Ex parte James; Re Condon198 involved a judgment creditor of the bankrupt who had completed execution before the bankruptcy. The judg-
ment creditor was therefore entitled in law to keep the proceeds. The judgment creditor paid the funds to the trustee after the trustee demanded payment and threatened legal proceedings to recover it. At the time, a claim to recover mistaken payments (what is recognized to be a claim in unjust enrichment) was not available in respect of payments made under a mistake of law. Despite the fact an action to recover the money was not then available, the court held that the judgment creditor was entitled to recover the money paid to the trustee. The decision relied upon the principle that the trustee is an officer of the court and is expected to act in accordance with a standard of fairness that prevents the trustee from asserting a legal right if to do so would be inconsistent with natural justice and honesty.199
Payments made on the basis of a mistake of law are now recoverable in a restitutionary action.200However, the rule in Ex parte James is not restricted to mistaken payments. Nor is the principle restricted to cases where the trustee’s high-handed action has caused the payment to be made. It has been applied where the trustee is passive and the hardship comes about for other reasons. For example, the principle was applied in Re MCDONALD201 in which a bankrupt had been granted a discharge conditional on payment of $3,300 to the trustee, and the bankrupt had repaid all but one dollar.
The difficulty with the rule is that it is unpredictable and provides little guidance as to its proper application. Often it is possible to achieve the same result through the application of some other established legal principle,202and this is likely to produce a more principled and predictable approach than an over-reliance on the rule in Ex Parte James.
BURROWS, A., "Proprietary Restitution: Unmasking Unjust Enrichment" (2001) 117 Law Q. Rev. 412
CHAMBERS, r., "The Constructive Trust in Canada" (1999) 37 Alta. L. Rev. 173
---, "Resulting Trusts in Canada" (2000) 38 Alta. L. Rev. 378
COPE, m., Proprietary Claims and Remedies (Sydney: Federation Press, 1997)
GOODE, r., "Property and Unjust Enrichment" in Andrew Burrows, ed., Essays on the Law of Restitution (Oxford: Clarendon Press, 1991) 215
KLOTZ, r., Bankruptcy, Insolvency and Family Law, 2d ed. (Scarborough, ON: Carswell...