Kyalo v Unity Micro Investments Ltd & another (Commercial Case E1447 of 2025) [2026] SCC 87 (KLR)

to itself. The subordinate court could not therefore entertain the suit and allow only that part of the claim that was within its pecuniary jurisdiction.” 4. It is trite law that jurisdiction is everything. Anything done without jurisdiction is a nullity, and such a finding operates retrospectively. In the famous case of Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd [1989] eKLR, the court held: “ 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 its tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.” 5. Jurisdiction can only be conferred upon a court by the constitution and statue. In this case the relevant constitutional provision establishing the Small Claims Court is Article 169 (1)(d) of the Constitution of Kenya, 2010 and for all intents and purposes, it is a subordinate court. Further, the Small Claims Court Act at Section 12(2) and (3) provides for the jurisdiction of the Court over contracts for money held and received worth one million shillings or less. 6. In the instant suit, the claimant seeks judgment for breach of an investment agreement dated 19th April 2021 by the Respondent. Pursuant to the said agreement, the Claimant invested Kshs. 200,000/= into the Respondent and it was an agreed term that the Claimant was to be paid 60% interest per annum on the principal sum as well as a monthly interest of 5%. The unpaid amount as at September 2021 was Kshs. 720,000/= due to the Claimant. On its part, the Respondent relies on clause 15 of the investor agreement that stipulates for alternative dispute resolution and in particular arbitration. 7. The court has looked at Clause 15.1.1.1 of the agreement which stipulates that parties shall attempt in good faith to resolve any dispute arising out of or relating to this agreement promptly by negotiations between oficials of each party who have authority to settle the controversy and where that fails the matter is referred to arbitration. Neither party has brought before this court cogent evidence of negotiations held between oficials of each party who have authority to settle the controversy. 8. Black’s Law Dictionary, 10th Edition defines good faith as – “A state of mind consisting in (1) honesty in belief or purpose, (2) faithfulness to one’s duty or obligation, (3) observance of reasonable commercial standards of fair dealing in a given trade or business, or (4) absence of intent to defraud or to seek unconscionable advantage.” 9. Section 6(1) of the Arbitration Act provides that where proceedings are brought before a court in a matter which is the subject of an arbitration agreement, the court is obligated, upon application by a party, to stay the proceedings and refer the parties to arbitration, unless it finds that the arbitration agreement is null and void, inoperative, or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration. 10. In the instant case, the claimant submits that there is no dispute to be referred to arbitration as the respondent has not denied the claim. The Respondent avers that it does not owe the Claimant any money. A dispute has been defined in Black’s Law Dictionary as a confiict or controversy; a confiict of claims or rights; an assertion of a right, claim, or demand on one side met by contrary claims or allegations on the other. 11. In my view, the foregoing clearly discloses the existence of a dispute, since the Claimant seeks this court’s intervention to ascertain its rights against the Respondent. Thus, the issues raised fall squarely within the ambit of the dispute resolution clause contained in Clause 15 of the Agreement which parties have not engaged. Thus, were this court to proceed to determine the claim and award the reliefs https://new.kenyalaw.org/akn/ke/judgment/scc/2026/87/eng@2026-04-23 2

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sought, would amount to usurping the powers of the Arbitrator, and efiectively rewriting the terms of a contract, which this Court has no authority to do. 12. Additionally, the Claimant has not presented any material to suggest that the Alternative Dispute Resolution clause is null, void, inoperative, or incapable of being performed. Accordingly, this court is bound to give efiect to the parties’ agreement. 13. Sections 3 and 18 of the Small Claims Court Act stipulate that; in exercising judicial authority this court may adopt any alternative dispute resolution mechanisms where parties consent and the agreement binding to court. In the instant case, from the foregoing, there exists a dispute which in the court’s eyes is yet to be negotiated between oficials of each party who have authority to settle the controversy and where that fails, referral of the same for arbitration. Far be it from this court to seek to re-write the contract of the parties. I rely on the reasoning in Gituma & another v Skyview Gardens Limited (Civil Appeal E127 of 2021) [2023] KEHC 1948 (KLR) (Commercial and Tax) (20 March 2023) (Judgment). 14. In the end the Statement of Claim dated 15th December 2025 is hereby struck out for want of jurisdiction in limine with no orders as costs. DATED SIGNED AND READ VIRTUALLY AT MOMBASA THE……23rd …. DAY OF……… APRIL… 2026 HON. THERESA N. MWANGEKA RESIDENT MAGISTRATE/ADJUDICATOR In the presence of; ……Mr. Kithili…… for Claimant; ……Mr. Wairagu…… for Respondent C/A Sabina Signed By/For: THE JUDICIARY OF KENYA HON. THERESA N. MWANGEKA MOMBASA SMALL CLAIMS COURT SMALL CLAIMS COURT DATE: 2026-04-23 10:38:38 https://new.kenyalaw.org/akn/ke/judgment/scc/2026/87/eng@2026-04-23 3

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