Migwi v Kisaju Enterprises Limited (Civil Appeal E001 of 2025) [2026] KEHC 10640 (KLR) (14 May 2026) (Judgment)

Migwi v Kisaju Enterprises Limited (Civil Appeal E001 of 2025) [2026] KEHC 10640 (KLR) (14 May 2026) (Judgment) Neutral citation: [2026] KEHC 10640 (KLR) Republic of Kenya In the High Court at Kerugoya Civil Appeal E001 of 2025 EM Muriithi, J May 14, 2026 Between George Migwi Appellant and Kisaju Enterprises Limited Respondent (Being an Appeal from the Ruling and Order issued by Honourable Grace Waithira– Adjudicator R.M) on 31st October 2025) Judgment Introduction 1.The appellant was aggrieved by a ruling an order of the trial small claims court dated 31/10/2025 when it dismissed with costs in the cause a Preliminary Objection on jurisdiction of the Court dated 18th July, 2025, which was in the following terms:“Notice Of Preliminary ObjectionTake Notice that the Respondent herein shall raise a Preliminary Objection on a point of law to be heard in limine on the grounds that- 1.The Respondent was at all material times employed by the Claimant as a Sales Representative a fact that is averred at paragraph 4 of the Statement of Claim. 2.Accordingly, subject matter of this suit is a dispute between an employee on one hand and his employer on the other hand which arose within the course of employment. 3.Section 12(1)(a) of the Employment and Labour Relations Court Act as read with the Article 162(2) of the Constitution vests the Employment and Labour Relations Court exclusively with the jurisdiction to hear ALL matters relating to employment and labour relations including "(a) disputes relating to or arising out of employment between an employer and an employee". 4.This honourable court lacks jurisdiction to hear the matter on the basis of the subject matter and must down its tools.S. The original Statement of Claim filed herein on the E-Filing Statement are in respect of a Respondent known as Wilfred Muli and the suit filed to piggy ride on that claim is hence fatally defective and ought to be struck out on that basis.And the Respondent shall apply to have the suit struck out with ocsts.Dated at Nairobi on this 18th day of July 2025.M/S Guandaru Thuita & CO. Advocates for the Respondent.” 2.The Respondent’s claim against the appellant was set in paragraphs 3, 4 and 5 of the Statement of claim dated 30/6/2025 as follows:“ 3.Nature of Claim (Please tick where appropriate)- Claim to a tune of Kenya Shillings Five Hundred and Eighty Thousand One Hundred and Nine (Kshs.580,109/=). 4.Briefly explain the circumstances under which the claim arose and attach documents (if any) in support of your claim.- On various diverse dates in the year 2023, the Claimant supplied various goods through the Respondent as a Sales Representative, when certain goods were sold by the Respondent but the sales were not remitted to the Claimant.- Since then, the Respondent has only made part payments of the various goods, leaving an outstanding balance of Kshs.580,109/= . 5.What is the Remedy/Relief sought; (Please tick where appropriate)- Judgment in the sum of Kenya Shillings Five Hundred and Eighty Thousand One Hundred and Nine (Kshs.580,109/= Plus interest at court rates.- Costs of the Clam (to be assessed by the Court).” 3.By its Ruling of 31/10/2025, the Small Claims Court ruled as follows:“RULING 1.A preliminary objection has been raised by the respondent regarding the jurisdiction of this court to hear and determine the claim. In the Notice dated 18th July 2025, the respondent asserts that he was the claimant's sales representative and the subject matter of the suit is an Employment and abour Relations matter between an employee and employer. 2.The respondent also asserted that the statement of claim is in respect to one Wilfred Muli and is therefore fatally defective. 3.The preliminary objection was canvassed by way of written submissions which this court has considered. 4.A preliminary objection has been defined as a pure point of law, which can dispose of a matter in limine. In the locus classicus on the subject, the court in Mukisa Biscuits Manufacturing Co, Ltd -v- West End Distributors Limited (No 2) [1970J EA, defined a preliminary objection thus;"...A Preliminary Objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the Jurisdiction of the court or a plea of limitation" or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration." 5.In the equally seminal case of Owners of the Motor Vessel "Lillian S" v Caltex Oil (Kenya) Ltd (Civil Appeal 50 of 1989) [1989] KECA 48 (KLR) (17 November 1989) judgment), Nyarangi J. A. as he then was, held as follows on the significance of a court's jurisdiction to hear and determine disputes placed before it:"Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of proceedings pending other evidence. A court of law down tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.” 6.The court's mandate to hear and determine a suit is therefore a pure point of law which the court can determine based on the facts pleaded without requiring the parties to adduce evidence. 7.In the impugned statement of claim, the claimant has sought a refund for a sum of Kshs.580,109/=. According to the claimant, it supplied various goods through the respondent as its sales representative but the respondent did not remit payment after the goods were sold. 8.The respondent's learned counsel submits that the dispute is an employment and labour relations issue as the claim arose while the respondent was employed by the claimant. 