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I am unhappy about interceptive subtraction for the reasons Lionel sets out in his 1991 OJLS piece. I therefore think it must be right to say that the buyer has no direct action against the thief in tort or UE. I also agree with Lionel that subrogation could nonetheless get the buyer out of his hole, but I would add that although the subrogation solution could be reached via a UE analysis, a court might equally well imply a subrogation term into the contract without invoking UE at all.

In our case, X and Y enter a contract for the sale of goods. The contract provides that Y will sell the goods to X, that title to the goods does not pass until delivery, but that the risk of loss prior to delivery is to be borne by X. The contract gives X no express right to be subrogated to any right of action which Y might have against Z in the event that Z negligently damages or converts the goods after X is put on risk but prior to delivery.

Assuming that it is right to say that X has no standing to sue Z directly in the event that Z does either of these things, but that Y does have such a right, it seems to me that a court might well conclude that a subrogation term should be implied into the contract because:

1) A reasonable bystander would say 'of course not', if asked whether X and Y both contemplated that Y should be able to keep X's payment and also enforce his right against Z for himself and so effectively be paid twice for his goods.

And 2) He would also say 'of course not' if asked whether X and Y both contemplated that as between X and Z it should be X rather than Z who should pay Y.

In answer to Lionel's question whether an insured's cause of action against a 3rd party is held on trust for his indemnity insurer, this idea was floated in Lord Napier & Ettrick v Hunter, but expressly left undecided by the HL. McGillivray and Parkington para 22-70 argue against it because it would make it difficult for a 3rd party to know whether he was safe to compromise the insured's claim or even whether he was safe to pay the insured without also getting a discharge from the insurer. Personally I think the HL was wrong to give the insurer any proprietary right at all, even to the proceeds of the insured's action once completed, but that's another story ...

Charles

PS Tracing enthusiasts will be interested to read the Ont CA's discussion of the lowest intermediate balance rule in Law Soc of Upper Canada v Toronto Dominion Bank, unrep, 7th Dec 1998.

__________________________
Dr Charles Mitchell
Lecturer in Law
School of Law
King's College London
Strand
LONDON WC2R 2LS

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