https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/8700

Mutie v Image Connections (Civil Appeal E196 of 2025) [2026] KEHC 8700 (KLR) (19 June 2026) (Judgment) Neutral citation: [2026] KEHC 8700 (KLR) Republic of Kenya In the High Court at Machakos Civil Appeal E196 of 2025 BM Musyoki, J June 19, 2026 Between Christone Mwende Mutie Appellant and Image Connections Respondent (Being an appeal against ruling and orders in Machakos Small Claims Court (Honourable B. A. Luova Adjudicator/RM) claim number SCCOMM E280 of 2025 dated 24th July 2025) Judgment 1.This is an appeal that impugns ruling of the lower court dated 24th July 2025 in which the it declined to strike out the claim for lack of jurisdiction. The claim before the trial court was for recovery of Kshs 187,720.00 owed by the appellant to the respondent as balance of money lost in the hands of the appellant while she was working as an employee of the respondent. It was averred that the appellant negligently lost and/or used monies which was under her direct control for purposes other than what she was gainfully employed for and upon realising that she was at fault, she willingly entered into an agreement dated 23-12-2024 to reimburse the sum of Kshs 269,237.00 which she had partly paid leaving the balance claimed. 2.The appellant by a notice of preliminary objection dated 3rd June 2025 pleaded as follows;1.This Hounourable Court’s jurisdiction has been improperly invoked, as it lacks the required jurisdiction to hear and determine the claim as drawn, for it offends the mandatory exclusion of jurisdiction of this Honourable Court pursuant to Section 13(5) of the Small Claims Courts Act since it relates to a dispute emanating from an employment relationship.2.The claimant’s claim offends the mandatory provisions of Section 12 of the Employment and Labour Relations Act, 2012. 3.In its impugned ruling, the trial court overruled the preliminary objection holding that the underlying cause of action was the agreement dated 23-12-2024 and not the employer/employee relationship. The appellant was not satisfied with the said ruling and has preferred this appeal vide memorandum of appeal dated 12th August 2025 relying on the following grounds;1.The learned Magistrate misapprehended the totality of the pleadings, submissions and the law in finding that the Small Claims Court has jurisdiction to entertain the matter before it, arrogating itself jurisdiction by judicial craft.2.The learned Magistrate erred in finding that it had jurisdiction over a matter which was purely a dispute emanating from an employer-employee relationship.3.The learned Magistrate erred in finding that based on a contract entered between the parties to the dispute, there was a separate agreement created outside the employer-employee relationship and that this shifted the claim outside the scope of an employment relationship between the parties.4.The learned Magistrate erred in finding that the matter before it was squarely under the four corners of Section 12(1)(b) of the Small Claims Court Act.5.The learned Magistrate erred in finding that the preliminary objection dated 3rd June, 2025 lacked merit and dismissed the same with costs assessed at Kes. 10,000.6.The learned Magistrate's decision, if allowed to stand shall amount to a miscarriage of justice and shall enhance an abuse of the processes of the Small Claims Court. 4.I have read the submissions of the appellant dated 11th December 2025 although they are indicated to be the respondent’s. I have also read the submissions of the respondent dated 14th November 2025. The single issue for determination in this appeal is whether the trial court had jurisdiction to hear and determine the matter. 5.The importance and central role of jurisdiction cannot be gainsaid. It has been held and it remains the position of the law that jurisdiction is everything and where it is established that a court or tribunal has no jurisdiction over matters placed before it, it should immediately down its tools. Jurisdiction is the door that opens the court to the seat of adjudicating over the matters placed before it. Without that door opening, the court must remain outside and let the forum which is mandated to deal, do so. It was held in Kenyara v Kenya Power and Lighting Company [2023] 685 (KLR) that;‘It is also an elementary principle in law that a court cannot adjudicate on matters in which it lacks jurisdiction. The jurisdiction of the court is derived from the Constitution or statute. If a court finds that it lacks jurisdiction to hear and determine a matter, it is obligated to halt the proceedings. It cannot expand or arrogate to itself jurisdiction which is not conferred upon it by the law.’ 6.The respondent maintains that the trial court had jurisdiction to hear and determine the claim pursuant to Section 12(1)(c) of the Small Claims Courts Act while the appellant claims that the court did not possess requisite jurisdiction the same having excluded by Section 13(5) of the said Act. 7.Section 12(1)(c) of the Small claims Courts Act provides that, subject to this Act, the Rules and any other law, the Court has jurisdiction to determine any civil claim relating to a contract relating to money held and received. 8.Section 13(5) of the same Act provides that, a claim shall not be brought before the Court if the cause of action is founded upon defamation, libel, slander, malicious prosecution or is upon a dispute over a title to or possession of land, or employment and labour relations. 9.The appellant has submitted that the claim was entirely founded on an employer employee relationship regardless of the fact that there was a separate agreement for repayment of the lost money. The respondent on the other hand maintains that the claim was purely based on a sperate and distinguishable contractual relationship between the parties, one being employer-employee and the other a binding transactional contract between the two. 10.The common ground is that the money in issue was lost during the time the respondent was an employee of the appellant. It is also common ground that the parties entered into a contract for reimbursement. In my view the sole fact that parties are in an employer-employee relationship does not place every of their interactions or acts under the definition of employer/employee relationship. It is common that human beings will interact and relate in different ways and description and that does not close doors to other definitive relationships. 11.The appellant sought reliance on the case of Anne Kinyua v Nyayo Tea Zone Development Corporation & 3 others KEELRC 219 (KLR) and specifically the following holding;‘Both the Constitution (Article 162(2)) and Industrial Court Act use the phrase ‘disputes relating to’. A dispute is a disagreement or argument between two or more people. To relate to something is to have connection… to this extent, the Constitution and Industrial Court Act has given the Industrial Court original and exclusive jurisdiction to hear and determine disputes relating to employment and labour relations. That means, any dispute regardless of its nature which arises in the context of employment and labour relations is within exclusive mandate of the Industrial Court.’ 