Star Energy UK Onshore Ltd & Anor v Bocardo SA

Ownership of land ordinarily includes the strata beneath its surface, unless those strata have been alienated. A petroleum licence transfers ownership of petroleum and authorises its licensee to search for and extract it, but does not itself authorise entry through strata owned by another person. Without agreement or an ancillary right, such entry is an actionable trespass, even where it causes no practical interference with the landowner’s use or enjoyment. Damages may exceed nominal damages because a tortfeasor should not benefit from failing to obtain the right lawfully. Under the Mines (Working Facilities and Support) Act 1966, compensation is assessed by reference to the value lost by the grantor, disregarding value created solely by the licensing scheme but allowing for a special purchaser’s interest. The damages here were limited to £1,000.

Bocardo owned the freehold of the Oxted Estate. Star and its predecessors held a petroleum licence under the Petroleum (Production) Act 1934 and drilled three deviated pipelines beneath Bocardo’s land to extract oil. No agreement or ancillary right had been obtained.

Peter Smith J held that the drilling and continued use of the pipelines constituted trespass. He awarded damages calculated at 9 per cent of the relevant oil revenue and granted an injunction, subject to payment for continued extraction. Star appealed, challenging both the finding of trespass and the measure of damages. The central questions were whether the licence justified entry into the substrata and how compensation should be assessed by reference to the statutory ancillary-rights regime.

Disposition

Lord Justice Aikens delivered the leading judgment. Lord Justice Sullivan and Lord Justice Jacob agreed. The appeal was allowed, the order below was set aside, and the court declared that Star had committed and continued to commit trespass, but that Bocardo was entitled to £1,000 only.

1. Ownership and possession. The surface freehold owner ordinarily owns the strata beneath the land, including minerals, subject to alienation: Mitchell v Mosley [1914] 1 Ch 438. The maxim extending ownership to the heavens and the centre of the earth was not itself part of English law: Commissioner for Railways v Valuer General [1974] 1 AC 328. Bocardo therefore owned the relevant substrata, although the petroleum belonged to the Crown under section 1(1) of the Petroleum (Production) Act 1934.
2. Trespass. The paper-title owner is prima facie deemed to possess the land, with the factual possession and intention required by Powell v McFarlane (1977) 38 P&CR 452 and JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419. The common-law access principle recognised where minerals are reserved by grant did not apply because the Crown owned the petroleum but not the surrounding strata: Re an Arbitration between Lord Gerard and London and North Western Railway Company [1895] 1 QB 459; Eardley v Granville (1876) 3 Ch D 826.
3. Effect of the petroleum legislation. Sections 1 and 2 of the Petroleum (Production) Act 1934 conferred ownership and licensing rights concerning petroleum, but no express or implied right to bore through third-party strata. Section 3 recognised that ancillary rights might be needed, including rights to enter land and use underground wayleaves. Section 10(3) preserved landowners’ rights. Star’s entry was therefore an actionable, though purely technical, trespass.
4. Damages. Nominal damages were inappropriate because Star would otherwise be better off by trespassing than by obtaining the necessary right lawfully. Under section 8(2) of the Mines (Working Facilities and Support) Act 1966, compensation was to reflect what Bocardo lost, consistently with compulsory-acquisition principles: BP Petroleum Developments Ltd v Ryder [1987] 2 EGLR 233; Waters v Welsh Development Agency [2004] 1 WLR 1304. Value attributable solely to the petroleum scheme was excluded, but Star’s special interest as licensee could be considered factually. The statutory assessment was £82.50, while a hypothetical pre-trespass negotiation would have produced no more than £1,000.

• Court of Appeal (Civil Division) [2009] EWCA Civ 579: allowed Star’s appeal, set aside the High Court order, declared that the trespass continued, and substituted damages of £1,000.
• High Court, Chancery Division: Peter Smith J held that the pipelines constituted trespass, awarded £621,180 for the past period on a 9 per cent revenue basis, and granted an injunction subject to payment for continuing extraction.