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Imagereal Capture TRACING AT COMMON LAW-MYTH OR REALITY? It is clear that there is a right to trace property in equity. It is a right in rem, and it enables a plaintiff to take priority over the ordinary creditors where the defendant is insolvent. This equitable proprietary remedy is available where, as a result of what has gone before, some equitable proprietary interest has been created and attaches to the property in the hands of the defendant.l In other words, this remedy would seem to be available only where there is a trust or a fiduciary relationship between the plaintiff and the defendant, or between the plaintiff and someone through whom the money has passed to the defendant.2 Although this limitation has been criticised? the scope of the remedy is tolerably well defined. But what of the right to trace property at common law? Is there such a right? What is its scope? A discussion of these questions is of more than academic interest, for if a legal proprietary remedy exists its scope would not depend upon the requirement of a fiduciary relationship, and this would be of enormous importance in the development of an adequate and unified law of restitution. Indeed, of such importance that it is thought to warrant one more attempt to explain the position at law. THE PROBLEM It is submitted that the crux of the matter is this: can a proprietary- - remedy for the recovery of money be enforced by an action for money had and received? Or does a plaintiff in such an action have to prove as an ordinary creditor where the defendant is insolvent? In other words, is an action for money had and received a strictly personal action, or does it fall into two distinct categories-the normal quasi- contractual action and a strictly proprietary one? It would seem that there is considerable academic support for the view that a proprietary remedy can be enforced by an action for 1 Re Diplock, [I9481 1 Ch. 465, 530. 2 Ibid. 3 See especially Maudsley, Proprietary Remedies for the Recovery of Money, (1959) 75 L.Q.R. 234, 241-243; WATERS,THE CONSTRUCTIVETRUST 33-43, 66 et seq; GOFF a JONES, THELAM' OF RESTITUTION41-43 (1966). hereafter cited as GOFF a JONES. TRACING AT COMMON LAW 403 money had and received. Stoljar is of opinion that the action for money had and received 'had not only made possible the following of money into the hands of transferees, it had enabled recovery from bankrupt estate^.'^ Indeed he goes so far as to say that the refinement developed by equity whereby it could create a charge upon a mixed mass of money, existed at common law 'simply because money had and received also gave a right to the same quantity: we might as well have said that it too created a charge upon the mixed mass.'6 He cites, in the main, a group of old cases as a~thority.~It will be submitted that these cases do not support such a proposition and further that Stoljar is claiming too much for the action of money had and received. Goff and Jones submit that 'subject to the requirements of identifi- ability and the defence of bona fide purchaser, the action for money had and received should be available as a proprietary remedy to enable A to follow his money into the hands of C (a third party who will either be mala fide or an innocent volunteer) in the following circumstances . .'?, and they go on to list a number of different situations. What is difficult to understand is that the learned writers also say that this action can only result in a personal judgment against C.8 What then do they mean by the use of the term "pro- prietary"? Does it mean that A has priority over C's creditors in the case of the latter's insolvency? Or does it simply mean that C must have received A's money; in other words, that C must have been unjustly enriched at the expense of A? If the latter, then this is a necessary requirement in an ordinary quasi-contractual action for the recovery of money. And if this is the case, is it not misleading and confusing to reflect this view by referring to money had and received as a proprietary remedy? Finally, this question has been examined by Scott in a recent artic1e.O His thesis is an interesting one. The common law, he says, does not give a remedy in rem for the recovery of money or other property. There is no action at law equivalent to the equitable tracing remedy. To "trace" at law therefore 'means no more than to identify property, in a changed form and in new hands, in order to found a 4 STOLJAR,THE LAW OF QUASI-CONTRACT114 (1964), hereafter cited as STOLJAR. 6 STOLJAR115. 6 Id. at 114. 7 GOFF JONES36, n. 12. 8 Id. at 36. 9 Scott, The Right to "Trace" at Common Law, (1966) 7 WEST.AUST. L. REV. 463, hereafter cited as Scott. 404 WESTERN AUSTRALIA LAW REVIEW personal action in support of a proprietary right.''' But nevertheless, he continues, the terminology of tracing at law is appropriate. This is because the common law can, by means of a purely personal action, achieve an effect very similar to that achieved by the equitable tracing remedy. Thus 'where money or other property belonging to A can be identified as having passed into the hands of B and thence into hands of a third party, C, this may give rise to a personal right of action against C in conversion or in detinue or for money had and re- ceived; and in the specific case of an insolvency of B, this action against C (whether he be the banker of B, the trustee in bankruptcy of B, one to whom B has consigned the goods of A, or the personal representa- tive of B, etc.) will enable A to recover in full as against the other creditors of B, and so to recover all he would have done by tracing order in equity.'" He concludes by saying that this common law remedy is wider in these aspects than the equitable proprietary remedy. 'It does not depend upon a fiduciary relationship; it does not depend upon any adoption by the plaintiff of an agent's acts;12 and since it operates strictly in personam it does not depend upon the continued existence or identifiability of the res.'13 What Scott appears to attempt to do is to give the terminology of "tracing at law" a new and very different meaning from the usual definition. It is difficult to accept this rather novel argument. It is perhaps true that a personal action for money had and received may lie against C where he is an innocent volunteer or a mala fide pur- chaser, but it is difficult to see how such an action would lie against C personally where he is B's trustee in bankruptcy, personal represen- tative or his banker. Surely C cannot in these cases be sued in his personal capacity but only in his represenatiue capacity. If the former were the case, it is difficult to see how this would not be a very simple method of always avoiding the disadvantages which result from having to prove as an ordinary creditor. Furthermore, what if C were insolvent? According to Scott's view the action is strictly in personam. If that is the case then A would have to prove as an ordinary creditor. Scott argues that there is authority for his view. The question whether the cases he cites actually support his thesis will be discussed presently. At the moment it is intended to state what, in this writer's view, is the scope of the right to "trace" at law. P 10 Scott 489. 11 Ibid. 12 But, quaere, does the equitable tracing remedy? 13 Scott 489. TRACING AT COMMON LAW THE SCOPE OF THE RIGHT TO TRACE AT LAW The two remedies usually available for the recovery of money are conversion and money had and received.14 The former is a complicated action. It is hydra-headed in the sense that while in most cases the result of the action is a personal remedy for damages, it can be used to enforce a proprietary claim. Indeed, although a tort action, con- version has its basis in property. The defendant must have dealt with the property in the plaintiff's chattels. Basically, then, the action of conversion is proprietary, but most of the time it is disguised as a personal action.15 It is this action which is dependant upon "identi- fying" the proceeds. Thus, if a fund or its product can be earmarked even in the hands of a third party, for example an innocent volunteer, then in the right circumstances it is possible that a plaintiff can obtain this specific fund or its product by an action in conversion. And if the defendant is insolvent he can do so in preference to the general creditors. Taylor u. plume^,'^ the leading case on "the doctrine of following money at law", substantiates this view. That was a case of trover. There, it will be remembered, Sir Thomas Plumer entrusted a large sum of money to his agent with instructions to buy Exchequer bills. Instead the agent misapplied it by purchasing American securi- ties and bullion, and with these set off for North America. However, he was caught at Falmouth and the securities and bullion were turned over to sir-~homaswho sold them and received the proceeds.
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