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

Lord Hope of UK Supreme Court addresses the notion of hearing Scottish cases in London

Over two-hundred law students, trainees, solicitors and advocates attended the inaugural annual lecture of the Scottish Young Lawyers’ Association. The keynote speaker was The Right Honourable Baron Hope of Craighead, KT, PC, QC, FRSE. Lord Hope is the Deputy President of the Supreme Court of the United Kingdom of Great Britain and Northern Ireland along with being Chancellor of the University of Strathclyde in Glasgow. Lord Hope is arguably considered the 21th Century most eminent scholars of jurisprudence and is one of only ten individuals to have served on the final session of the Appellate Committee of the House of Lords and the inaugural session of the Supreme Court.

The lords of appeal in ordinary or Law Lords were physically moved from the chambers and halls the Parliament Building at Westminster to the newly created bench at Middlesex Guildhall, which is located between Westminster Abby and the HM Treasury Building. The House of Lords, which is the upper house of the UK’s legislative branch of government, served as the highest court of appeal from 1399 to 2009. The Law Lords used to hear appeals each day in the chamber of the House of Lords. During the Second World War the House of Commons was bombed and the Law Lords moved their hearings to a nearby committee room to escape the noise of the building repairs, constituting themselves as an Appellate Committee for the purpose. In fact, this temporary arrangement proved so successful that it became permanent, and continued until it was abolished and replaced by the Supreme Court on 1st October 2009.

Lord Hope’s speech was called, “Scots law seen from south of the border”, and focused on a comparison between the world when he began law school at the University of Edinburgh in nearly 50 years ago. He emphasised how much has changed, but said to long to go backwards is not the way forward and stressed how much better off students are today with a refined and long educational tenure to join the profession of law.

Lord Hope also mentioned how much technology has changed and how much more of a demand is on the profession for accuracy, efficiency and minimizing errors. His reflection of his career also included a bit of rye humour, as he said, “It was, of course, a different world in 1962. It was not quite the world of silent motion pictures, although many of the films were still in black and white. Sex had not yet been discovered. That did not happen until 1963, according to the poet Philip Larkin. Nor indeed had drugs. For the most part we did what we were told. As students we all wore jackets and ties and, unlike those who followed soon afterwards, we all had short hair cuts, unlike a few years later when Gordon Brown, the former Prime Minister, had hair down to his shoulders.”

The speech went on to address how the Supreme Court dealt with Scottish cases being appealed from Inner House of the Court of Session (unlike England, the Inner House has a right of appeal to the Supreme Court). Lord Hope spoke of the Scottish case, “Sharp v Thomson[1], which was followed a few years later by Burnett’s Tr v Grainger[2]. It was a case about personal insolvency. There the question was whether the house was part of the ‘whole estate’ of the debtor so as to be part of the estate which vested in his trustee in bankruptcy. The House of Lords distinguished Sharp and held that it did: the trustee does indeed take both the house and the money. Centuries of case law made clear which meaning was to be given to phrase ‘the whole estate of the debtor’ used in the Bankruptcy Act. It was made clear that there was no intermediate right between a personal and a real right, and that delivery of the disposition did not give rise to a trust, either actual or constructive, in favour of the buyer. By now the personnel in the House of Lords had changed. I was one of the two Scottish judges on that case, along with Lord Rodger. Lords Hoffmann, Bingham and Hobhouse made up the rest of the panel. Anyone who reads the opinions of Lords Hoffmann and Hobhouse will see that they felt strongly that the case should have been decided the other way. But they did not dissent. Lord Bingham, however, felt strongly that on an issue such as this – where there was genuinely a distinctive point of principle of Scots law – that if the Scottish judges reached a particular decision, it was not for him – unfamiliar with the system – to interfere.”

The final points Lord Hope made concerned the Cadder Case[3], in which the Supreme Court upheld the ECHR against the Scottish procedural rule of being able to interrogate a detainee for up to six hours without legal representation. He could not make too many comments, as there are five cases on appeal to the Supreme Court, which concern clarifying Cadder.

Lord Hope concluded by saying as long as the Scottish courts sent business down to London, then the Constitutional Convention of having two of the twelve justices on the Supreme Court coming down from Scotland and one from Northern Ireland would continue to be upheld. He did mention that if Scotland were to make the Court of Session the highest court in the land, then there would be no need for the convention to be sustained.

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[1] 1997 S.C. (H.L.) 66; 1997 S.L.T. 636; 1997 S.C.L.R. 328; [1998] B.C.C. 115; [1997] 1 B.C.L.C. 603; 1997 G.W.D. 9-364

[2] [2004] UKHL 8; 2004 S.C. (H.L.) 19; 2004 S.L.T. 513; 2004 S.C.L.R. 433; [2004] 11 E.G. 139 (C.S.)

[3] [2010] UKSC 43; [2010] 1 W.L.R. 2601; 2010 S.L.T. 1125; 2010 S.C.L. 1265; 2010 S.C.C.R. 951; [2010] U.K.H.R.R. 1171; (2010) 107(43) L.S.G. 21; (2010) 154(41) S.J.L.B. 30