Schweppes left with US$16.4 million bill after attempt to wiggle out of contract

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HARARE – Beverages maker, Schweppes Zimbabwe is set to pay over R247 million (US$16.4 million) to a South Africa-registered company, Blakely Investments, after the High Court threw out its bid to evade paying the money following a packaging material supply deal consummated in 2018.

Schweppes had approached the High Court seeking to avoid paying the money to Blakely, arguing that both parties had violated the country’s exchange control regulations by entering into a supply chain agreement before obtaining exchange control approval.

However, High Court judge Tawanda Chitapi dismissed Schweppes’ request, saying its argument did not justify its bid not to pay for the goods supplied.

The judge said: “I must state that 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.

“It is in my view not the policy of the Exchange Control Regulations to assist contracting parties in business to renege on obligations which arise in terms of their concluded contracts. 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.

“It was not enough for the plaintiff to simply plead that there was no exchange control authority to enter into the contract without anything further and to seek a declaration of invalidity of the contract upon a generalised basis.”

He said both parties had agreed that there were ongoing arbitration and court proceedings in South Africa, which made it impossible to rule in favour of Schweppes.

“In conclusion, it is my judgment that the plaintiff has not made out a case for the issue of the declaratur as sought. It is ordered that: The plaintiff’s claim be and it is hereby dismissed with costs,” the judge ruled.

According to Chitapi’s judgement, the parties’ agreement had been varied several times, which had seen the contract dates being shifted too.

“The plaintiff and the defendant subsequently varied the initial agreement on May 30, 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, the agreement was now due to lapse on June 30, 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,” Chitapi said.

While Schweppes had sought to wriggle its way out based on the claim that parties had violated exchange control regulations, Blakely, said that the argument did not hold any water.

“The defendant pleaded that it would amount to unjust enrichment and be contrary to public policy and a grave injustice were the plaintiff to be allowed to prejudice the defendant of R247,054,711 due to it in terms of the performance by the defendant of its obligations in terms of the agreement for which the amount was due as payment.

“For the reasons given, the defendant pleaded that the plaintiff’s claim be dismissed to prevent an injustice to the defendant,” Chitapi noted.

Schweppes are the manufacturers of the world-famous Mazoe soft drink.