9.This court was referred to Section 12 (1) (a) of the Employment and Labour Relations Court Act and Article 162 (2) of the Constitution where the law vests the Employment and Labour Relations Court with exclusive jurisdiction to hear matters relating to employment and labour relations. It was submitted that where a dispute relates to or arose out of employment, the dispute would fall squarely within the jurisdiction of the Employment and Labour Relations Court. 10.In contrast, counsel for the claimant argued that the dispute was purely contractual and commercial in nature and did not relate to interpretation or application of employment law. 11.Indeed, the predominant issue for determination in this case is a commercial dispute which requires tabulation of monies that have allegedly not been remitted to the claimant. While there might have been an employer/employee relationship between the parties, the cause of action in this case does not relate to their employment contract. 12.In a similar case where the respondents had been sued for refund of money lost in the course of their employment to the claimant, the Employment and Labour Relations Court in Maisha Mapya Kenya Foundation Limited v Shikuku 1&another (Employment and Labour Relations Cause E043 of 2024) [2025] KEELRC 761 (KLR) (7 March 2025) (Ruling) held that it did not have jurisdiction to hear the matter. The court found;"Further, the claim is for special damages for money apparently stolen by the two Respondents during their term of employment. This is a suit that should be in the High Court and clearly not this court. This would be better tried in a Civil court.” 13.This court finds that the dispute between the parties does not relate to the terms of the respondent's employment to the claimant. The dispute is purely a commercial dispute, which falls within the jurisdiction of this court. 14.As to the respondent's submissions that the suit ought to be struck out as it has been filed against "Wilfred Muli," learned counsel for the claimant counters that the institution of the claim against "Wilfred Muli" was a clerical error which is curable by amendment. 15.Rule 17 of the Small Claims Court Rules permits parties to amend their pleadings not later than 7 days before a matter is fixed for hearing. To strike out the suit where an amendment could cure a defect in pleadings beats the purpose of the Small Claims Court Act which promotes the timely andcost-effective disposal of suits. 16.In the end, this court finds no merit in the preliminary objection raised in the Notice dated 18th July 2025 and dismisses it with costs in the cause. 17.The claimant is granted leave to file and serve an amended statement of claim within 7 days of this decision. The respondent has corresponding leave to file a response to the amended statement of claim within 7 days of service. 18.This matter shall be mentioned on 1st December 2025 to confirm compliance.Dated, Signed And Delivered At Kerugoyathis 31st Day Of October 2025.Hon. Grace WalthiraSenior Resident Magistrate/adjudicator” 4.The appellant raised grounds in the Memorandum of Appeal dated 30/11/2025 as follows:“Memorandum Of AppealGEorge Migwi the above-named Appellant appeals to the High Court against the whole of the above-mentioned Decision on the following grounds:- 1.The Learned Adjudicator erred in law in failing to find that the Small Claims Court lacked jurisdiction in the matter as the Claim was one that arose in the course of employment between an employee and an employer. 2.The Learned Adjudicator erred in law in finding that the claim before the court was “purely a contractual and commercial in nature” and did not relate to the interpretation and application of employment law. 3.The Learned Adjudicator erred in law and misdirected herself in finding that the predominant issue was a claim for money not remitted to the Respondent. 4.The Learned Adjudicator erred in law in failing to appreciate that a contract of employment of a sales representative such as that of the Appellant herein would as of necessity have terms of how the Appellant would be handed custody of products, how the same would be delivered to the customers and how the payments would be made or collected from the customer and by who. 5.The Learned Adjudicator erred in law in failing to appreciate that the question of whether it was the duty of the Appellant to collect debts on behalf of the Respondent was an issue under employment. 6.The Learned Adjudicator erred in law in failing to appreciate that the filing of the claim was meant to beat the Limitation of Time Period under Section 90 of the Employment Act. 7.The Learned Adjudicator erred in law in failing to consider the Appellant’s submissions and materials provided.It Is Proposed:a)That this Appeal be allowed.b)That the entire Ruling and order of the Honourable Grace Waithira – Adjudicator R.M) on 30th October 2025) be set-aside and, in its place, an order be issued striking out the claim.c)That the cost of this Appeal and of the trial court be awarded to the Appellant. d)Such further orders made by this honourable Court that may be deemed fit and just to grant.Dated At Nairobi On This 30th Day Of November 2025Guandaru Thuita & Company Advocates For The Appellant” Submissions 5.The parties filed submissions on their respective contentions. The appellant’s submissions dated 13/4/2026 and filed on 27/4/2026 urged as follows:“Submissions In Support Of The AppealA. Introduction1)It is common ground between both parties that the Appellant was employed by the Respondent as a Sales Representative. The Respondent asserts at paragraph 4 of its Memorandum of Claim that on various dates in the year 2022, it supplied various goods to its customers through the Appellant but that the Appellant allegedly failed to remit the proceeds of those sales.2)The Appellant raised a Preliminary Objection on