BAT Kenya wins Sh157m case against Tanzanian distributor

What you need to know:

Tanzania Court of Appeal has annulled a 2016 decision by the high court awarding the money to Mohans.
The firm had sued BAT Kenya over the termination of a cigarette supply contract.

Cigarette maker British American Tobacco Kenya (BAT) #ticker:BAT has won an eight-year legal battle against a distributor in Tanzania, sparing it from paying Sh157 million (Tsh3.2 billion) court award.

The Tanzania Court of Appeal has annulled a 2016 decision by the high court awarding the money to Mohans Oysterbay Drinks Limited as damages after it sued BAT Kenya over the termination of a cigarette supply contract.

Mohans claimed it had the exclusive rights to sell BAT products in Tanzania, which the cigarette maker disputed.

“In our view, there was no evidence to prove the existence of a distributorship agreement between the parties, nor its breach,” said the appellant court.

The dispute

In 2014, Mohans went to the high court to dispute BAT’s award of an exclusive distribution contract to another firm after a review of the cigarette maker’s business model.

The Dar es Salaam-based firm had been importing and supplying BAT cigarettes in Tanzania since 2000.

Mohans claimed in the suit that there existed a contract between the two parties, which BAT unlawfully terminated, causing the supplier damages.

On its part, BAT said the contract was non-existent and, therefore, it was not in breach.

Further, the cigarette maker said it had twice attempted to formalise the business with Mohans in 2008 and 2011, but the supplier turned down the offer.

The high court ruled in favour of the Tanzanian firm in September 2016, holding that an implied contract between the parties existed in their 14 years of engagement.

The judge awarded Mohans Tsh3.2 billion (Sh157m) in damages for loss of goodwill and money invested in the business.

Appeal

After losing the case, BAT turned to the Court of Appeal to oppose the ruling.

The firm said the judge had erred in law among 12 other grounds of appeal.

The three appellate court judges ruled that the parties’ business relationship was “neither express nor implied agreement” between them before 2010.

Further, the judges said the high court had erred in its decision, given that BAT had tried to formalise the distributorship agreement.

“Our construction of the oral and documentary evidence on this point leads us to the conclusion that by repeating the proposal for signing of a formal contract, it is clear that it was not the intention of the appellant (BAT) to be governed by an implied term of contract.”