Banks lose battle to stop class action suit at Supreme Court

KBA chief executive officer Habil Olaka (left) and Jared Osoro, the research and policy director, at a recent event. PHOTO | FILE 

By BRIAN WASUNA, bwasuna@ke.nationmedia.com

Posted  Friday, October 30   2015 at  12:27

In Summary

• The Kenya Bankers Association was seeking to terminate a case pitting banks against borrowers who are accusing them of charging interest rates without the Finance minister’s authority as required by law.
• Kenyan law requires lenders to seek the minister’s permission before increasing interest rates or other bank charges.
• The Supreme Court ruled that the issues the KBA had raised in its appeal had not been argued in the lower courts and could therefore not be canvassed in the top court.
• The ruling paves the way for hearing of the case to begin in earnest.

Commercial banks Thursday lost a last-ditch effort to terminate a potentially devastating class action suit pitting them against hundreds of borrowers who are seeking compensation for interest rates they claim were illegally charged on their loans.

The Supreme Court dismissed the Kenya Bankers Association’s (KBA) application seeking to dismiss the class action suit that the borrowers had filed in the High Court, paving the way for hearing of the case to begin in earnest.

Judges Njoki Ndung’u, Kalpana Rawal, Philip Tunoi, Jackton Ojwang and Smokin Wanjala ruled that the issues the KBA had raised in its appeal had not been argued in the lower courts and could therefore not be canvassed in the Supreme Court.

The KBA had asked the top court to dismiss the suit on grounds that the complainants did not seek the High Court’s permission compelling a lobby group to defend a suit on behalf of its members.

The judges said the KBA had not raised the argument in the High Court and could therefore not introduce it in the Supreme Court.

The KBA is a lobby that draws its membership from Kenyan commercial banks.

The Supreme Court judges also ruled that the KBA had failed to demonstrate how its application to strike out the class action suit is of public interest or in pursuit of a fundamental right in danger of violation.

The Supreme Court has a narrow mandate that is restricted to hearing presidential election petitions, matters regarding violation of human rights and interpretation of the Constitution.

“We are all of the opinion that the application does not raise issues of general public importance. We find that the issue KBA raised in its intended appeal will raise a new issue. The matter must have been raised in both the High Court and the Court of Appeal to find a footing here. We therefore disallow the application,” the judges said, ordering the KBA to pay Rose Florence Wanjiru, the businesswoman who initiated the class action suit, the legal costs she incurred defending the appeal at the Court of Appeal and the Supreme Court.

The KBA’s court battle began 2003 in the High Court where Ms Wanjiru sued all commercial banks on behalf of past and present depositors for charging interest rates without the Finance minister’s authority as required by law.

Kenyan law requires lenders to seek the minister’s permission before increasing interest rates or other bank charges.

READ: 1,238 borrowers join interest rates battle against banks

The Supreme Court’s decision clears the way for High Court judge Charles Kariuki to start hearing the 15-year-old case that, if successful, could see the banks pay past borrowers billions of shillings in compensation for interest rates charged illegally.

The suit has attracted 185 other bank clients who claim to have been charged illegal interest rates. Parties to the suit are expected in court on November 18 for direction.

The KBA went to the Supreme Court after the Court of Appeal dismissed its bid to terminate the class action suit in October 2013.