the grounds that the alleged cause of action "related to" or "arose out of the employment" and that accordingly the Small Claims Court lacked jurisdiction, since Section 12(1)(a) of the Employment and Labour Relations Court Act vests jurisdiction over such matters exclusively with the Employment and Labour Relations Court (ELRC).3)The Trial Court dismissed the Preliminary Objection by characterising the claim as a "purely contractual and commercial matter" and asserted jurisdiction accordingly. The Appellant, being dissatisfied with that decision, lodged the present Appeal.4)The Appellant contends that the Trial Court erred in law by characterising an employment-related dispute as a "purely contractual and commercial" matter, thereby usurping the exclusive jurisdiction of the ELRC conferred by Article 162(2) of the Constitution of Kenya 2010 and Section 12(1)(a) of the Employment and Labour Relations Court Act, 2011.5)Though the Memorandum of Appeal raises seven grounds, the issues for determination may be distilled as follows: i. What is the nature of the Respondent's cause of action? ii. Whether the Small Claims Court has jurisdiction to hear the Claim. iii. Whether by filing the Claim before the Small Claims Court the Respondent was evading the limitation period under the Employment Act.6)It is these issues that we shall analyse in order to demonstrate why the Appeal should be allowed in favour of the Appellant.B. What Is The Nature Of The Respondent's Cause Of Action?7)The Trial Adjudicator found as follows at paragraphs 11 and 13 of the Ruling:"11.Indeed, the predominant issue for determination in this case is a commercial dispute which requires tabulation of monies that have allegedly not been remitted to the claimant. While there might have been an employer/employee relationship between the parties, the cause of action in this case does not relate to their employment contract...13.This court finds that the dispute between the parties does not relate to the terms of the respondent's employment to the claimant. The dispute is purely a commercial dispute, which falls within the jurisdiction of this court."8)The Appellant respectfully submits that this finding constitutes a fundamental misdirection in law. To properly characterise a cause of action, one must look to its origin — not merely the form of the relief claimed. It is settled law that courts must examine the pith and substance of a dispute to determine its true character. Courts must look beyond the form of a pleading and examine the substance of the relationship giving rise to the claim.9)It is our humble submission that the Appellant's obligation to handle goods, collect payments, and remit funds did not arise from any standard commercial supply contract. It arose exclusively from a Contract of Service. The Appellant was a "Sales Representative" — a fact admitted by the Respondent in its own pleadings. But for the employment relationship, the Appellant would never have been in possession of the Respondent's goods. Any alleged breach — including failure to remit proceeds — is therefore a breach of an employee's duty to his employer.10)This principle has been expressly recognised in various cases where it has been held that any claim which requires an investigation into an employee's duties, conduct, or performance within the employment relationship falls squarely within the exclusive jurisdiction of the ELRC — regardless of whether the relief sought is monetary in nature.11)In Abraham Nyambane Atsiago v Barclays Bank of Kenya [2013] eKLR The Court stated:“The question then is what constitutes a dispute relating to or arising out of employment between an employer and an employee. Is it confined to issues that are ordinarily found in employment contracts or does it extend to all matters emanating from the employment relationship? By its nature, the employment relationship generates a multiplicity of rights and obligations, some of which are not to be found in the express provisions of the employment contract. In my view, all these fall under employment and labour relations as intended by the law makers. To rule otherwise would be to create a situation where an employer or an employee traverses different courts to enforce different rights arising from the employment relationship. That in my view could not have been the intention of the legislators.”12)The Trial Court's finding that the matter was "purely contractual and commercial" was thus a misdirection in law. Resolving the claim against the Appellant necessarily requires the court to examine: a) The Appellant's employment terms — specifically his duties relating to stock collection and debt recovery; b) Reporting lines, supervision, and company policy on remittance procedures; c) Whether handing-over procedures were duly followed upon cessation of duties. All of these are matters of employment law, not commercial law. 13)It is further significant that the Appellant has not been accused of theft, fraud, or conversion. The decision cited by the Trial Court — Maisha Mapya Kenya Foundation Limited v Shikuku — is distinguishable on its facts as it concerned "money apparently stolen", which might indeed lean toward criminal or tortious liability independent of employment. In the present case, the dispute is over performance of employment duties — either negligently or not at all — which is pre-eminently a matter for the ELRC.14)A sales representative's duty to collect and remit proceeds is a core term of the contract of service. This is not an ordinary buyer-seller transaction; it is a fiduciary duty arising from the employment relationship. The existence of financial obligations between employer and employee