12.In handling the preliminary objection, the trial court stated that while appreciating the cited authorities, the facts in it were distinguishable for the reason that the claimant in the cited case was seeking to be reinstated to her position at work after lapse of her contract which was not the case in the instant claim which was based on the contract entered into on 23rd December 2024. 13.The appellant has argued before me that the court erred in the way she distinguished this case from the Anne Kinyua authority. According to the appellant, the trial court should not have distinguished the authority by looking at the factual analysis of the cause of action but the ratio decidendi which is that, all disputes between employer and employee should be heard by the Employment and Labour Relations Court. In my view, this is a wrong approach in using or applying the doctrine of stare decisis or precedents. Although the ratio decidendi is the authoritative part of a precedent, the facts and the basis of what led to the court to hold as it did is an essential part of application and use of judicial precedents. 14.A court seeking to rely on an authority should not just pick a holding in isolation of circumstances of the case and the root cause of action. The holding in the cited authority was in the context of the fact that the issues which the court was handling was based on the contract of employment and not acts which are independent and separate from the employer-employee relationship. Whether or not the trial court correctly applied the authority is a different issue altogether but I cannot fault her for making reference to facts of case in her efforts to distinguish it from the one before her. Honourable Justice John M. Mativo (as he then was) captured this better in Ekuru Aukot v Independent Electoral & Boundaries Commission & 3 others [2017] KEHC 9390 (KLR) by holding that;‘The doctrine of precedent decrees that only the ratio decidendi of a judgment, and not obiter dicta, have binding effect. The fact that obiter dicta are not binding does not make it open to courts to free themselves from the shackles of what they consider to be unwelcome authority by artificially characterising as obiter what is otherwise binding precedent. Only that which is truly obiter may not be followed. But, depending on the source, even obiter dicta may be of potent persuasive force and only departed from after due and careful consideration.’ 15.I now turn to the main issue of whether the matter belonged to the Employment and Labour Relations Court. Section 86 of the Employment Act which the appellant has heavily relied on gives three categories of the nature of disputes that should be exclusively tried by the Employment and Labour Relations Court. It provides as follows;‘1.Subject to the provisions of this Act whenever-a.an employer or employee neglects or refuses to fulfill a contract of service; orb.any question, difference or dispute arises as to the rights or liabilities of either party; orc.touching any misconduct, neglect or ill treatment of either party or any injury to the person or property of either party, under any contract of service, the aggrieved party may complain to the labour officer or lodge a complaint or suit in the Employment and Labour Relations Court.2.No court other than the Employment and Labour Relations Court shall determine any complaint or suit referred to in subsection (1).2.This section shall not apply in a suit where the dispute over a contract of service or any other matter referred to in subsection (1) is similar or secondary to the main issue in dispute.’ 16.Sub-Section 1(a) in my view does not apply in this case since this case was not about the contract of service but a debt repayment which was acknowledged was incurred otherwise than in the course of employment. The agreement dated 23rd December 2024 which has been acknowledged by both parties was exclusive of the consequences on either party in respect of the contract of service. In other words, the consequences for non-compliance did not affect the parties’ rights and obligations as far as the contract of service was concerned. 17.Sub-section 1(b) talks about disputes relating to rights and obligations of either of the parties. The cause of action before the trial court arose from the time the money in question got lost. An employer has a right of restitution and the employee has the obligation to restore or compensate the employer for any loss suffered during the performance of the contract of service. The agreement dated 23-12-2024 was in my view a solidification of these rights into writing. It was just an acknowledgement and confirmation that the cause of action which was then continuing had crystalized. Rights and liabilities flew from the parties’ contract of service and the same could not be severed by a mere fact that the parties decided to put them into writing. They existed before the agreement was drawn. That said, I hold that the dispute herein fell under the category provided under Subsection 1(b). 18.In the same breath, I hold the view that the dispute could as well fit under Section 86(2)(c). It is common ground that the money was lost in the course of employment through acts of negligence. Clause 1 of the agreement stated;‘The employee agrees to reimburse the employer a total of Kenya shillings Two Hundred and Sixty Thousand Two Hundred and Thirty Seven only (269,237/-) being funds withdrawn lost by the employee due to her acts of negligence.’ 19.I see no meaning in the clause other than that the respondent had the custody of the money by virtue of her employment which she negligently used or applied. Obviously, the money was a property of the respondent and in that context< the appellant suffered loss through the appellant’s negligence. 20.Flowing from the above, I do agree with the appellant that this dispute belonged to the Employment and Labour Relations Court and the Small Claims Court did not have jurisdiction to entertain it. Consequently, this appeal succeeds and I proceed to make the following orders;1.Th ruling and orders of the Small Claims Court at Machakos in its claim number E280 of 2025 dated 24th July 2025 is hereby set aside and substituted for an order sustaining the appellant’s preliminary objection dated 3rd June 2025 with results that the claim is struck out for lack of jurisdiction.2.Each party shall bear their own costs in the trial court and in this appeal. DATED SIGNED AND DELIVERED AT NAIROBI THIS 19TH DAY OF JUNE 2026.B.M. MUSYOKIJUDGE OF THE HIGH COURTJudgment delivered in absence of the parties.