Latium Fleet Management (“Latium”) appealed a Chambers Judge’s Order that required it to pay $130,000 into Court as Pre-Judgment Security for Davlyn Corporation’s (“Davlyn”) outstanding contractual interest claim at a rate of 24% per annum. Although other parts of the Order stayed enforcement of Summary Judgment and required Security for Costs of Appeal, those aspects were not under Appeal. On Appeal, Davlyn also applied to introduce new evidence about Latium’s later request for an extension to pay the funds into Court, arguing it demonstrated concerns about Latium’s financial position.

The Court first addressed Davlyn’s Application to adduce new evidence under Rule 14.45. The proposed new evidence was an Affidavit from Latium’s director and a transcript showing the Chambers Judge had granted Latium more time to pay the ordered Security into Court.

The Court applied the test set out in Palmer v The Queen, [1980] 1 SCR 759: (1) the evidence could not, with due diligence, have been obtained earlier; (2) the evidence must be relevant to a decisive or potentially decisive issue; (3) the evidence must be credible; and (4) it must be capable of affecting the result if believed. While the Court found the Affidavit and transcript were relevant and credible and could not have been produced sooner, they did not meet the fourth criterion. The additional evidence did not address the key legal issue on Appeal, which was whether the Chambers Judge properly exercised jurisdiction to grant Pre-Judgment Security for an unproven claim. The Application to admit new evidence was therefore dismissed.

Turning to the Appeal, the Court found that the Chambers Judge had conflated principles for Security for Costs with the very different concept of ordering Security for a claim before Judgment is granted. The Chambers Judge had not addressed the established legal tests for Security for Judgment, which are recognized only in rare and exceptional circumstances, generally after Judgment and in circumstances similar to those for Mareva injunctions or attachment proceedings under the Civil Enforcement Act. The Court reviewed prior authorities, confirming that an Order requiring a party to secure a claim in advance of Judgment is extraordinary and requires a clear basis in law, which was not demonstrated here. There was no analysis that Davlyn’s claim for contractual interest met the high threshold for preserving assets or preventing misuse of the court’s process, and no statutory authority was identified to support Pre-Judgment Security for a contested interest claim.

As a result, the Court concluded that the Chambers Judge erred in principle by ordering Latium to pay $130,000 into Court for Pre-Judgment Security on interest that remained to be proved. The Appeal was allowed, the Order for Pre-Judgment Security was set aside, and the amount paid into Court for that purpose was ordered to be returned to Latium with any accrued interest.