does not transform an employment dispute into a commercial one.15)The Trial Court erroneously focused on the form of the relief (recovery of money) rather than the substance of the relationship (employment). This approach was expressly condemned by Abuodha J. of the ELRC in Peter Mutisya Musembi & another v National Bank of Kenya [2014] eKLR, where the learned Judge cautioned against the fragmentation of employment claims by allowing parties to isolate monetary components and file them in civil courts.C. Whether The Small Claims Court Has Jurisdiction To Hear The Claim16)Jurisdiction is the very foundation of judicial authority. The Supreme Court of Kenya stated unequivocally in Samuel Kamau Macharia & another v Kenya Commercial Bank Limited & 2 others [2012] eKLR:"A court's jurisdiction flows from either the Constitution or legislation or both. Thus, a court of law can only exercise jurisdiction as conferred by the Constitution or other written law. It cannot arrogate to itself jurisdiction exceeding that which is conferred upon it by law... without jurisdiction, the court cannot entertain any proceedings."17)The Court of Appeal similarly emphasised in Owners of the Motor Vessel "Lillian S" v Caltex Oil (Kenya) Ltd [1989] KLR 1, per Nyarangi JA: "Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of proceedings pending other evidence. A court of law downs tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction."18)Under Article 162(2) of the Constitution of Kenya 2010 and Section 12(1)(a) of the Employment and Labour Relations Court Act, 2011, the ELRC has exclusive original jurisdiction to hear and determine all disputes relating to or arising out of employment between an employer and an employee. This is a constitutional mandate that no inferior court may usurp.19)The constitutional exclusivity of the ELRC's jurisdiction was affirmed by the Court of Appeal in Republic v Karisa Chengo & 2 Others [2017] eKLR (Supreme Court Petition No. 5 of 2015), where the Supreme Court held that the Constitution sets out in broad terms the jurisdiction of the ELRC and that this jurisdiction cannot be undermined by assignment of employment-related matters to other courts.20)The question is therefore whether this dispute "relates to" or "arises out of" employment. The Respondent's own Statement of Claim admits that the Appellant was its "Sales Representative" and that the claim arose from goods supplied "through" the Appellant in that capacity. On any fair reading, the pith and substance of this claim is rooted in the employment relationship.21)In John Kabugi Macharia v Kenya Tea Development Agency Ltd [2011] eKLR, it was held that once a court identifies that a dispute arises from or relates to an employment contract, it must immediately down its tools. In Daniel N. Mugendi v Kenyatta University & 3 Others [2013] eKLR, the Court of Appeal confirmed that the ELRC's jurisdiction is robust and comprehensive, covering all manner of disputes rooted in the employer/employee relationship — including financial claims — in order to avoid the fragmentation of employment-related suits across different courts.22)The Court of Appeal further held in Jamal Salim v Yusuf Abdulahi Abdi & another [2018] eKLR:"Jurisdiction either exists or it does not. Neither can it be acquiesced or granted by consent of the parties."23)Accordingly, the fact that neither party challenged jurisdiction before the Trial Court in the first instance does not cure the fundamental jurisdictional defect. The Small Claims Court simply had no power to entertain this claim.24)Any claim whose "pith and substance" is the employment relationship falls squarely under the ELRC's exclusive jurisdiction — even where the relief sought is monetary in nature. The ELRC's jurisdiction covers all matters arising from the employer-employee relationship precisely to avoid the fragmentation of claims and to ensure that specialist expertise is applied to employment disputes.25)The jurisdiction of the Small Claims Court is governed by the Small Claims Court Act, 2016. Section 12 thereof explicitly excludes matters that fall within the exclusive jurisdiction of courts established under Article 162(2) of the Constitution, which includes the ELRC. The Trial Court's failure to recognise this exclusion constitutes an error of law going to the root of its jurisdiction.26)In Gathaiya v Attorney General & 2 others; & 176 Interested Parties [2026] KEHC 290 (KLR), a 3 Judge bench was explicit on the position that the Small Claims Court was not a court for every claim that is below a million shillings. One such as our present one requiring dissection of the contract of employment, duties and breach if any is not the sort of simple and straight forward case meant for the Small Claims Court.27)We therefore humbly submit that this Honourable Court must find that the Trial Court lacked jurisdiction to entertain the Claim, and must accordingly allow the appeal and set aside the Ruling.D. Whether By Filing Before The Small Claims Court The Respondent Was Evading The Limitation Period28)A further and compounding vice in the Respondent's conduct is its apparent attempt to circumvent the mandatory limitation period prescribed under Section 90 of the Employment Act, 2007, which provides:"Notwithstanding the provisions of section 4(1) of the Limitation of Actions Act (Cap. 22), no civil action or proceedings based or arising out of this Act or a contract of service in general shall lie or be instituted unless it is commenced within three years next after the act, neglect or default complained of or in the case of continuing injury or damage within twelve months next after the cessation thereof."29)The Court