Kenyan Supreme Court spares EABL executives from US$300.46m contempt case against Bia Tosha

KENYA – The Supreme Court of Kenya has dismissed the contempt of the court case against East African Breweries Limited (EABL) and Diageo Kenya executives that Bia Tosha had presented to it.

Bia Tosha was seeking the court to fine the Directors of East African Breweries Limited (EABL) an equivalent of 20 percent of EABL’s sales, or Sh39 billion (US$300.46m), for refusing to give it back beer distributorship routes in parts of Nairobi, Machakos, and Kajiado.

The distributor had sued East African Breweries Limited (EABL) executives, including CEO Jane Karuku and Andrew Kilonzo, the managing director of Uganda Breweries Ltd, and other 33 executives for failing to honor the Appeal Court decision to reinstate distribution routes redistributed in 2006.

The long-running battle between the beer maker and the distributor has been returned to the High Court of Kenya for punishment but has released the Diageo executives from the case.

In an appeal, Karuku, together with Kilonzo, asked the apex court to review the decision issued last month, saying the court condemned them unheard. Also named in the case was former director Andrew Cowan.

The senior officials argued that the punishment of jailing them for six months, as sought by Bia Tosha, was radical and gross that should never be issued without hearing them.

The Supreme Court found the application by Bia Tosha to be legally untenable and criticized the applicant for improperly introducing parties not involved in the primary dispute through an application for contempt.

“In the result, and having remitted the dispute to the High Court, we reiterate that the parties are at liberty to raise all their issues for determination by the High Court, which is competently seized of the dispute,” court papers read in part.

“The allegations of non-disclosure, concealment, and misrepresentation of facts are best dealt with by the High Court in line with the directive of this Court, as it is a question of fact and evidence.”

The genesis of the partnership between the distributor and the brewer started in 1997 when they entered a distribution agreement for the latter’s products within some stipulated routes.

In the year 2000, through a letter dated July 20, 2000, Bia Tosha was offered new distribution areas on the condition that it would pay a non-refundable goodwill of Sh6,630,000 to Kenya Breweries.

In 2006, Bia Tosha’s territory grew to 22 routes after receiving rights to new routes. For the newly added territories, the distributor was asked to pay goodwill amounting to Sh31,668,000, to which it paid Sh27.3 million.

However, in the years that followed, EABL’s subsidiary, Kenya Breweries Limited, repossessed some territories, including Baba Dogo, Dandora I and II, and Kariobangi North, from Bia Tosha to enable the brewer to serve the new areas.

Bia Tosha requested to be refunded the goodwill for the territories that were repossessed, but Kenya Breweries declined, indicating that the amounts were non-refundable, and further claimed that it was within their discretion to appoint other distributors as the agreement was non-exclusive.

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