EABL, Diageo directors face $300m fine in Supreme Court suit
Friday March 17 2023
Directors of East African Breweries Limited (EABL) and its parent company Diageo face multi-billion shilling fines after being accused of disobeying a Supreme Court order on a beer supply contract.
The brewer’s former supplier, Bia Tosha Distributors Ltd, wants the directors to be fined an equivalent of 20 percent of EABL’s sales, or Ksh39 billion ($300 million), for refusing to give it back beer distributorship routes in parts of Nairobi, Machakos and Kajiado.
The Supreme Court last month ordered EABL to reinstate Bia Tosha on the contested routes following a suit that has dragged in court since 2016.
Bia Tosha told the Supreme Court that EABL has ‘sponsored’ the present distributors to sue at the High Court in a bid to derail the implementation of the apex court’s order.
“The respondents have acted with reckless abandon and with total contempt for the authority of this court, have continued to infringe upon the applicant’s distribution areas,” Anne-Marie Burugu, managing director of Bia Tosha, says in documents filed in court.
Read: EABL bosses fight contempt charges over beer distribution
“…That the respondents upon conviction for the contempt, be condemned, individually and collectively, to pay a fine equivalent to 20 percent of their individual gross company turnovers as reflected in their respective 2021-2022 published accounts.”
Ms Burugu further wants the country’s top court to compensate Bia Tosha more than Ksh1 billion ($7.7 million) for the losses suffered in the seven years EABL has kept it out of the beer distribution business.
The long-running court battle started in 2016 after Bia Tosha accused Kenya Breweries Ltd (KBL) of terminating the distributorship contract entered between them in 2006.
The distributor initially supplied the alcohol in 14 areas before the territory was expanded to 22 larger areas to include parts of Athi River, Kitengela and Kawangware.
EABL then repossessed some routes, including Baba Dogo, Dandora and Karobangi North, so that Bia Tosha could concentrate on the larger routes.
The distributor then asked for a refund of the goodwill but KBL rejected the demand saying the amount was non-refundable.
The refusal to refund the money triggered the court battle as the distributor accused KBL of unfair trade practices.
The High Court referred the matter to arbitration but Bia Tosha appealed against the decision and lost once again.
The distributor then escalated the matter to the Supreme Court and on February 17, the court allowed the appeal by Bia Tosha and directed EABL to reinstate the distributor to the contested routes.
Five judges of the court also referred the matter back to the High Court for the contempt hearing against EABL executives.
Ms Burugu says EABL has continued to trade with third parties in disregard of the Supreme Court order. The disobediences, she argues, are deliberate and pre-determined.
She said the cases filed in the High Court by the distributors following the Supreme Court order are nearly similar, arguing that they are under the direction of EABL.
The distributors have also been accused of failing to inform the High Court of the Supreme Court judgment in their applications.
Bia Tosha wants the parent firm’s directors and EABL CEO Jane Karuku committed to civil jail for a term not exceeding six months.
Read: Early bidders to get priority as Diageo buys EABL shares
“They ought to receive a severe reprimand in both monetary penalties and custodial sentences for its officers for the contempt,” Ms Burugu says.
The application comes a few days after Ms Karuku and Andrew Kilonzo, the managing director of Uganda Breweries Ltd, petitioned the apex court to review the decision issued last month, saying the court condemned them unheard.
The senior officials said having them jailed them for six months, as sought by Bia Tosha, is a radical and gross punishment that should never be issued without hearing them.