of Appeal in Rift Valley Railways (Kenya) Ltd v Hawkins Wagunza Musonye & another [2016] eKLR held definitively, per Waki JA, that the three-year limitation under Section 90 is mandatory and admits of no exception save for continuing injury. The learned Judge observed that Parliament's insertion of the word "shall" was deliberate and peremptory, designed to protect both employer and employee from irredeemable prejudice arising from stale claims where "memories have faded, documents lost, witnesses dead or untraceable". Crucially, the ELRC has no jurisdiction to extend this period.30)This mandatory character of Section 90 was confirmed by the ELRC in Maweu v Safaricom Ltd [2025] KEELRC 1441 (KLR), where the court held:"It is therefore undeniable that the Court's position regarding Section 90 has become a banal principle in our jurisprudence, reinforcing its mandatory application as a jurisdictional limitation."Time under Section 90 cannot be extended — period. 31)The transactions in question occurred in the year 2022. The suit was filed in June 2025 — approximately three years after the cause of action arose. Had the claim been properly characterised as an employment matter and filed before the ELRC, portions of it arising from 2022 transactions would be time barred under Section 90. By mislabelling the claim as a commercial debt and filing it in the Small Claims Court, the Respondent seeks to take advantage of the six-year limitation period under the Limitation of Actions Act (Cap. 22) — a clear case of forum shopping, mischief and abuse of court process.32)It is trite law that a party cannot, by clever pleading, alter the character of a dispute in order to gain a procedural advantage. As affirmed in numerous High Court decisions on ELRC jurisdiction: "A party cannot, by clever pleading, seek to avoid the mandatory provisions of the Employment Act by couching an employment dispute as a general civil claim."33)The ELRC in Vipingo Ridge Limited v Swalehe Ngonge Mpitta [2022] eKLR confirmed that each act of default under an employment contract starts the limitation clock running independently. Consequently, even on the most favourable interpretation, the Respondent cannot resurrect time-barred employment claims by the simple expedient of re-labelling them as commercial debt recovery proceedings.34)Furthermore, the ELRC in Elias Kibathi & another v Attorney General [2021] KEELRC 1630 (KLR) affirmed its jurisdiction to determine the proper application of Section 90 and held that the limitation period contained therein does not violate constitutional rights — it is a valid legislative policy choice that must be respected by all courts. A finding that this dispute is commercial in nature would effectively grant the Respondent an unlawful extension of the time Parliament has prescribed for employment disputes.35)We submit that the Trial Court's decision to allow the case to proceed as a commercial matter effectively enables the Respondent to circumvent the clear legislative intent of Section 90 of the Employment Act — a result that cannot be countenanced.E. Summary Of Submissions36)In summary, the Appellant submits as follows:a)The pith and substance of the Respondent's claim is an employment dispute. The Appellant's possession of goods, duty to sell, and obligation to remit proceeds all derived exclusively from his contract of service.b)By virtue of Article 162(2) of the Constitution and Section 12(1)(a) of the ELRC Act, the ELRC has exclusive jurisdiction over this dispute. The Small Claims Court lacked any jurisdiction to entertain it.c)The Respondent engaged in forum shopping by deliberately misdescribing an employment dispute as a commercial debt in order to circumvent the mandatory three-year limitation under Section 90 of the Employment Act.d)Any proceedings conducted by the Small Claims Court without jurisdiction are a nullity ab initio — as confirmed in Owners of the Motor Vessel "Lillian S" v Caltex Oil (Kenya) Ltd [1989] KLR 1.F. Proposed Orders37)The Appellant humbly prays that this Honourable Court be pleased to find and order as follows:a.That the Small Claims Court lacked jurisdiction to entertain a dispute arising out of the employer-employee relationship between the parties herein.b.That the Appeal be allowed.c.That the Ruling and Order of the Trial Court dated 31st October 2025 be SET ASIDE and replaced with an Order STRIKING OUT the Claim with costs. d. THAT costs of this Appeal be awarded to the Appellant." 6.The Respondent supported the decision of the trial court in Submissions dated 10/4/2026 and urged as follows:“Respondent’s Submissions In Opposition To The Memorandum Of Appeal Dated 30th November 2025The Respondent’s Memorandum of Appeal raises one main issue: 1.That the matter is an employment dispute within the exclusive jurisdiction of the Employment and Labour Relations Court (ELRC) under Section 12(1) (a) of the ELRC Act and Article 162(2) of the Constitution. We submit that this limb is without merit and that the Appeal ought to be dismissed with costs.Whether The Suit Is An Employment Dispute Within The Exclusive Jurisdiction Of The ELRC 1. The Appellant asserts that the dispute arises out of employment simply because he was at some point engaged as a Sales Representative for the Respondent. However, the Statement of Claim and supporting documents filed as well as the Ruling by the Small Claims Court reveal that the cause of action is the failure to remit sales proceeds from goods entrusted to the Appellant. 