For nearly two decades, a local building-materials distributor, Space and Style Limited, helped build the Kenyan market for New Zealand roofing brand Decra.
But when the roofing business relationship collapsed in 2023, the Kenyan distributor went to court claiming that the commercial goodwill it had built was its property.
The manufacturer, Roof TG Pacific Ltd, countered that the goodwill belonged to it under the contract and that the distributor owed nearly $792,399 (Sh102.6 million).
The dispute has exposed the financial and legal risks facing local firms that invest heavily in developing foreign brands without securing clear protection for the value created through their distribution networks, customers and marketing efforts.
The High Court at Thika dismissed Space and Style’s constitutional petition on September 3, 2026, after finding that the New Zealand company had not been properly brought within the court’s jurisdiction.
The court did not decide whether the contract termination was lawful, whether Space and Style owned the goodwill, or whether the distributor deserved compensation. The decision left the central commercial dispute unresolved.
Space and Style, a local company dealing in building materials and roofing products, said it had been appointed Decra’s exclusive distributor in Kenya under an agreement entered into in July 2004.
It said the arrangement allowed it to distribute the products exclusively for more than 19 years, from 2004 until September 2023, to the exclusion of any other parties.
During that period, it claimed to have invested substantial capital in marketing, promotion, and advertising.
In its petition dated February 2, 2024, the company contended that it built massive goodwill through distributorship of Roof TG Pacific’s Decra-branded roofing products; thus, the respondent’s action to terminate the contract immediately was an infringement of the petitioner’s right to property.
The company also said it committed time, labour and resources to building Decra’s reputation among Kenyan customers, contractors, developers and other buyers.
It argued that the goodwill generated through those efforts was separate from the Decra brand itself. It claimed that the commercial value attached to its local distribution business amounted to property protected by Article 40 of the Constitution.
“The said exclusive distribution rights incentivised and motivated the petitioner to invest substantial capital, time, energy and effort in gradually establishing and developing its goodwill in the distribution of the respondent’s Decra-branded roof products in Kenya,” it argued.
The petitioner claimed that it had also “built massive goodwill through distributorship of the respondent’s Decra-branded roofing products”.
Space and Style said Roof TG Pacific withdrew its exclusive rights through a letter dated September 28, 2023. It described the decision as irregular, illegal, unprocedural and arbitrary, and that the withdrawal constitutes an arbitrary deprivation of its property in the goodwill established.
It sued seeking declarations that it remained the exclusive distributor, that the goodwill belonged to it, and that the withdrawal violated its constitutional property rights.
It also wanted compensation, a permanent injunction and an order requiring the manufacturer to reverse any appointment of another Kenyan distributor.
The distributor said no compensation had been offered after the termination. Nonetheless, it contended that no amount of monetary compensation is adequate to compensate it for the deprivation of its goodwill.
It argued that the loss extended beyond stock and immediate sales because its business had been built around Decra products for nearly two decades.
It further told the court that it had entered into several customer orders awaiting delivery. It warned that failure to supply the products could expose it to financial losses and possible lawsuits from customers.
However, Roof TG Pacific presented a different account of the collapse. The New Zealand company said the agreement recognised the manufacturer as the exclusive owner of the intellectual property in the products and all associated goodwill in the brand names.
The manufacturer relied on a clause stating that the distributor would not obtain any claim in the brand names and that goodwill arising from their use would accrue exclusively to Roof TG Pacific.
It also said the agreement allowed termination where a material breach was not remedied within 30 days after notice requiring correction.
Roof TG Pacific alleged that Space and Style had failed to maintain sufficient stocks, had not purchased Decra products since 2022, and had failed to settle invoices falling due between November 2021 and October 2023.
The outstanding amount was stated as $792,399.33 (Sh102.6 million).
The manufacturer therefore maintained that the September 28, 2023 termination letter was issued under the express terms of the agreement.
It also disputed the claim that Space and Style alone had financed Decra’s roofing products growth in Kenya. Roof TG Pacific said it had spent $860,283.63 (Sh110.9 million) between 2010 and 2021 promoting the brand through credits to the distributor for marketing expenses.
The manufacturer argued that Kenyan law did not automatically give distributors a right to goodwill compensation. It said the parties were bound by their contract and that the agreement contained no compensation provision.
Space and Style disputed that position. It argued that Roof TG Pacific had failed to give the required 30-day notice before terminating the relationship. It also alleged that appointing another local distributor breached its exclusive appointment.
The distributor relied on earlier Kenyan cases recognising goodwill as a form of property. It cited the description of goodwill as “the benefit and advantage of the good name, reputation and connection of a business” and “the attractive force which brings in custom”.
However, the court examined the limits of such claims. It said that the Supreme Court had previously held that goodwill qualifies as property only where it is identifiable and a measurable value can be attached to it.
The court noted that distribution agreements define the rights and obligations of manufacturers and distributors, including ownership of goodwill. It also observed that Space and Style had not demonstrated the value of the goodwill it claimed.
“There was no evidence placed before this court to demonstrate the value of the goodwill allegedly built by the petitioner,” said the court.
The case was significant because courts have previously awarded substantial damages to local distributors whose exclusive arrangements were improperly terminated.
For instance, in the case of Dutch firm Heineken East Africa Import Company Ltd and local company Maxam Ltd, the Court of Appeal in May 2024 upheld an award of Sh1.79 billion for loss of business. This was after Heineken breached a beer distribution agreement with Maxam.
The court relied on expert valuation evidence covering discounted cash flow, future earnings, price-earnings multiples and dividend value.
However, that case involved a different contract and different evidence. New Zealand’s Roof TG Pacific argued that that case could not be compared with the Decra dispute because Space and Style had not particularised its damages or supplied a valuation report.
The manufacturer cited the absence of audited accounts, customer details, investment records and an independent valuation as weaknesses in the goodwill claim.
The court ultimately did not reach those questions because it first considered whether it had jurisdiction over the New Zealand company.
Space and Style admitted that it had not obtained permission of the court to serve the foreign respondent outside Kenya. It argued that service by email was valid under the Civil Procedure Rules and that Roof TG Pacific’s lawyers had accepted service and responded to the petition.
Justice Lawrence Mugambi rejected that argument, and the case failed at that procedural entry point.
The judge held that email service did not remove the requirement to obtain leave before serving a foreign defendant outside Kenya. After filing the petition, the local company was required to seek the court’s permission to serve the foreign defendant the documents.
“It is only upon such service of summons that a court assumes jurisdiction over a foreign defendant and not a moment sooner,” the court stated, citing the procedural rules.
The court further held that appointing lawyers did not cure the defect because Roof TG Pacific had filed a notice of appointment “without prejudice and under protest”.
“It is immaterial that the respondent appointed advocates to represent them in the matter. The purpose of the court before granting leave for service of summons outside jurisdiction is to satisfy itself that there is a case worth entertaining,” the court said.
“It therefore follows that this court has no jurisdiction over the respondent and must down its tools. Jurisdiction is everything. Without it, a court has no power to make one more step,” the court said, dismissing the petition.
For Kenyan distributors, the unresolved dispute highlights the importance of documenting marketing expenditure, separating brand goodwill from distributor goodwill, obtaining independent valuations and negotiating clear termination and compensation clauses before committing resources to foreign products.
It also shows that even a long commercial relationship may not protect a distributor where the written agreement assigns brand goodwill to the manufacturer or where procedural steps for suing a foreign company are not followed.
