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I appreciate that this is not a particularly helpful reply to James' question, but when considering the respective rights of the true owner of the stolen goods and the purchaser of the goods in the situation which he postulates, it might be useful to bear in mind that three first-instance judges have now shown a marked reluctance to extend Lord B-W's rule to the case where a claimant is fraudulently induced to enter a contract under which he transfers property to a defendant (besides questioning the rightness of Lord B-W's rule even in the case of the thief): Box v Barclays Bank [1998] Lloyd's Law Reports Banking 185, 200-1 (Ferris J); Papamichael v National Westminster Bank [2003] 1 Lloyd's Rep 341, [231]-[241] (Judge Chambers QC); Shalson v Russo [2003] EWHC 1637 (Ch), [106]-[127] (Rimer J).

On a completely different point, Mummery LJ has just reaffirmed Sir Martin Nourse's comments in Hammond v Osbourn, to hold in Niersmans v Pesticcio [2004] EWCA Civ 372 that UI is not an equitable wrong: the relevant bit is para 20:

The insistence of Mr Thomas that Maureen had "done nothing wrong" is an instance of the "continuing misconceptions" mentioned by Sir Martin Nourse in Hammond about the circumstances in which gifts will be set aside on the ground of presumed undue influence. Although undue influence is sometimes described as an "equitable wrong" or even as a species of equitable fraud, the basis of the court's intervention is not the commission of a dishonest or wrongful act by the defendant, but that, as a matter of public policy, the presumed influence arising from the relationship of trust and confidence should not operate to the disadvantage of the victim, if the transaction is not satisfactorily explained by ordinary motives: Allcard v. Skinner (1887) 36 Ch D 145 at 171. The court scrutinises the circumstances in which the transaction, under which benefits were conferred on the recipient, took place and the nature of the continuing relationship between the parties, rather than any specific act or conduct on the part of the recipient. A transaction may be set aside by the court, even though the actions and conduct of the person who benefits from it could not be criticised as wrongful. The presumption arising from the trust and confidence of their relationship made it unnecessary, for example, for Bernard to prove that Maureen actually had influence over him in relation to the gift of the, House, let alone that she in fact exercised undue influence or applied improper pressure to obtain the Deed of Gift. Whether or not Maureen's conduct could be described as "wrongful", the requirement of the doctrine of undue influence is that it must be "affirmatively established that the donor's trust and confidence in the donee has not been betrayed or abused: " see Hammond at paragraph 32. On that point Mr Thomas relied on the part played by Miss Tindall.