Murray-Aynsley CJ:

In the course of 1946 and 1947 the Municipal Commissioners passed certain resolutions for the making of payments to employees in respect of the period of the Japanese occupation.The Municipal Commissioners regard these payments as ex gratia, or in English as gifts.Whether the recipients so regarded them is open to question, but the matter has been argued on that basis.

The conditions under which these payments were made have been set out in the affidavit of Mr. Stevens.The conditions incorporated certain provisions adopted by the Government of the Colony. I think the only provision material to the present issue is one that payments should be made to the estate of deceased officers.

Among those who had become entitled to this bounty was one AM Drysdale who had been made a bankrupt in 1941 and died in 1945, and was still a bankrupt at the time of his death.On 20 February 1948 the Municipal Treasurer paid a sum of money to the Official Assignee in respect of the said AM Drysdale.It appears that in accordance with the resolutions in force at that time the payment was correctly made.

On 30 April 1948 the Municipal Commissioners passed a further resolution the effect of which was that payments in respect of deceased officers should be made to the dependents of the deceased or such other persons as the Commissioners should think proper.

On 7 May 1948 the Municipal Secretary informed the Official Assignee of this.

On May 1948, the Assistant Official Assignee replied.So far as it is material his letter amounts to this: Payments received after 30 April would be paid over to relatives.Those received before that date would be administered as assets of the various bankruptcies.

On 13 May 1948 the Official Assignee paid over as much of the sum received as was sufficient to pay a dividend of 100 on the bankruptcy.The balance was, by an order of Court, paid out subsequently to the widow.

The Municipal Commissioners seek to recover such part of the sum as was paid out to creditors.

This claim is based on what may be termed the rule or doctrine of Ex parte James 9 Ch App 609; 43 LJ Boy 107.The facts in that case are interesting and peculiar.There was a competition for certain funds between the trustee in bankruptcy and an execution creditor.Another case where the same question arose, Ex parte Villars 9 Ch App 432, had been decided by Mellish LJ in the sense favourable to the trustee, and on the strength of that the execution creditor paid over the sum of money concerned to the trustee.Subsequently the matter of Ex parte Villars was reheard by a Full Court consisting of Lord Cairns, James LJ and again Mellish LJ. This Court unanimously came to the opposite conclusion, (see 9 Ch App 432). On this the execution creditor wanted his money back.The Registrar made an order to that effect and the trustee appealed.The argument for the execution creditor seems to have been based on the doctrine that in equity the rule regarding money paid under mistake of law did not apply invariably, as Counsel argued, "not an inflexible rule". They cited two cases: Re Saxon Life Assurance Society 2 J & H 408 and Stone v. Godfrey 5 De GM and G 76. In both of these cases the Court had rather vaguely held out claims to relieve against mistakes of law.

In his judgment James LJ seems to have decided on those lines.He uses the words "money which in equity belongs to someone else". I am sure that when an equity lawyer used the word "equity" in the year 1874, he intended to use it in a technical sense, not in a vague or popular sense.Mellish LJ merely agreed.It will be seen that at this date the principle invoked had nothing peculiarly to do with bankruptcy, that it was merely a case of quasi contract and was possible owing to the fact that ideas on quasi contract were still fluid.It should be noted that in that case the money was still in the hands of the trustee.

The next application of the doctrine was in Ex parte Simmonds, re Carnac [1885] 16 QBD