The Supreme Court has dismissed Mohamed Al Fayed’s appeal against a decision to overturn a High Court order that he should receive almost £750,000 in damages for trespass into oil reserves beneath his
This morning, by a narrow 3:2 majority, the court dismissed his appeal against the June 2009 Court of Appeal decision to overturn Peter Smith J’s order for Star Energy to pay the compensation after it drilled diagonally under Barrow Green Court, Al Fayed’s country estate in Oxted, Surrey.
The court unanimously dismissed a cross-appeal by Star Energy arguing that the Court of Appeal had been wrong to hold that a trespass had taken place; the Court of Appeal had held that Al Fayed owned the land at the depth of the oil wells.
Between 1990 and 2007, approximately 1.006m barrels of oil were extracted from wells that penetrated almost 1km beneath the estate, which sits on part of the Palmers Wood oilfield and is owned by Al Fayed’s company Bocardo SA.
Allowing Al Fayed’s claim in July 2008, Peter Smith J ruled that there had been a trespass and awarded Al Fayed 9% of Star Energy’s income from the wells, which amounted, since 2000, to approximately £7m, and the same percentage of future income.
However, allowing Star Energy’s appeal against that decision in the Court of Appeal, Aikens LJ held that although Al Fayed owned the strata beneath the estate, he did not own the petroleum found in those strata and reduced the damages to £1,000.
Lord Walker, Lord Brown and Lord Collins dismissed Al Fayed’s appeal against that decision, with Lord Hope and Lord Clarke dissenting, on the ground that Bocardo was not entitled to a share of the value of the petroleum being accessed through its land.
The court also ruled that surface landowners own their land to an indefinite depth beneath their property.
In a statement following the judgment, Al Fayed said: “It is outrageous that the Supreme Court has chosen to follow the Court of Appeal in awarding me paltry damages despite having decided unanimously that Star Energy trespassed on my family’s land to extract valuable oil reserves without consent.
“How can it be right for the state to have allowed Star to do this by nationalising inland oil in the
“It seems to be impossible for me to get justice in this country even at the highest level, and I will now have to look to the European Convention on Human Rights which was established precisely to prevent such abuses.”
Real estate partner and head of property litigation Julian Cridge, of Denton Wilde Sapte, who acted for Bocardo, said: “There is a 13th century legal maxim that ‘whoever owns the soil, it is theirs up to heaven and down to hell’. The Supreme Court’s judgment in our client’s favour now confirms that this ancient saying does indeed apply to the land under our feet, with the decision having potentially far-reaching implications for property owners, the extractive industries and real estate lawyers around the globe.”
Charlotte Bijlani, solicitor advocate, who leads the real estate dispute resolution team at Norton Rose, said: “The decision sensibly puts the technical trespass in the context of the relevant statutory background. The extraction rights were clearly intended to extinguish any ransom value and limit compensation on the usual compulsory purchase basis.”
Comment on the decision, Gary Lawrenson, real estate litigation lawyer at Osborne Clarke, said: “There are no winners following this judgment. Oil companies that have been drilling at deep levels assuming immunity to actionable trespass will have to re-evaluate their position.
“At the same time, landowners with oil and gas reserves under their land will not obtain the windfall they may have been hoping for.”
Bocardo SA v Star Energy UK Onshore Ltd and another Supreme Court (Lord Hope deputy president, Lord Walker, Lord Brown, Lord Collins and Lord Clarke) 28 July 2010.
Jonathan
