The Offside Goals Rule

The offside goal rule (doctrine of notice) deals with the consequences of fraud and applies to corporeal and incorporeal property which is capable of possessing a real right. The case law in this area stretches back to the 16^th Century (Stirling and White v Drummond [1582] Mor 1689), though attention was not drawn to this rule in law until Rodger (Builders) Ltd v Fawdry 1950 SC 483;Wallace v Simmers 1960 SC 255 and Trade Development Bank v Warriner and Mason 1980 SC 74 along with Optical Express (Gyle) Limited v Marks & Spencer plc 2000 SLT 644; The Advice Centre for Mortgages v McNicoll 2006 SLT 591 and most recently Gibson v Royal Bank of Scotland[2009] CSOH 14.

There is much academic debate as to whether or not the rule is good or bad law; if the former, then should be in the corpus of property and conveying law, or contract law, as the circumstances which give rise to such a rule are usually rooted in the contract. The rule has been given fundamental principal status in Burnett’s Tr v Grainger 2004 SC (HL) 19,^[1]in which Lord Rodger of Earlsferry referred to the offside goals rule in his opening paragraph.

“[T]he offside goals rule provides that a transfer or grant of a real right by A to C will be voidable if (i) A had already undertaken to transfer or grant a right in the same property to B (ii) that prior right was "capable of being made real" (iii) the grant to C was in breach of the prior obligation to B and (iv) C knew of that prior obligation or acquired gratuitously or at a material undervalue.”^[2]

If a party is to dispute another’s title, then they must demonstrate that the acquisition was defective on account of the transferee being in bad faith. “On this basis, the “offside goals” rule allows the reduction of a perfected transfer on proof of bad faith in the form of knowledge, actual or imputed, of the prior entitlement of another party.”^[3]

“If the owner of land agrees to grant a lease, but then sells the land before the tenant has gained a real right, the tenant may seek to invoke the offside goals rule if the new owner knew about the grant of the lease.”^[4]

“One difficulty with the offside goals rule is that a race to the register can only ever be a blind man’s race: one in which neither party knows who else might be running; the race is one against a ghost: the spectre of a trustee in sequestration. But, as I have indicated, as a result of the reforms that followed the Sharp v Thomson and Burnett’s Tr v Grainger saga, providing agents can get their act together within 28 days [(Bankruptcy (Scotland) Act 1985, s 31(1A) and (1B))] of delivery of a disposition from a natural person or other transferor that may be sequestrated, such a race can but rarely arise”, writes Dr Ross Anderson in his 9 June 2010 address to the Royal Faculty of Procurators 2010 Conveyancing Conference in Glasgow, Scotland.^[5]

University of Edinburgh lecturer, Scott Wortley, explains the offside goals rule has been given “detailed consideration by Professor Reid, The law of property in Scotland (1996) paras 695 - 700; Professor Carey Miller and David Irvine, Corporeal Moveables in Scots law (2nd edn, 2005) para 8.31, Ross Anderson in a valuable article "Offside goals before Rodger Builders" 2005 JR 277 (and an updated version in his Assignation (2008) paras 11-04 - 11-31, as well as my own discussion in 2002 JR 291 and in Professor McDonald's Conveyancing Manual (7th edn, 2004) paras 32-51- 32-62.”^[6]

It should be noted in football (soccer) an offside goal is void, whereas in conveyancing and property law an offside goal is voidable.

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^[1]2004 SC (HL) 19 at para 67

^[2]P Webster, ‘Options for the offside goals rule’ [2009] 13 Edin L Rev 524

^[3]DC Miller, ‘Title to moveables: Mr Sharp's Porsche’ [2003] 7 Edin L Rev 221

^[4]GL Gretton & AJM Steven, Property, Trusts and Succession (Tottel Publishing, West Sussex 2009) 263

^[5]R Anderson, ‘The offside goals rule in practice’ Royal Faculty of Procurators 2010 Conveyancing Conference 9 June 2010

^[6]S Wortley, ‘Offside traps - Gibson v Royal Bank of Scotland [2009] CSOH 14’Edinburgh Centre for Commercial law blog <http://www.law.ed.ac.uk/ecclblog/blogentry.aspx?blogentryref=7681> 9 Feb 2009 accessed 26 Apr 2011