Dutch brewer Heineken has moved to the Court of Appeal to challenge the inclusion of interest in a Sh1.47 billion compensation award to tycoon Ngugi Kiuna arising from the termination of a distributorship contract in 2016.
The beer maker argues that interest on the damages due to Mr Kiuna’s firm, Maxam Ltd, should not be factored into the final payout, claiming the extra Sh230 million payment was not part of the court proceedings and was only introduced after judgment.
A three-judge bench of the Court of Appeal agreed that the multinational brewer has raised a valid and arguable point.
Maxam successfully asked the High Court to include interest in the final payment, but Heineken had opposed the decision, arguing that the extra payment was not part of the court awards in line with High Court and Court of Appeal decisions of 2019 and 2024, respectively
The inclusion of interest, Heineken argues, would push the award to more than Sh1.7 billion.
Now, the Court of Appeal has directed Heineken to provide a bank guarantee of Sh250 million as a condition for suspending enforcement of the Sh1.7 billion pending the hearing and determination of the appeal.
“In the result, we are persuaded that this is an appropriate case for the grant of a conditional stay,” said the court.
“…Pending the hearing and determination of the appeal, on condition that the applicant shall, within 30 days from the date hereof, furnish a bank guarantee in the sum of Sh250,000,000 in favour of the respondents,” the court said.
The judges warned that the order would automatically lapse if the guarantee is not provided within the stipulated 30 days.
This means that the lower court would proceed and determine the final pay if the guarantee is not provided by then.
The Dutch brewer lost the initial dispute after the courts held that it was liable to compensate Maxam for terminating the distributorship agreement in January 2016.
Maxam 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 contracts entered into by the parties in May 2013.
At the time the contracts were terminated, Maxam argued that it had made substantial financial investments that were likely to be wasted once it was forced out of the business.
The distributor said it had already negotiated and entered into binding agreements with third parties to secure warehousing, delivery and logistics services, significantly expanding the market and increasing profitability for the Heineken brand.
Through lawyer Philip Nyachoti, the distributor accused the beer maker and its affiliates of unilaterally terminating the agreements on flimsy, selfish and malicious grounds.
Mr Kiuna argued that the termination was intended to frustrate Maxam, deprive it of income and allow newcomers to enter the business under more favourable financial terms.
The court was told that Heineken East Africa Import Company, which markets and sells Heineken lager beer, was part of the Heineken Group of Companies, a globally renowned brewer with operations in more than 170 countries.
The dispute later escalated to the Court of Appeal and subsequently the Supreme Court, where the compensation award in favour of Maxam was upheld.
The parties then returned to the High Court for the determination of costs arising from the dispute, at which point the issue of interest was raised.
In November last year, the High Court dismissed Heineken’s application and allowed Maxam’s request for the inclusion of interest in the award.
Heineken argued that the inclusion of interest would significantly increase the amount of damages payable.
The brewer further contended that Maxam was no longer operational and therefore incapable of refunding the money should the appeal succeed. It added that execution of the decree would expose the company to irreparable financial and reputational harm, including the risk of insolvency proceedings.
Mr Kiuna opposed the application, arguing that Heineken had not placed any credible or tangible evidence before the court to demonstrate that he would be unable to refund the money if required.
The appellate court noted that the question of whether interest can be introduced after judgment where it was neither pleaded nor awarded is not frivolous.
“Without expressing any concluded view on the merits, we are satisfied that the first limb has been met,” the court said.
Mr Kiuna is a former chairman of BOC Kenya and is among the company’s largest shareholders. He also previously served on the boards of Proctor & Allan and TransCentury Kenya, where he retains a stake.