2. The nature of this claim is debt recovery and breach of a commercial obligation, not a dispute over employment terms, unfair termination, wages, or conditions of service. Filed on: - No Paid- - BY: MAGUA & MBATHA ADVOCATES - Reference: E6EMZR2B - KSH. 0.00 3. Section 12(1)(a) of the Small Claims Court Act, No. 2 of 2016 provides that this court has jurisdiction to determine civil claims relating to: “Contracts for the sale and supply of goods or services; … and recovery of debts.” 4. The fact that the Appellant was once an employee does not automatically transform all claims against him into employment disputes. As the Court of Appeal held in David Sironga Ole Tukai v Francis Arap Muge & 2 Others [2014] eKLR: “Jurisdiction is determined on the basis of the pleadings and the relief sought, not on extraneous facts raised by a party.” 5. Similarly, in Phoenix of E.A Assurance Co. Ltd v S.M. Thiga t/a Newspaper Service [2019] eKLR, the court stressed that the nature of the cause of action — as pleaded — determines jurisdiction. 6. In the present matter, the relief sought is for the payment of sums due from unremitted sales, a classic debt recovery matter, which falls squarely within the jurisdiction of the Small Claims Court. The Appellant’s failure to remit sales proceeds is an act of conversion or theft which creates a civil debt. This debt exists independently of the employment contract and should be pursued in a court of competent civil jurisdiction, in this case, the Small Claims Court. 7. Article 162(2)(a) of the Constitution and Section 12 of the ELRC Act give the ELRC exclusive jurisdiction over disputes relating to or arising out of employment in so far as they require the interpretation or application of employment law. This claim does not require such interpretation — it is contractual and commercial. The Employment and Labour Relations Court’s exclusive jurisdiction is reserved for disputes regarding the rights and obligations of labor not the recovery of converted commercial assets. 8. The High Court in Stanbic Bank Kenya Ltd v Kenya Revenue Authority & Another [2009] eKLR observed: “Jurisdiction must be exercised in accordance with the subject matter of the dispute and the relief sought. The existence of another relationship between the parties, whether contractual or otherwise, does not oust jurisdiction if the cause of action falls within the court’s mandate.” 9. In determining a Preliminary objection, the ELRC court in Nakuru downed its tools in Maisha Mapya Kenya Foundation Limited v Shikuku & another [2025] KEELRC 761 (KLR) by stating: 19.”…….the claim is for special damages for money apparently stolen by the two Respondents during their term of employment. This is a suit that should be in the High Court and clearly not this court. This would be better tried in a Civil court. 20.The court agrees with the Respondent’s Preliminary objection that this court has no jurisdiction to hear this claim. As is trite law where the court has no jurisdiction it has no option but to down its tools.” Filed on: - No Paid- - BY: MAGUA & MBATHA ADVOCATES - Reference: E6EMZR2B - KSH. 0.00 In the above case, the Court also held that it could not handle the matter because by the time of filing the case, there was no employer-employee relationship between the parties and thus the relationship had already changed to a “creditor” seeking his money from a “debtor”. In the case of Masinde t/a C Masinde & Company Advocates v Lewa [2023] KEHC 18644 (KLR), the court held: “The claim here falls within small Claims Act, as money had and received.” 10.The Small Claims Court’s mandate under Article 48 of the Constitution and the Small Claims Court Act is to provide expeditious and informal resolution of small-value commercial disputes and forcing an employer to come before this Honourable Court for a simple salesproceeds claim which in this case is under 1M, would be a procedural hurdle that defeats the very purpose of the Small Claims Court. It would over-burden this Court with matters that are purely accounting-based. To uphold the Appellant’s view would be to convert the ELRC into a debt-collection agency for every commercial transaction involving an employee, thereby defeating the specialized mandate of that Court and the expeditious nature of the Small Claims Court. 11.Your Lordship, many Courts have been recently leaning towards creating a clear distinction between an employment dispute and a recovery of funds lost through employee malpractice. In the case of National Social Security Fund Board of Trustees v Kenya Tea Growers Association & 14 others (2023) eKLR, it was held that fraud or misappropriation by an employee does not, without more, render a dispute an employment matter. 12. In Kilimall International Limited v Wanjiru & another [2025] KEHC 13883 (KLR), Kilimall sued a former employee in the Small Claims Court for recovery of funds lost through fraudulent diversion of goods. The employee argued that the Small Claims Court lacked jurisdiction because the act happened during employment. However, the Court in emphasizing the Small Claims Court’s jurisdiction stated: “Although the alleged acts occurred in the course of employment, the pleadings reveal that the Appellant’s claim is for recovery of funds allegedly lost through fraudulent diversion of goods, and not one relating to employment rights, benefits, or termination. Accordingly, I find and hold that the claim does not constitute an employment dispute within the meaning of Section 12(1) of the Employment and Labour Relations Court Act. Having found that the claim does not amount to an employment dispute, the remaining issue is whether the Small Claims Court is seized of jurisdiction. Guided by the authorities placed before me, I am satisfied that the Court has jurisdiction to entertain the claim. I accordingly hold and direct that the matter shall proceed before the Small Claims Court for hearing and determination on its merits.” 