Heineken EA now at Supreme Court over decision to award Maxam Ltd Sh 1.7B for breach of contract

The Supreme Court of Kenya.

Heineken East Africa Import Company Limited has moved to the Supreme Court to challenge the decision awarding one of its former distributors Sh 1.7 billion for breach of contract.

In the appeal, Heineken EA has sued Heineken BV and Maxam Limited (distributor) after the appellate court awarded Maxam Sh 1,799, 978,868 for unlawful termination of contract.

Aggrieved by the decision, the applicant wants the Supreme Court to issue an order of stay against the execution and/or enforcement of the said judgement.

The applicant is challenging the application of article 10 of the constitution in the adjudication of the contract between Heineken EA and Maxam before the appellate court.

Through lawyer Fred Ngatia, the applicant argues that the said article was not pleaded by any of the parties to the dispute.

“The applicant has set out the binding case law that would debar the court of appeal from considering article 10 of the constitution in the application or interpretation of the contract,” said Ngatia.

Heineken EA further argues that the court of appeal should not have used article 10 to to circumvent the clear terms in the distributorship agreement and/or to avoid the inbuilt termination clause.

Court of appeal judges Pauline Nyamweya, Abida Ali-Aroni and John Mativo upheld the award by the High Court to Maxam Ltd of special damages for loss of business to be paid by Heineken E.A and Heineken B.V.

“We affirm and uphold the award by the High Court to Maxam Ltd of special damages for loss of business of Sh 1,799,978,868.00 to be paid by Heineken E.A and Heineken B.V, arising from their repudiatory breach of the Kenya Distribution Agreement,” the judges ruled.

The Agreement

In the case, Maxam Ltd was appointed by Heineken E.A on 1st May 2013 as the exclusive beer distributor in Kenya for a period of three years with an option to extend distributorship for a one-year term.

Through lawyer Philip Nyachoti, Maxam submitted that it was also prohibited from dealing with any competing beer brands during the life of the Distributorship Agreement.

The court heard that the said business relationships proceeded as set out in the respective agreements until 27th January 2016, when Heineken International B.V, on behalf of Heineken East Africa Import Company Limited and on “a without prejudice” basis wrote a letter to Maxam Ltd terminating the agreement.

According to the said letter, the termination was to take effect from 1st May 2016 which was to be the third anniversary of the effective date.

Heineken had also appointed one of Maxam’s sub-distributors to be the main distributor of its products in Kenya.

Maxam Ltd justified the award by proving that it had incurred costs from expanding their business in order to discharge its obligations under the Distributorship Agreement.

It was Maxam’s submission that the termination notice was illegal, unprocedurally issued, invalid, null and void.

Supreme court Deputy Registrar Nelly Kariuki directed the matter to be mentioned virtually on 5th July 2024.