Judgement

Appeal (No. 25 of 1928) from a decree of the High Court in its appellate jurisdiction (January 18, 1927) reversing a decree of the Court in its original jurisdiction.

The appellant, who had leased to the respondents three oil sites, brought against them in the High Court a suit claiming compensation for natural gas which the respondents had obtained from one of the sites and had used for their own purposes.

The facts appear from the judgment of the Judicial Committee.

By the lease dated June 5, 1918, the appellant leased to the respondents "his oil well sites, Nos. 3993, 3978, 3995, and the right to win oil therefrom for a period of 25 years from date hereof,” and agree that during the lease they should have possession of the said oil sites. The lessor covenanted as to the validity and maintenance of the Government grants of the right to win oil; and the lessees agreed to begin to drill in six months, but they were to be sole judges whether the quantity of oil produced rendered the continuance of work advisable. The lessees agreed to pay royalty at the rate of 8 annas for every 100 viss of oil produced by them from the sites. The lessor agreed to allow the lessees, their agents drillers, etc., free access upon the well sites " for any of the purposes of this lease."

The trial judge (Das J.) held that the right to royalty upon the oil involved a right to compensation for the gas taken, and ordered an inquiry as to the amount of the compensation.

Upon appeal the decision was reversed and the suit dismissed. The learned judges (Rutledge C.J. and Brown J.) held that oil upon which royalty was payable did not include gas. They said that the plaintiffs advocate had admitted that the plaintiff was not owner of the gas at the date of the Government grant or of the lease, and they held that the Oil Field Act, 1918, and the rules thereunder, did not enlarge his rights ; and accordingly that " the ownership of natural gases, so far as they are capable of ownership, remained in the Government."

1929. Feb. 4. Dunne K.C. and Pennell for the appellant. Having regard to Barnard, etc., Oil and Gas Co. v. Farquharson ([ 1912] A. C. 868.) the appellant concedes that the right to a royalty on the oil won did not carry a right to be paid for gas obtained. The appellant was, however, entitled to compensation. As owner of the sites he was entitled to all the profits and rights in the land save so far as the Government, in the right of conquest, had reserved them to itself. The effect of U.B. Regulation

III. of 1889, ss. 23, 27 and 31, is to recognize private ownership in lands other than " state lands," and though under the Regulation and the Oil Fields Act, 1918, the right to oil is reserved to the Government, there is no reservation as to natural gas. The lessor did not grant the respondents the right to the gas, and the right remained in the appellant. Every invasion of a right of property, whether corporeal or incorporeal, gives a right of action against the invaders Mansell v. Valley Printing Co. ([ 1908] 2 Ch. 441, 446.) Having regard to the provisions of the lease it clearly was merely for the purpose of winning oil, and by the Transfer of Property Act, 1882, s. 108 (o), the lessee was not entitled to use it for any other purpose. [Reference was made also to the U. B. Land Revenue Manual, 1900, p. 227.]

Clement Davies K.C. and Gordon Brown for the respondents. The lease gave the respondents the right to possession of the oil sites, and they were entitled as against the appellant to reduce the gas into possession. Owing to the nature of the gas there was no property in it until it was reduced into possession ; any adjoining owner could have tapped it. Even if the lease was merely for the purpose of winning oil, the respondents were entitled to any ancillary profit which arose in process of doing so Robinson v. Milne. (( 1884) 53 L. J. (Ch.) 1070.)

Dunne K.C. replied.

The judgment of their Lordships was delivered by

LORD HAILSHAM L.C.