13. Your Lordship, in his statement of response dated 1st December, 2025 the Appellant stated that he left employment on or around 10th December 2022 and thus by the time of filing Filed on: - No Paid- - BY: MAGUA & MBATHA ADVOCATES - Reference: E6EMZR2B - KSH. 0.00 of the proceedings, he was no longer an employee of the Respondent. We submit that the Appellant is attempting to use his former status as a shield to unjustly enrich himself at the expense of the Respondent. 14.We humbly submit that This Court must look at the nature of the claim, not the identity of the person. A former employee who holds onto company cash is no different from a stranger who holds onto company cash as both are debtors in the eyes of the law. 15.The Appellant’s reliance on Section 12(1)(a) of the Employment Act is a misdirection. That section limits the ELRC's jurisdiction to disputes specifically arising from the statutory provisions of the Employment Act. A claim for 'Money Had and Received' is a common law cause of action that exists independently of the Employment Act. As recently clarified by this Court in Kilimall International Limited v Mandela Gichini Wanjiru [2025], the recovery of unremitted funds is a civil commercial matter falling squarely within the Small Claims Court’s mandate under Section 12(1)(b) of the SCC Act. 16.The employment contract is functus officio. There exists no subsisting relationship of 'employer' and 'employee' that would necessitate the specialized intervention of the Employment and Labour Relations Court. What remains is a purely civil obligation for the recovery of a liquidated debt, which falls squarely within the jurisdiction of this Honourable Court under Section 12(1)(b) of the Small Claims Court Act. The Appeal is therefore without merit and should be dismissed.CONCLUSION 17.We respectfully submit that: a) The cause of action is a debt recovery/commercial claim within the jurisdiction of the Small Claims Court, not an employment dispute within the exclusive jurisdiction of the ELRC. 18.In line with the principles in Article 159(2)(d) of the Constitution, Sections 12 & 19 of the Small Claims Court Act, and the cited authorities, the Appeal should be dismissed with costs, and the matter should proceed to hearing on its merits in the Small Claims Court. 19.The Respondent therefore prays that:a)The Memorandum of Appeal dated 30th November, 2025 be dismissed in its entirety;b)Costs be awarded to the Respondent. 20.These are our humble submissions.” Determination 7.In determination a question whether it is the specialized court on Employment and Labour Relations Court (ELRC) or the ordinary civil court/small claims court in view of the quantum of claim, the Court must consider the cause of action in the Plaint. 8.The jurisdiction of the Employment and Labour Relations Court according to the nature of the dispute is set out at section 12 (1) of the Act as follows:“12.Jurisdiction of the Court(1)The Court shall have exclusive original and appellate jurisdiction to hear and determine all disputes referred to it in accordance with Article 162(2) of the Constitution and the provisions of this Act or any other written law which extends jurisdiction to the Court relating to employment and labour relations including—(a)disputes relating to or arising out of employment between an employer and an employee;(b)disputes between an employer and a trade union;(c)disputes between an employers’ organisation and a trade union’s organisation;(d)disputes between trade unions;(e)disputes between employer organisations;(f)disputes between an employers’ organisation and a trade union; (g) disputes between a trade union and a member thereof; (h) disputes between an employer’s organisation or a federation and a member thereof;(i)disputes concerning the registration and election of trade union officials; and(j)disputes relating to the registration and enforcement of collective agreements.” 9.In this case, it is a claim of money had and received the recovery of which does not depend on the employment or the labour relationship between the claimant company and its employee respondent. 10.Is the issue in dispute herein a dispute on an employment or labour relations issue, within the meaning of section 12(1) (a) of the Act, or put another way , is it a dispute relating to or arising out of employment between an employer and an employee? 11.The raising of a Preliminary Objection indicates that the party raising accepts the factual position on the matter as pleaded by the other party so that if the preliminary issue requires facts to be established between the parties, the objection is not properly taken as held in Mukisa Biscuits case. The parties are bound by the claim as pleaded in the Plaint. 12.The cause of action in this case is reminiscent of the old action of assumpsit for negligent performance of an undertaking such the one undertaken by a sales representative. The claimant could sue in an action for money had and received for his use. Bullen and Leacke p.663 an action for money had and received is discussed as follows:““A person upon whom a tort has been committed and who brings an action for the benefits received by the tortfeasor is sometimes said to waive the tort. The election to bring an action of assumpsit is not, however, a waiver in the sense of affirming it as rightful, but is a choice of one of two alternativeremedies (United Australia Bank vs Barclays Bank [1941] AC 1 at page 18 up to judgment, the Plaintiff may pursue both remedies together, but he can take judgment only for the one and his cause of action will then be merged