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Dear Lionel,

Inspired by your note I have looked at the Re Barnabe decision -- actually the role of constructive trust in bankruptcy is a hot issue in US restitution these days, the only pity is that the bankruptcy lawyers arguing about it don't realize that it is restitution --

Anyway, my reaction from the point of view of US law, for what it's worth, is two-fold:

(1) The broad statements of the Ont Ct of Appeal about the purposes of constructive trust are unnecessary to decide the case, since it has always been necessary to TRACE the funds claimed; here the ct's statement that the partnership account "has generally been in negative balance" is enough to decide right there, because of the rule of "lowest intermediate balance."

(2) The ct's statement that a constr trust cannot be imposed for the purpose of granting the beneficiary a priority over the creditors misconceives the function of the constr trust remedy in these circumstances: the real unjust enrichment (where it exists) is precisely the enrichment of the creditors at the expense of the claimant, in that the debtor's obligations are being satisfied with the claimant's (traceable) funds ... So that properly understood, the only time when the constr. trust remedy makes sense in bankruptcy is indeed when the object is to create a priority for the claimant.

I think that what I am saying here is absolutely main-line orthodoxy so far as US restitution is concerned; I am curious whether it strikes a Canadian observer as equally obvious. For all I know you may find these suggestions untoward.

Best regards

Andrew Kull