One of the biggest problems businesses and individuals are facing in the pandemic season, is cash flow partly caused by unserviced debts.
The rate of debt default has increased ever since the pandemic began.
One of the biggest problems businesses and individuals are facing in the pandemic season, is cash flow partly caused by unserviced debts. The rate of debt default has increased ever since the pandemic began.
The only option such businesses had so as to recover outstanding debts is debt recovery through the traditional court process. This is a very long and costly process. It took an average of about three-five years for a creditor to recover debt through the court process. In the end it made little commercial sense to undertake debt recovery through the traditional court system.
A new law- the Small Claims Court Act- has now made it easier for businesses and individuals to recover debts of less than Sh1 million. Before its enactment, creditors had two main options in recovering debt. Either through arbitration where there was an arbitration clause or through the court processes. The new law provides an additional platform through which creditors can quickly and easily recover outstanding debt.
Other than entertaining disputes of a commercial nature, the Small Claims Court listen to personal injury cases and other contract related disputes. This means if there has been an injury but the claim is less than Sh1 million, then a litigant can file their claim in this court.
Breach of contracts such supply of goods can be heard in this court. Therefore, in the event you supplied goods or services whose value is below Sh1 million, then you can file your claim in this court.
The Small Claims Court is presided over by an adjudicator and is a part of the Judiciary and court judicial process.
The Small Claims Court has several benefits which I will highlight. The first is that the court does not strictly follow technical procedures. In other courts like the Commercial Courts, the technical rules are very strict and a litigant can lose a case on the ground of technicalities. The technical nature of civil disputes means that it has been very difficult for non-lawyers to understand the process. The Commercial Court process demands observance of technical procedures like the Civil Procedure Act. Unless one is trained in civil procedure it is difficult to adhere to the process without external professional advice. The Small Claims Court does not demand strict observance of technical procedures and therefore it is easier for litigants to understand and follow the process.
A second benefit is that it has the potential of resolving disputes in a timely manner. The promise is that disputes shall be resolved within a record 24 hours.
One of the deterrents against traditional litigation is that it is a protracted process. On average it takes three-five years to conclude a matter.
The Small Claims Court allows litigants to quickly resolve their disputes. It therefore makes a lot of business sense to resolve disputes through this avenue. Cash strapped businesses can resort to the Small Claims Court to resolve their disputes.
The third benefit is that debt recovery is cheaper than the traditional methods. It costs only Sh1,000 to file a dispute of about Sh1 million.
The Small Claims Court is an ideal platform for cash strapped businesses recover debts. It is ideal for suppliers, tender disputes and other contractual claims. It is also ideal for lenders and creditors like saccos, investment groups and micro-finance institutions. It is ideal for creditors with bulk debt recoveries.
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