Kenya Breweries Limited (KBL) has suffered a major blow after it lost an attempt to stop distributor Bia Tosha from supplying its products across the country.
In a judgment rendered by the Supreme court on Friday, February 17 overturned a decision of the Court of Appeal to lift High Court temporary orders that had granted Bia Tosha one of the largest beer distributors in Kenya the exclusive right to supply beer in 22 areas in Nairobi pending determination of a petition involving partnership dispute.
In their decision, the Supreme Court five-judge bench led by Deputy Chief Justice Philomena Mwilu have also reversed the Court of Appeal's decision to refer the dispute to arbitration per the respective parties’ distributorship agreements.
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Further, the apex court has remitted the case to the High Court for disposal of the Petition dated June 20, 2016, on the issue of a partnership between the parties on a priority basis considering the age of the matter.
The Supreme Court, while ruling on an appeal filed by Bia Tosha, reinstated the temporary orders issued by the High Court preserving the Bia Tosha's distribution territory exclusively to it.
The High Court orders had been issued on June 29, 2016, by Justice Joseph Onguto, pending the hearing and determination of the petition filed by Bia Tosha challenging repossession of the routes and refund of Sh27.3 million it had paid the Kenya Breweries as goodwill in 2005.
While granting Bia Tosha the exclusive right to supply beer in the areas, the judges noted that the Court of Appeal erred when it overturned the ruling by the High Court.
"This was by failing to appreciate and uphold that the dispute before the court related to a breach of constitutional rights. In issuing the relief countermanding that was made by the High Court and by referring the matter to the arbitrator, and making a full and final determination on matters still pending before the High Court, the Court of Appeal fell into further error," Justice Mwilu led bench stated.
The decision comes after Bia Tosha appealed a decision by the Court of Appeal ruling dated July 10, 2020, that Kenya Breweries Limited had been allowed to repossess some routes from it and reallocate them to other distributors, who could not access the market areas.
The Appeal Court also referred Kenya Breweries Limited and Bia Tosha to arbitration as per their distribution agreement while dispensing an application for contempt and arrest of EABL executives.
Further, the Supreme Court has directed the High Court to consider the consequences of any disobedience of the orders issued by Justice Onguto. It found there was contempt on the part of EABL and UDV (Kenya) Limited for interfering with some routes.
"Having overturned the Court of Appeal judgment and having established that there was contempt of court, the same should not go unpunished. We direct the High Court to, based on our finding on contempt, issue suitable punishment for contempt of court on a priority basis as it deals with the petition pending before it on its merits," said the Supreme court.
"Having found that there was contempt of court, the High Court should also proceed to assess the suitable punishment arising out of the contempt application dated August 23, 2016, by Boa Tosha pending before it." the Apex court judges ruled
The 22 routes that Bia Tosha claimed exclusive control and which had been repossessed and given to other companies are Namanga, Bissil, Kajiado, Kitengela, Athi River, Industrial Area, South B, and Nairobi West.
Others are Kenyatta, Langata, Rongai, Kiserian, Magadi, Upperhill, Ngong Road, Hurlingham, Kawangware, Satellite, Dagoretti, UDV A, UDV B, and UDV C.
The genesis of the matter started in 1997 when the partnership between Bia Tosha and EABL was entered when the former was appointed as a distributor for the later's products within Gachie, Mwimuto, Kanunga, Kiambaa, Banana, Karura, Gathanga, Ndenderu, Ndumberi, Tinganga, Riabai, Kanguya, Wangige, and Ridgeways.
Subsequently, in the year 2000, through a letter dated July 20, 2000, Bia Tosha was offered new distribution areas namely Baba Dogo, Kariobangi North, Dandora I, and Dandora II on the condition that it would pay a non-refundable goodwill of Sh6,630,000 to the Kenya Breweries.
In the year 2006, Bia Tosha’s territory grew and included areas of Namanga, Bissil, Kajiado, Kitengela, Athi River, Industrial Area, South B, Nairobi West, Kenyatta, Langata, Rongai, Kiserian, Magadi, Upperhill, Ngong Road, Hurlingham, Kawangware, Satellite, Dagoretti, UDV A, UDV B, and UDV C.
For these territories, the distributor was asked to pay goodwill amounting to Sh31,668,000 out of which it paid Sh27.3 million.
Sometime thereafter, the Kenya Breweries re-possessed Baba Dogo, Dandora I and II, and Kariobangi North, from Bia Tosha to enable the brewer to serve the new areas and Bia Tosha requested to be refunded the goodwill for the territories that were repossessed.
This, the 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. This ignited the dispute after Kenya Breweries assigned other distributors in the area.
