Australian common law is generally as Andrew says here the UK law is. Perhaps the most useful Australian case is the Federal Court decision of Flack v Chairperson, National Crime Authority (1997) 80 FCR 137 (affirmed on appeal in (1998) 86 FCR 16, but I think the trial level decision by Hill J gives a good overview) - suitcase containing large amount of cash found at back of cupboard in house owned by mother of suspected criminal; having been seized by the authorities, it later had to be returned despite suspicions of its illegal origins.
>>>A.M.Tettenborn 11/05/07 7:25 >>>
The position in England is, as might be expected, much the same on principle as in Canada. In one spectacular case, Costello v Chief Constable of Derbyshire  1 W.L.R. 1437, the police seized a stolen car from the thief, but while it was clear that the thief was a thief no-one managed to establish whose the car really was. The thief won his action against the police. A similar case is Gough v Chief Constable, West Midlands  EWCA 206, where the Court of Appeal reached the same conclusion although with considerable distaste.
There is a theoretical reason for this rather bizarre rule. Unbelievable as it may seem to a civil lawyer, English law does not have any equivalent of the Roman vindicatio (i.e. a proprietary action to let an owner get his property back from a wrongful possessor). Instead we say that anyone with actual possession of goods can proceed in delict against someone without a better right who takes the goods from him, and can recover the full value of the goods as damages (the court also has a discretion to order the return of the goods themselves). Unlike the position under the vindicatio, where the plaintiff has to prove he is the owner, all that is required is proof of actual possession: the fact that that possession is wrongful as against a third party is therefore irrelevant.
However, one qualification must be noted. Our rules of ordre public / public policy prevent a person suing for the taking of goods where it was actually illegal for him to possess them at all (i.e. if you steal my stock of crack cocaine I can't sue you). Today this may be of more relevance than it seems. Recently we introduced legislation aimed at money-laundering, which is very wide. That legislation makes it illegal (subject to a few exceptions that don't matter here) to possess anything which is the proceeds of crime. This might mean that cases like Costello would be decided differently today, the argument being that the possession of the stolen goods was itself a crime and hence the possessor could not sue someone who took them. There's been no decision yet on this point, but the argument seems pretty unassailable to me.
I hope this helps. If Marten would like further details offlist, I'll be happy to assist.