(3) an argument as to parties.
138 Both the claims and the debate at trial were based on the identification of the funds.
139 Bankes LJ said that, as a volunteer, the appellant (the mistress) took no title against the bank; the notion of a cheque as currency did not prevent tracing; and that the funds could be traced at law, or alternatively, in equity, reference being made to Sinclair v Brougham, Taylor v Plumer (1815) 3 M & S 562; 105 ER 721 and Re Hallett's Estate.
140 Scrutton LJ, to similar effect, said that the appellant received money to which the respondent had title and she had none. However, Scrutton LJ (unlike Bankes LJ) tended to the view that the funds could not be traced at law and that this would be a good answer to a claim for money had and received (at 330). His Lordship, however, went on (at 330) to apply equitable tracing in Re Hallett's Estate, as explained in Sinclair v Brougham, to enable "money though changed in character to be recovered, if it can be traced." Referring to Sinclair v Brougham, Scrutton LJ said, (at 330) "[i]n that case there was an equitable charge on the substituted fund or property, if it could be traced to the stolen money." (The reference by Scrutton LJ to "stolen money" may have been misplaced given the facts of Sinclair v Brougham.)
141 Atkin LJ noted that the trial judge had treated the claim as one for money had and received and given a money judgment for £315 (being the amount of money in the account). The trial judge had also made an order that the sum paid into Court (by the bank, originally a defendant, being the funds in the account) be paid out to the plaintiffs. Atkin LJ noted the potential difference between the two orders. As to the right to follow the funds in equity, Atkin LJ referred (at 333) to Re Hallett's Estate. He said (at 333) that and on the basis of equitable tracing the plaintiffs:
"… were, on the grounds alleged in the statement of claim, entitled to a specific order for the return of the money in question, and, as it is now represented by the sum in Court, to payment out of Court of that sum."
142 Atkin LJ then said that it might be a different question whether a right to trace in equity gave a right to a claim at law for moneys had and received. Relying on Taylor v Plumer and Re Hallett's Estate he accepted that a common law action lay. This conclusion was, however, based in part on the debatable proposition (at 335) that tracing at law was of the same width as in equity. Atkin LJ concluded, after referring to Re Hallett's Estate, at 335-336:
"… On these principles it would follow that as the money paid into the bank can be identified as the product of the original money, the plaintiffs have the common law right to claim it , and can sue for money had and received. In the present case less difficulty than usual is experienced in tracing the descent of the money, for substantially no other money has ever been mixed with the proceeds of the fraud. Under the order of the Court in this case I think the money paid into Court must be treated as paid in on behalf of the defendant … and the money judgment, together with the order for payment out to the plaintiffs, effectually secures their rights."
143 The claim at law (as this was) can be seen in the reasoning of each of the judges in Banque Belge to be based, at least in part, on a recognition at law of the equitable ownership of the fund. Banque Belge and, indeed, Taylor v Plumer can both be seen as examples of common law courts (one pre-Judicature Act and one post) recognising equitable titles: see generally Jacobs' Law of Trusts, at 670 [2702]; Equity: Doctrines and Remedies, at [1-205]; L Smith "Tracing in Taylor v Plumer: Equity in the Court of King's Bench" [1995] Lloyd's Maritime and Commercial Law Quarterly 240; Trustee of the Property of F. C Jones & Sons (a firm) v Jones [1997] Ch 159 at 169 (Millett LJ). (The comment of Moffitt ACJ in R v Grant [1979] 2 NSWLR 478 at 487 that Banque Belge dealt (only) with common law tracing is not correct.)
