Geothermal drilling firm faces Sh186m costs after losing case

A geothermal drilling company is facing Sh186 million in costs and tax in a dispute with another firm that had contracted it to drill wells at Menengai Crater, Nakuru County.

In a court battle around State-owned Geothermal Development Corporation (GDC), Justice Chacha Mwita ruled that the fight between Great Rift Drilling Ltd (GDR) and Cluff Geothermal Ltd should be resolved in London as they had agreed.

The judge also lifted orders barring Cluff from removing or shifting its drilling rig from Kenya until the battle between it and GRD is over.

“Great Rift has not demonstrated that there is a strong reason for this court to depart from the general rule not to give effect to the exclusion clause in the deed. This court declines to assume jurisdiction in this matter,” ruled Mwita.

Cluff is registered in the United Kingdom and owned by George Percy, while David Coulson and Carl Badenhorst incorporated GRD for drilling services in Kenya.

On February 15, 2013, Cluff signed a deal with GDC to provide top hole-drilling services for 20 geothermal wells in Menengai Crater area.

Three days later, Cluff contracted Great Rift Drilling (Mauritius) (GDR-M) to provide equipment to facilitate drilling services.

GDR-M then assigned its Kenyan branch Great Rift Drilling (Kenya) Ltd (GRD-K) to manage human resource, vehicles, procurement, sub-contracts, logistics and administration.

On the contract at the heart of the case, Cluff informed the State corporation that GDR-K would be the one to provide the services.

GDC and GRD-K then agreed that it would pay all the money from the contract to Co-operative Bank as the latter had obtained an overdraft facility from the lender.

The court heard that drilling commenced in August 2013 but GDC breached the contract.

“The plaintiff (GRD) ceased drilling in 2015,” GRD case filed by lawyer Timothy Bryant read in part.  

According to the papers filed before Mwita, the government corporation was already in arrears.

GRD sued GDC before the London Court of International Arbitration (LCIA) but it was not represented by a lawyer during the hearing.

It claimed that Cluff had committed to offer representation before the London-based tribunal as it was impossible to hire lawyers, as the contract was the only one it was working on in the country.

According to GRD, it performed its part of bargain but it was left with nothing as GDC failed to pay. It is then, it sought for Cluff’s help to pursue GRD. 

After hearing the case, the tribunal awarded GRD $2,259,680 (Sh281 million at current rate) for three invoices it presented before it and $593,497.44 (Sh73.8 million) interest. 

However, according to court papers, GDC remitted the money to Cluff instead of GDR.

This is where the battle between GRD and Cluff started.

GRD in its case claimed that that Cluff allegedly declined to forward the money it received. 

It said it was with a Sh186 million debt to three companies, which had offered their services in the contract, and Kenya Revenue Authority KRA).

Central to the case also is who between GRD and Cluff should pay KRA tax following the arbitration award.

GRD insisted that Cluff should shoulder the tax burden, while Cluff asserted that the responsibility to pay KRA was on GRD.

GRD asked the court to bar Cluff from removing or shifting its drilling rig from Kenya. It claimed that the rig was the only asset owned by Cluff in the country.

Cluff on the other hand argued that it owes GRD nothing. 

In its reply, it urged Mwita to strike out the case. According to Cluff, the Kenyan court had no jurisdiction to hear the case as the two firms had agreed that any case between them would be settled by the courts of England and Wales.

Cluff admitted that the arbitration claim between GDC and GRD partially succeeded. It, however, said the money received was used in accordance with its agreement with GRD. 

It argued that only the England courts would settle any dispute arising from the agreement.