Land Rovers that CMC supplied to the Kenya Police in the past. JLR is accusing the motor dealer of substandard performance in the region. Photo/FILE
What you need to know:
JLR told the High Court that it had issued a six-month notice of termination to CMC on August 3 and opened a window for the auto dealer to participate in a competitive tender where RMA beat it and several other dealers.
JLR is seeking to overturn the injunction issued on December 10 stopping it from terminating its dealership agreement with CMC, which the courts Tuesday upheld until January 25.
Jaguar Land Rover has hit back at CMC Holdings and its chief executive Bill Lay over the termination of their distributorship agreement and accused the listed auto firm of poor performance and telling lies.
South Africa-based JLR threw CMC Motors into a crisis on November 26 last year with the announcement that it would transfer the rights to exclusively trade in Land Rover Defender, Jaguar and Range Rover brands to rival RMA Group from February 3 this year.
The auto dealer moved to court on December 7 seeking to stop JLR from severing links on the grounds that the franchise owner was driven by malice because it had prompted CMC to spend millions of shillings to strengthen their pact over the previous three months.
But Tuesday, JLR told the High Court that it had issued a six-month notice of termination to CMC on August 3 and opened a window for the auto dealer to participate in a competitive tender where RMA beat it and several other dealers.
JLR’s operations director for sub-Saharan Africa Nigel Clarke said in an affidavit that no Kenyan court has jurisdiction over the dispute with CMC besides terming Mr Lay a liar.
“The steps requested by the respondent (JLR) including the calling for detailed presentations from the applicants (CMC) and the various meetings held were clearly inconsistent with and a departure from the impugned notices of August 3, 2012,” CMC’s chief executive Bill Lay said in an affidavit.
“It is not available to the respondent to call to its aid the said notices or purport to act in furtherance thereof.”
Mr Clarke countered Mr Lay’s stance, saying the notice remained effective during JLR’s further engagement with CMC and that the franchise owners made it clear that they were reviewing their dealership in Kenya.
“I vigorously deny Mr Lay’s assertions that JLR agreed to continue with the relationship at any time after the issuance of the termination notices,” Mr Clarke said.
Mr Lay says that CMC was not aware that JLR had called for any competitive tendering for the franchise, adding that it was surprised when the franchise owners announced the appointment of RMA as their new dealer in Kenya.
He added that CMC knew and participated in the competitive bids and has now decided to deny all knowledge of the process after losing to RMA and after its request to keep the franchise until end of 2013 was denied.
JLR identified key problems it has with CMC as poor credit rating, non-payment of sums owed to the franchise owners and lack of acceptable showrooms and service centres.
“CMC’s performance as a JLR dealer had been substandard and was among the worst in the region,” Mr Clarke said.
JLR has previously expressed its disappointment with CMC’s handling of its brands in East Africa, blaming the franchise holder of underinvestment in the showrooms and marketing.
Kenya Motor Industry data shows that CMC’s sale of JLR brands fell steadily from a high of 661 units in 2007 to a low of 292 units in 2010 before rising to 404 last year.
Mr Clarke added that the agreement his company signed with CMC was not exclusive and that disputes arising therefrom can only be settled by an English court as it was crafted under the English Law.
Rewriting contract
“I verily believe that this honourable court has no place in re-writing the contract ... any perceived breach of which may only be dealt with under English Law, by the English Courts or through any arbitration commenced under the specific provisions of the contract,” Mr Clarke said.
JLR is seeking to overturn the injunction issued on December 10 stopping it from terminating its dealership agreement with CMC, which the courts Tuesday upheld until January 25.
JLR brands account for 30 per cent of CMC’s annual unit sales and their loss will hurt the troubled auto firm whose operating profits have been falling since 2008.
The threat of losing the JLR brands comes after CMC lost the exclusive dealership of MAN trucks with the appointment of a second dealer, RT East Africa, to distribute the commercial vehicles.
CMC Holdings, which is listed at the Nairobi Securities Exchange (NSE), has been out of the trading floor since September last year when its shares last traded at Sh13.50.
