Schweppes loses R250 million case

SCHWEPPES Zimbabwe (Schweppes) has lost a bid to overturn a R250 million packaging supply deal to Blakely Investments (Blakely) after the High Court threw out its application to nullify a three year-old agreement on the basis that it was fraught with numerous irregularities.

The June 2021 case was predicated on the Coca-Cola subsidiary’s contention that it could not honour payments to the South African-based company, as the contract relied on had been negotiated in violation of its own procurement policies – by one of its senior executives – and the country’s exchange control regulations, but Justice Tawanda Chitapi would have none of it.

“…I agree with the plaintiff’s (Schweppes) submission that an agreement in breach of a peremptory provision of a statute is void because courts do not have the equitable discretion to dispense with strict compliance with statute. In casu, the court does not have sufficient evidence of Exchange Control Authority put paid to the plaintiff’s case,” he said.

“It is… not the policy of… exchange control to assist contracting parties… to renege on obligations… A party to a contract should not be allowed to seek to invoke the Exchange Control Regulations as a way out of an obligation and where that party seeks to do so, there must be cogent evidence to show that indeed the law was contravened,” Chitapi said, adding it was “not enough for the plaintiff to declare an invalidity of the contract based on generalisations and in disregard of ongoing arbitration, and court proceedings in South Africa”.

Apart from noting that Schweppes had failed to “make a case for the issue of the declaratur sought,” the judge also noted that the parties had made several variations or changes to the agreement since May 2018.

“Variations made in material areas increased the duration of the initial contract from 18 months to five years. The initial contract had been due to expire on December 31, 2019. In terms of the variation to duration,” Chitapi said, adding the current pact was to end in June 2023.

“The variations also resulted in an increase in the volume of product to be delivered by the defendant as well as price variations. The variations also added a new product, name, a machine stretch wrap which was not included in the initial contract. The contract was further varied on June 26, 2018. The variation concerned an increase in the price of the products with such increase to take effect from July 1, 2018,” he said.

While Schweppes had sought to wriggle out of the agreement and pay the Durban-based plastics manufacturer on the basis that it violated Zimbabwe’s strict exchange control laws, Blakely maintains the covenant was valid.

“The defendant pleaded that it would amount to unjust enrichment and be contrary to public policy, and a grave injustice were (it) to be prejudiced of R247 054 711 due to it in terms of… the agreement for which the amount was due as payment,” Chitapi said.

“For the reasons given, the defendant pleaded that the plaintiff (Schweppes)’ claim be dismissed to prevent an injustice to the defendant,” he noted.
And it is not clear whether appeals would be lodged yet.