Star Energy Weald Basin Limited and another v Bocardo SA

The Supreme Court held that drilling deviated wells and leaving casing and tubing within the substrata beneath another’s freehold constituted an actionable trespass. The court applied conventional principles: the freehold owner’s title extends to the subsurface strata (subject to express alienation), paper title is sufficient for possession for trespass purposes, and a licence under the Petroleum (Production) Act 1934 did not itself authorise entry beneath another’s land. The respondents had no common-law defence and no statutory right under the 1934 Act (read with the Mines (Working Facilities and Support) Act 1966) to avoid liability.

On quantum the court addressed the proper basis of compensation: damages must be assessed on the basis of what a willing grantor and a willing grantee would have agreed for a wayleave or user, having regard to the statutory background. Compulsory acquisition principles, including the ‘‘value to the owner’’ idea and the Pointe Gourde/no-scheme rule, govern valuation under the 1966 Act. On the facts a majority concluded the special or ransom/key value claimed by the landowner derived from the statutory scheme and was to be disregarded, so only nominal compensation was appropriate; a minority would have awarded higher wayleave-based damages and remitted the detailed quantification to the High Court.

Background and parties:

• The appellant (Bocardo) owned the Oxted Estate. The respondents (Star and predecessor companies) held a petroleum production licence under the Petroleum (Production) Act 1934 covering the Palmers Wood Oil Field, the apex of which lay beneath Bocardo’s land.
• Respondents’ predecessors had drilled three deviated (diagonal) wells from a well-head outside Bocardo’s land; the wells entered the substrata beneath the Oxted Estate at depths of about 800–1,300 feet and terminated deeper (about 1,400–2,900 feet). Two wells were production wells, one was for water injection. Bocardo were unaware of the drilling until 2006.

Nature of claim and procedural posture:

• Bocardo sued for trespass and sought damages; the trial judge (Peter Smith J) found liability and awarded substantial damages. The Court of Appeal affirmed liability but reduced the award markedly. The case reached the Supreme Court on Bocardo’s appeal on damages and the respondents’ cross-appeal on trespass.

Issues framed by the court:

1. Does a freehold owner’s title extend to the subsurface strata at the depths at issue?
2. Is possession or a right to possession a pre-condition of trespass and did Bocardo have sufficient possession?
3. Did the licence under the 1934 Act or any common-law principle give respondents a defence to trespass?
4. If trespass, what is the correct measure of damages (user/wayleave basis or otherwise) having regard to the statutory scheme (1934 Act and 1966 Act) and principles of compulsory acquisition (including the Pointe Gourde/no-scheme rule)?

Court’s reasoning and conclusions:

• On subsurface ownership and trespass the court concluded that, as a general rule, the registered freehold owner’s title extends to the underlying strata (subject to alienation of minerals), the old brocard has continuing relevance as a prima facie guide, and the depths in question (800–2,800 feet) are within that ownership. Paper title sufficed to establish possession for trespass purposes. The 1934 Act did not of itself authorise entry under another’s land: section 10(3) (now mirrored in later legislation) and the ancillary-rights scheme under the 1923/1966 Acts showed that a licensee needed to acquire a wayleave or equivalent; accordingly the respondents had trespassed and the cross-appeal was dismissed.
• On damages the court analysed the correct hypothetical negotiation under section 8(2) of the 1966 Act: the compensation or consideration is what would be fair and reasonable between a willing grantor and a willing grantee, having regard to the statutory background. The majority treated the assessment as governed by compulsory acquisition principles (value to the owner, the Pointe Gourde/no-scheme rule and related authorities) and concluded that the landowner’s asserted ransom/key value was attributable to the exploitation scheme and so should be disregarded, yielding only nominal compensation. A minority considered the statutory test to postulate the same negotiation as common-law wayleave/user damages and would have awarded a larger sum (and remitted detailed calculation).

Wider implications:

• The decision reaffirms that an owner’s subsurface title can support trespass claims against deep intrusions, and it confirms that statutory licences to win minerals do not automatically oust property rights in the subsurface; compensation for compulsory acquisition of ancillary rights under the statutory scheme is to be assessed by reference to a hypothetical negotiation and (in the view of the majority) informed by established compulsory-purchase valuation principles.

Appeal dismissed (majority); cross-appeal dismissed. The court held that the deviated wells and associated casing and tubing constituted actionable trespass because the freehold title extends to the subsurface strata and paper title suffices for possession; a licence under the Petroleum (Production) Act 1934 did not authorise entry beneath another’s land without ancillary rights. On damages the majority applied compulsory-acquisition valuation principles (value to owner, the Pointe Gourde/no-scheme rule) under section 8(2) of the Mines (Working Facilities and Support) Act 1966 and concluded the landowner’s ransom/key value was attributable to the scheme and therefore to be disregarded, so only nominal compensation was appropriate; a minority would have awarded larger wayleave-based damages and remitted quantification to the High Court.

The case came from the High Court (Chancery) where Peter Smith J gave judgment: [2008] EWHC 1756 (Ch). The decision was affirmed on appeal to the Court of Appeal: [2009] EWCA Civ 579. The defendants appealed to the Supreme Court, which delivered judgment on 28 July 2010: [2010] UKSC 35.