in the one (ibid at 30).... Thus, where the Plaintiff's goods have been wrongfully obtained by the Defendant and converted into money, the Plaintiff may waive the tort and sue for the proceeds as money received for his use.” 13.The cause of action for money had and received was considered by Mwongo, J. in MOMBASA HC Commercial Civil Case No. 16 of 2006 Rift Valley Products Limitedv. Plexus Cotton Limited, citing Bullen and Leake and the case of Brocklebank vs The King (1952) IKB 52, as follows:“ 15.The Brocklebank case, on which both counsel relied, requires further analysis. There, the Shipping Controller purporting to act under authority of the Defence of the Realm, required the suppliants to sell one of their ships to a foreign firm, as a condition of a licence, and pay a percentage of the money to the Ministry of Shipping. The suppliants paid the percentage. They then petitioned to recover back the money so paid. In holding that the Plaintiff could not waive the tort of illegal exaction and sue for money had and received, the court noted that the cause fell within the exceptions to statutory provisions. 16As such, the decision in Brocklebank was, in my view, confined to the language of the particular statute. It is thus unnecessary to consider whether it has any direct application to the present case. In Brocklebank, the Crown argued, as does the Defendant here, that the main and necessary constituent of the cause of action is tort; and that unless the supplicants pleaded (as they indeed did) and proved this tort, their action must necessarily fail. Scrutton LJ in Brocklebank discussed the principles on an action of assumpsit that help give clarity in the present case. 17.In his speech in Brocklebank Scrutton LJ quoted Sir John Salmond (On Tort) 4th Edition, Page 162, as stating the following principle in respect respect of action assumpsit:“There is, however, one rule which may be laid down with confidence, when the Defendant has by means of a tort become possessed of a sum of money at the expense of the Plaintiff, the Plaintiff may sue either for damages for the tort or for the recovery of the money thus wrongfully obtained by the Defendant, and this latter action (an action for money had and received by the Defendant to the use of the Plaintiff) is based on an implied contract of agency, the Defendant being fictitiously assumed to have rightfully received the money as the Plaintiff's agent, and to have failed to pay it over to his principal.” (underlining mine) 18.My understanding of this case is that whereas an action in assumpsit may be founded on tortious facts, it is open to the Plaintiff to elect to sue either in tort or for the recovery of the money wrongfully obtained by the Defendant. The action in that event is based on an implied contract fictitiously assumed.” 14.As between ordinary parties, this is clearly an action for money had and received or an action for account by principal against an agent. The action would be available against another person who was not an employee in the same circumstances. The cause of action does not dependent on the employment contract. The respondent would still have been able to recover such money from a person who had obtained such monies on its account or from a person who had received such sales money on its behalf even though he was not a n employee of the Respondent. The action can be maintained independently and separate from the parties’ relationship. 15.But when there exists a relationship of the employment relationship between employee/employer as between the appellant and the respondent, herein, two things happen, one is the ousting of the jurisdiction of the regular courts in view of the provisions of Article 162 of the Constitution, which gives the ELRC exclusive jurisdiction in disputes relating or arising out of a contract of service between an employer and an employee; and two, there is protection as exists in the statute of limitation under section 90 of the Employment Act. 16.The trial court improperly adopted the predominant issue test and resolved that “the predominant issue for determination in this case is a commercial dispute which requires tabulation of monies that have allegedly not been remitted to the claimant. While there might have been an employer/employee relationship between the parties, the cause of action in this case does not relate to their employment contract.” 17.The predominant issue test may be useful where two different court might have jurisdiction over the same matter with multiple issues arising some which are dominant in the claim and the question is one of choice of forum. 18.Where an issue of lack of jurisdiction in the matter is raised against a court hearing a matter, the proper test should be the test that evaluates the substance of the claim to see whether it is within the constitutional/statutory competence of the particular court. This is the pith and substance test of evaluation of questions of jurisdiction of court. 19.Consequently, the Court must find that the appeal has no merit. Orders 20.Accordingly, for the reasons set out above, the Court finds merit in the appeal and it is allowed. 21.The Ruling of the Small Claims Court Case NO. SCCCOMM E237 of 2025 delivered on 31/10/2025 is set aside. 22.The suit Small Claims Court Case NO. SCCCOMM E237 of 2025 Kisaju Enterprises Ltd. v. George Migwi is struck out. 23.The Appellant shall have the costs of the appeal.Orders accordingly. DATED AND DELIVERED THIS 14TH DAY OF MAY 2026.****EDWARD M. MURIITHIJUDGEAPPEARANCES:Mr. Munene instructed by M/S Guandaru Thuita & Co. Advocates for Appellant.Ms. Waithera instructed by M/S. Magua & Mbatha Advocates for the Respondent.10