Da Gama Rose enjoined in class action suit against banks

Businessman Horatius Da Gama Rose has been enjoined in a class action suit in which hundreds of bank clients are seeking compensation for interest rates charged on loans without the Finance minister’s approval.

Justice Francis Gikonyo Thursday enjoined Mr Da Gama Rose to the suit alongside 186 others seeking to prove that their banks charged interest on their accounts without the Finance minister’s approval, which is against Kenya’s banking laws.

The suit was filed by Rose Florence Wanjiru in 2003.

Mr Da Gama Rose, who is at the centre of a separate suit fighting to retain ownership of the controversial 134-acre Karen land valued at an estimated Sh8 billion, hopes to use the suit to rescue two of his companies that were placed under receivership by Bank of Baroda in 2008.

READ: Ngilu to be charged over Karen land saga
He holds that they were placed under receivership based on illegal interest rates and penalties the mid-tier lender slapped the firms with.

“The argument by the applicant makes sense, that the existing suit (against Bank of Baroda) relates to validity and enforceability of debenture and charge documents registered out of time and therefore a challenge of appointment of receivers and quite part form the question of whether the bank charged interest rate without prior approval of the Finance minister.

“I allow their joinder. From the material on record, the two parties have shown that they have the same interest in these proceedings despite the pending suit in court,” Justice Gikonyo ruled.

The judge however dismissed an application by Godfrey Okutoyi seeking to enjoin all bank clients to the suit, ruling that it would expose lenders to unfair mass condemnation without first-hand evidence that they had charged illegal interest rates.

Mr Okutoyi had argued that not all bank customers read newspapers where advertisements were placed inviting litigants. But the judge said he had to inspect the reason why each individual party wants to join the case to determine whether they have a case against their lender.

READ: Court opens door for millions to join interest rates suit

“I will not order the joinder of all customers as each customer will have to show by way of evidence that he has the same interest in the proceedings and that the specific bank with which he had a contractual relationship with levied interest and other charges in contravention of banking laws,” the judge added.

The developments in the case come as the Kenya Bankers Association (KBA), which was sued on behalf of all commercial banks, awaits a decision of the Supreme Court as to whether Rose Florence Wanjiru could sue the lobby’s chairman on behalf of all the lenders.

READ: Banks seek to knock out class action suit at Supreme Court

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Contractual obligations

The lobby holds that a trade union should not be sued in circumstances that will require it to investigate the contractual obligations between its members and their clients.

It also argues that Ms Wanjiru should have sought permission from the High Court to compel the KBA chairman to represent all 43 commercial banks in her class action suit.

Banks that had either not been formed before July 22, 2003 and those that have since gone under will however not be affected by any outcome of the suit.

The suit is even more defining in the fact that an order requiring banks to compensate a customer for illegal charges levied since 1989 would affect the