I'm perfectly happy to have a serious debate about this. But before I do so you really do need to do some proper research. Until then, I think we're back to "ask your dad".
Stop playing hide&seek games and cite some case law.
I've already provided a resource which says
nemo dat quod non habet applies in tracing into mixed funds.
Now it is your turn to cite something that refutes that. Otherwise you are just playing games.
" the original payer will have an equitable proprietary interest in the monies so long as they are traceable into whomsoever's hands they come other than a purchaser for value of the legal interest without notice."
Westdeutsche Landesbank Girozentrale v Islington LBC [1996] UKHL 12 (22 May 1996) at p. 26 per Lord Browne Wilkinson
Your turn
Hahaha. You misinterpreted the decision. So now I know you are not an attorney. Rather the decision reaffirms the equitable interest in mixed funds even if the recipient "
had no knowledge at any relevant time that the contract was void".
http://www.ucc.ie/law/restitution/archive/englcases/westdeutsche.htmHe held the money to be recoverable by the bank either as money had and received by the council to the use of the bank, or as money which in equity the bank was entitled to trace into the hands of the council and have repaid out of the council's assets. He decided that the bank's right to restitution at common law arose from the fact that the payment made by the bank to the council was made under a purported contract which, unknown to both parties, was ultra vires the council and so void, no consideration having been given for the making of the payment. The decision by the judge, which was affirmed by the Court of Appeal [1994] 1 W.L.R. 938, raised important questions in the law of restitution, which are of great interest to lawyers specialising in this field. Yet it is an extraordinary feature of the present appeal to your Lordships' House that the judge's decision on the substantive right of recovery at common law does not fall for consideration by your Lordships' House. The appeal of the council is confined to one point only - the question of interest.
The breadth of the submission
Although the actual question in issue on the appeal is a narrow one, on the arguments presented it is necessary to consider fundamental principles of trust law. Does the recipient of money under a contract subsequently found to be void for mistake or as being ultra vires hold the moneys received on trust even where he had no knowledge at any relevant time that the contract was void? If he does hold on trust, such trust must arise at the date of receipt or, at the latest, at the date the legal title of the payer is extinguished by mixing moneys in a bank account: in the present case it does not matter at which of those dates the legal title was extinguished. If there is a trust two consequences follow: (a) the recipient will be personally liable, regardless of fault, for any subsequent payment away of the moneys to third parties even though, at the date of such payment, the "trustee" was still ignorant of the existence of any trust: see Burrows, "Swaps and the Friction between Common Law and Equity" [1995] R.L.R. 15; (b) as from the date of the establishment of the trust (i.e. receipt or mixing of the moneys by the "trustee") the original payer will have an equitable proprietary interest in the moneys so long as they are traceable into whomsoever's hands they come other than a purchaser for value of the legal interest without notice. Therefore, although in the present case the only question directly in issue is the personal liability of the local authority as a trustee, it is not possible to hold the local authority liable without imposing a trust which, in other cases, will create property rights affecting third parties because moneys received under a void contract are "trust property."
Good to see you doing a bit of research.
The Islington LBC case concerns restitution of payments made under a void contract. Thus the decision itself was obviously not concerned with the rights of a bona fide purchaser without notice. However, the passage quoted is directly on point:
"other than a purchaser for value of the legal interest without notice.". The legal phrase for such a comment is a "
dictum".A dictum is a legally authoritative statement of principle in relation to an issue that does not form part of the decision itself, but which nevertheless carries weight.
Let me explain in a little more detail why you misunderstand the legal framework of bitcoin "theft".
1. The principle of nemo dat applies to certain types of property which are capable of "legal" ownership.
2. "Legal" ownership here has a narrow and technical meaning. It refers to a particular kind of right recognised by the common law.
3. If A has legal ownership of an item of property then, subject to certain limited exceptions (e.g. sale in market ouvert, sale by a buyer in possession), he retains that ownership if the property is wrongfully taken from him and even if it is transferred to an innocent third party.
4. The consequence of this is that if a third party receives the property, the original owner can sue the third party in tort for wrongful interference with goods (sometimes referred to as a claim in conversion) and can obtain an order that the goods be returned to him. This can have harsh consequences for innocent buyers.
5. Even a bona fide purchaser for value without notice has no special protection in a case where the original owner can assert a right to legal ownership in the requisite sense. Thus if I buy a stolen car then I am liable to be sued by the true owner even I bought it in good faith without realising it was stolen.
6. In limited circumstances, the law goes a step further and will even permit a claim to be brought by the original owner not only in respect of the original property but in respect of any subsequent property. This is known as common law tracing: the original property is "traced" into new property.
7. However, these rules (and allied rules for land and other types of property) only apply to things which are capable of being legally owned in the requisite technical sense.
8. This is where your analysis falls down. Bitcoins do not fall into this category. The analogy with commodities is just that - an analogy. Bitcoins are not tangible (or even intangible) goods in the technical legal sense and cannot be the subject of a claim for wrongful interference or conversion. They are not subject to the rules set out above. The closest analogy (though not a very good one) is probably money "in" a bank account (which is actually a contractual right enforceable against the bank) . As you well know, a "bitcoin" is simply a notional unit reflecting a ledger balance on the blockchain controlled by a confidential private key. It is far removed from tangible property to which the nemo dat and common law tracing principles apply.
9. This does not mean that the law will fail to recognise the rights of a bitcoin owner. The dichotomy is a false one. It is very likely (though not perhaps completely certain) that the law will recognise and protect the rights of a bitcoin owner in some way.
10. How exactly it will do so has yet to be worked out in any jurisdiction, as far as I am aware. However, the protection of the rights of a bitcoin owner is very likely - in a common law jurisdiction - to be based upon the recognition of some equitable claim (perhaps deriving from the confidential nature of the private key or perhaps based upon the recognition of bitcoins as a novel species of equitable property).
11. The significance of this is that equitable claims (of all kinds) are -
unlike common law claims for wrongful interference with goods - subject to the rights of a bona fide purchaser without notice. The quotation from Lord Browne-Wilkinson's speech in the Islington LBC case is not some novel principle. It is a fundamental principle of English (and U.S) trusts law that has been established for centuries. It applies to all kinds of equitable claims, irrespective of the source of the equitable right.
12. This is why the buyer of bitcoins will not be subject to the rights of the original owner unless he has notice that the coins were stolen.
13. For this purpose, "notice" has a specific technical meaning. It does not mean there was something about in the newspapers. It refers to the making of such inquiries as are reasonable in the circumstances.
14. Ultimately what counts as notice would be a question of fact in each case, measured against the legal test. Evidence of usual market practice will be relevant. In the context of a bitcoin purchase the Court would consider what inquiries (if any) a reasonable purchaser would make.
15. The answer to that is of course that a buyer from an exchange or market place does not make inquiries as to the provenance of the bitcoins he is purchasing and it is highly unlikely that he would be expected to, even were it technically possible to do so. Thus in all ordinary circumstances the buyer of bitcoins will take free of equitable claims.
16. This does not mean that the original owner has no remedy. He will have a good personal claim against the thief (if he can find him). But the notion that the victim of a bitcoin theft will be able to bring an equitable tracing claim against any subsequent owner whose balance can be traced back to the theft, is thus false.
Thus for all usual cases, the premise of your original post is false.