144 Importantly also, the whole of the reasoning in Banque Belge was based on the existence of the fund (which was in money). The case is authority for an action at law being available for moneys had and received, or an order for payment, in a sum representing the value of the property held by a volunteer defendant and owned in law or equity by the plaintiff. The amount of the judgment in Banque Belge was clear because the property was a fund of money. There is no reason why the case should not also be authority where the retained property owned in law or equity is an interest in land, commensurate with the traced proceeds of the plaintiff's funds. Given that the reasoning of the Court of Appeal was so clearly based on the existence of the identifiable property, there is much to be said for the proposition that any judgment money sum in this case should be the equivalent of the value remaining (at least up to the amount of the sums used) in Ms Belle's interest in the property, not the equivalent of the sums paid. It may also be that it should be limited to the increased value referable to payment of principal (and not interest). Banque Belge is not authority for the proposition that if moneys can be seen to be traceable into non-money assets (as here, real estate) a personal remedy in money had and received in the amount of the sum of money traced into the property exists, independently of the liability to repay or restore what is held. This is of some importance when one recognises that the sums that can be identified as paid into the mortgage accounts went to pay off (with other funds) both principal and interest, that the value of the asset may, conceivably have fallen and that, after payment, there were further borrowings on the security of the property. It is also important to recognise that Ms Belle, for the reasons discussed earlier, did not receive the funds in the relevant accounts.
145 To identify the common law right in this way is to focus upon the measure of the value surviving in the hands of an innocent voluntary recipient when notice of the claim is received, rather than the measure of value received: cf L Smith, The Law of Tracing (1997 Clarendon Press) at 28-32. This can be recognised as conformable with the underlying conception that it is the inequitable retention of money or benefit that lies at the root of unjust enrichment: Lipkin Gorman at 578-580 per Lord Goff of Chieveley. In the context of both the common law right and the equitable obligation to restore (see Black v S. Freedman, to which I will return presently) resting on the identification and recognition of the equitable interest in the property by tracing in equity, there is every reason for coherence and conformity between the operation of common law and equity in this respect: see Lipkin Gorman at 566 per Lord Templeman.
146 Further, this approach to the position of an innocent volunteer in a case such as this where the whole measure of receipt cannot be seen to be an enduring benefit conforms with the approach to recovery in Lipkin Gorman. There C, a solicitor, dishonestly withdrew cash from his firm's client (trust) account by making out cheques for cash and having a clerk cash them. C used the cash to gamble at the defendant's club where the cash was exchanged for chips. On one occasion, C procured a bankers draft made out to the firm which he endorsed to the club. No claim based on Barnes v Addy was made. The claim was in restitution. The House of Lords permitted recovery of the net gain by the club. The club was a volunteer, the contracts of gaming being rendered void by the gaming legislation. The club was held to be innocent. The present case can be distinguished in that Ms Belle did not receive the funds in the relevant accounts. But, nevertheless, Lipkin Gorman is of some assistance as to the importance of retention.
147 Lord Templeman (with whom Lord Bridge of Harwich, Lord Griffiths and Lord Ackner agreed) stated the general principle of the common law obligation of repayment of the receipt of stolen money as follows at [1991] 2 AC at 559:
"… But the law imposes an obligation on the recipient of stolen money to pay an equivalent sum to the victim if the recipient has been 'unjustly enriched' at the expense of the true owner. In Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd. [1943] AC 32, 61, Lord Wright said:
'It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep.'"
At 562 and 563, Lord Templeman identified the retention of received funds as crucial, stating the following at 563:
"… My conclusion is that the club has no right to retain stolen money received by the club from the thief. Repayment by the club to the victim, limited to the net amount of stolen money which the club retains, will not inflict a net loss on the club as a result of the transactions between the club and the thief. In the present case money stolen from the solicitors by Cass has been paid to and is now retained by the club and ought to be repaid to the solicitors. The solicitors will recover part of their stolen money and the club will only lose the winnings the club was not entitled to make out of the solicitors' money."
148 At 565-566 Lord Templeman referred to Black v S. Freedman and at 566 said:
"Although the decision in this case went on the grounds of trust, the reasoning applies equally to a claim for money had and received."
149 Lord Templeman then referred to and relied on Banque Belge. At 566, in discussing Transvaal v Delagoa Bay Investment Co Ltd v Atkinson [1944] 1 All ER 574 where the donee of the stolen money had dissipated it, Lord Templeman said:
"… The difficult questions which arise when a donee innocently disposes of stolen money do not arise in the present case where the stolen money has been retained by the club."