Tracing and Property Rights: The Categorical Truth
Once regarded as something of a legal terra incognita, the law of tracing has in recent years become far more accessible. The sustained theoretical analysis which has been brought to bear as a consequence of the emergence of the law of restitution has done much to reveal the doctrinal geography and function of tracing.' It is thus now clear that despite earlier characterisations tracing properly so-called is neither a right nor a remedy.2 Tracing is an evidential process by which one asset is permitted to stand in the place of another asset for the purposes of whatever rights or claims the plaintiff may have had in respect of the first asset.3 Where the asset in which the plaintiff holds rights is used to acquire or is exchanged for another asset ('the traceable product'), the rights in the original asset are transmitted4 to the traceable product. Even though the plaintiff would otherwise have no right or claim to the traceable product, it is nevertheless treated as the subject of his rights in place of the original asset. The function, then, of the specific rules of tracing is to identify those acquisitions or exchanges which are legally relevant and, thereby, which asset may properly be said to be the traceable product of the original asset. While the broad outline and function of tracing is now understood, many serious questions nevertheless remain to be answered. The issue we seek to address in this short paper concerns the origin of the plaintiff's rights in the traceable product. In particular, where the plaintiff asserts a proprietary right in a traceable product, what is the event or cause of action to which that right can properly be the response? The identification of the source of the right in the traceable product is not, moreover, a matter of idle academic interest. As Lord Millett has recently noted,5 taxonomy and classification have important practical implications. The classification of the origin of the plaintiff's right in the traceable product has consequences for the range of potential defences to the plaintiff's claim to the traceable product6 and the nature or type of the right which may appropriately be recognised in the traceable product.7 The dominant academic view of the origin of the plaintiff's right in the traceable product is that the right always and necessarily arises as a response to the principle