Co-op Sues KQ over 10-year-old Pilots Loan

by Lawyer Wanz
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Co-operative Bank has taken a dispute over a loan advanced to KQ trainee pilots a decade to the Employment and Labour Relations Court.

KQ was first taken to the High court before Justice Alfred Mabeya reffered the case to the labour Court saying the High Court did not have jurisdiction to handle the matter.

From the foregoing, it is clear that the dispute is between Kenya Airways Pilots Association (Kalpa)– as the trade union and the bank as a third party together with KQ as the employer of members of Kalpa. The inclusion of the bank as a lender does not change the nature of the dispute,” the judge said.

He added that the dispute relates to the employment conditions of members of Kalpa who are KQ’s employees.

In the dispute, KQ floated a tender for a financier to fund its pilots’ and cabin crew training scheme in 2010. Co-op emerged the successful bidder.

The airline and the lender then entered into an agreement whereby the bank was to advance loans to young Kenyans who wanted to become pilots to pay for their training.

The loans were guaranteed by KQ.

Trainee pilots were to be employed by KQ and bonded for eight years during which they were expected to repay the loans through deductions in their salaries.

Kalpa said that in May 2013, the lender amended the terms of the loan and that together with KQ, they demanded or coerced its members to sign new loan application forms.

According to the association, the revised facility letters contained fresh terms and conditions of the loan, which materially altered the interest rate payable.

The association then moved to court and challenged the alleged alteration. The court heard that the introduction of the accruing interest prejudsed the Kalpa members as there was a moratorium in place and its members were not earning any income.

The court further heard that the capitalisation of interest and subjecting it to further interest unlawfully circumvented compliance with the in duplum rule (the rule that provides that interest on a debt will cease to run where the total amount of arrear interest has accrued to an amount equal to the principal debt).

But the airline challenged the juridisction of the court saying the recognition agreement upon which Kalpa filed the case for purposes of collective bargaining should have been before the Labour Court and not the High Court.

Further, the airline said Kalpa was never a party to the loan and guarantee contracts between it, the pilot trainees and the bank.

In view of the foregoing, I hold the view that this court lacks jurisdiction to entertain this suit. To this end, to determine the issue of locus standi will be an academic and moot exercise which will waste the court’s valuable judicial time,” the judge ruled.


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