A and Heineken B.V on a “without prejudice” basis was inadmissible as evidence of any negotiations, acceptance or admission on the part of Maxam,” said the judges.
The court was informed that Heineken East Africa Import Company Ltd- which markets and sells Heineken lager beer- was part of the Heineken Group of Companies, a world-renowned and reputable company with operations in 170 countries.
“Absent a stay of ex parte at the first instance, the guarantee will be called upon thereby rendering this motion nugatory,” Mr Ngatia said.
In the intended appeal, Heineken wants the court to determine whether the court of Appeal erred in law by holding that there was a clear presumption that unilateral termination was not available in the distributorship agreement.
“A declaration that once the Court of Appeal erroneously assumed it was bound by imperatives set out on Article 10 when applying or interpreting contract law, the court violated the principle of avoidance which principle is binding upon it pursuant to Article 163 (7),” Heineken said.
The beer maker said the distributorship agreement was for three years starting May 1, 2013 up to May 1, 2016. A notice by either party served three months to the end of the period would terminate the agreement effectively, the firm said.
In the event the agreement was not terminated, the same would be renewed for one year. Similarly, a notice of three months before the expiry of term would effectively terminate the agreement, Heineken said in court documents.
The company said even with the notice, Mr Kiuna earned revenue for a period of four years and three months instead of three years as stipulated in clause 17 of the distributorship agreement.
“It is noteworthy that since termination did not take place, the 2nd respondent (Maxam) continued to trade and earn profits for the next period of one year and three months,” Heineken submitted.
Further, Heineken argued that the Court of Appeal erred in applying National Values and Principles of Governance to a purely private law dispute.
The company further said the appellate court did not specify which national value or principle of governance in Article 10 would be applied in the distributorship agreement or would be used in the interpretation of the agreement.
The Court of Appeal judges said the distributorship agreement legally existed by the time Heineken engaged other distributors.
Mr Kiuna is a former chairman of BOC Kenya and is among the largest shareholders in the company. He also previously sat on the board of Proctor & Allan and Transcentury Kenya, where he has a stake.
Maxam Ltd and its sister companies-Uganda’s Modern Lane Ltd and Tanzania’s Olepasu Ltd- sued Heineken East Africa Import company ltd and Heineken International B.V, seeking damages for the cancellation of the contracts entered between the parties in May 2013.
At the time the contracts were terminated, Maxam stated that it had made massive and substantial financial investments that were likely to be wasted once they were kicked out of business.
According to the distributor, Maxam had already negotiated and entered into binding agreements with third parties to secure warehousing, delivery and logistics that had greatly expanded the market and increased profitability for the Heineken brand.
Through lawyer Philip Nyachoti, the distributor accused the beer maker and its affiliates of unilaterally cancelling the deals on flimsy, selfish and malicious grounds.
Mr Nyachoti argued that the termination was meant to frustrate Maxam, deny the firm income and allow newcomers to infiltrate the business at lesser financial terms.
The distributor sought damages for loss of business, amounting to Sh1.799 billion, among other damages, which was granted by the High Court and upheld by the Court of Appeal.
