A recent High Court ruling in Thika, Kenya, has significant implications for local businesses and foreign manufacturers operating in the country. Space and Style Limited, a Kenyan distributor of Decra roofing products, had petitioned the court claiming ownership of goodwill built over 19 years. However, the court dismissed the petition on September 3, 2026, citing lack of jurisdiction over the New Zealand manufacturer, Roof TG Pacific Ltd. The court's decision did not address the central commercial dispute.
Space and Style Limited was appointed as Decra's exclusive distributor in Kenya in July 2004. Over the years, the company invested heavily in marketing, promotion, and advertising, building a reputation for Decra products among Kenyan customers. The distributor claimed that it had built massive goodwill through its distributorship of Decra-branded roofing products. According to Space and Style, this goodwill was separate from the Decra brand itself and constituted property protected by the Kenyan Constitution.
Roof TG Pacific Ltd countered that the goodwill belonged to it under the contract. The manufacturer claimed that Space and Style owed $792,399.33 (Sh102.6 million) in unpaid invoices. Roof TG Pacific argued that the agreement allowed termination where a material breach was not remedied within 30 days after notice. The manufacturer also disputed Space and Style's claim that it alone had financed Decra's growth in Kenya, citing $860,283.63 (Sh110.9 million) spent on promoting the brand between 2010 and 2021.
The court's decision highlighted the complexities of distribution agreements and goodwill ownership. According to the court, goodwill qualifies as property only where it is identifiable and a measurable value can be attached to it. The court noted that Space and Style had not demonstrated the value of the goodwill it claimed. The case has sparked debate over the financial and legal risks facing local firms that invest heavily in developing foreign brands without securing clear protection for the value created.
The dispute has significant implications for businesses operating in Kenya. According to industry experts, the case underscores the importance of clear contracts and protection for goodwill in distribution agreements. The court's ruling also highlights the challenges faced by local distributors in securing compensation for goodwill built over long periods. Space and Style's lawyer argued that the decision left the central commercial dispute unresolved.
The case may have far-reaching consequences for foreign manufacturers and local distributors operating in Kenya. The Kenyan economy has seen significant growth in recent years, driven in part by foreign investment. However, disputes over goodwill ownership and contract termination may deter investors. The court's decision has sparked calls for clearer regulations and guidelines on distribution agreements and goodwill ownership.
The parties involved in the dispute are yet to comment on the court's decision. However, industry experts predict that the case may be appealed or settled out of court. The dispute highlights the complexities of international business and the importance of clear contracts and protection for goodwill. As Kenya continues to attract foreign investment, the case serves as a reminder of the potential risks and challenges faced by businesses operating in the country.
Key points
- The Kenyan court's decision highlights the complexities of distribution agreements and goodwill ownership.
- Space and Style Limited claimed ownership of goodwill built over 19 years with Decra.
- The court's ruling has significant implications for businesses operating in Kenya, particularly in regards to clear contracts and protection for goodwill.
