No Free Ride: Foreign Creditor Must Post Security to Bankrupt BC Company

KORE Mining Ltd. (Re), 2026 BCSC 1541
Can a foreign creditor force a Canadian company into bankruptcy without putting up security for costs?

Summary:
A California company with no assets in BC, petitioned to bankrupt KORE Mining, and KORE applied for security for costs. The court found KORE had made out a prima facie case that Hawthorn couldn't cover a costs award, since Hawthorn held no exigible assets in BC and couldn't show sufficient assets elsewhere, spending borrowed litigation funds doesn't create an asset KORE could collect against. The court ordered Hawthorn to post $175,000 in security within 30 days and stayed the bankruptcy proceeding until it does.

Hawthorn Avenue Ventures II, LLC (“Hawthorn”) sought a bankruptcy order against KORE Mining Ltd. (“KORE”). Hawthorn is a California corporation with no corporate presence in BC. KORE opposed the granting of a bankruptcy order and applied for security for costs. KORE argued, in part, that the petition should be dismissed on the basis that Hawthorn had filed it for an improper purpose and without good faith and that the petition is an abuse of process.

Section 43(12) of the Bankruptcy and Insolvency Act provides that applicants who are resident out of Canada may be ordered to give security for costs to the debtor, and proceedings under the application may be stayed until the security is furnished. The provision is consistent with the ability to award security for costs in respect of proceedings more generally.

There is a two-stage legal test on an application for security for costs. The onus is initially on the applicant, at the first stage, to satisfy the court that there is a prima facie case that the respondent would be unable to pay the applicant’s costs if the respondent’s claim fails. If this threshold test is met, the onus then shifts to the respondent to show that it has sufficient exigible assets to satisfy an award of costs, or that there is no arguable defence to its claims. If the respondent is unable to satisfy the court on either of these two points, the court may then exercise its discretion to make an order that the respondent post security for costs, taking into consideration the following legal principles:

1. The court has complete discretion whether to order security, and will act in light of all the relevant circumstances;

2. The possibility or probability that the plaintiff company will be deterred from pursuing its claim is not, without more, sufficient reason for not ordering security;

3. The court must attempt to balance injustices arising from use of security as an instrument of oppression to stifle a legitimate claim on the one hand, and use of impecuniosity as a means of putting unfair pressure on a defendant on the other;

4. The court may have regard to the merits of the action, but should avoid going into detail on the merits unless success or failure appears obvious;

5. The court can order any amount of security up to the full amount claimed, as long as the amount is more than nominal;

6. Before the court refuses to order security on the ground that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that the claim would be stifled; and

7. The lateness of the application for security is a circumstance which can properly be taken into account.

Hawthorn is a foreign corporation without any exigible assets in BC. Notwithstanding that California is a reciprocating state for the purposes of Part 2 of Court Order Enforcement Act, a lack of exigible assets in this jurisdiction will ordinarily lead to a finding of a prima facie case. That ordinary result was held to apply in this case. 

The Court found that the ongoing bankruptcy proceeding and the prospect that Hawthorn would be granted a bankruptcy order—unilaterally bankrupting a BC corporation—had serious consequences for KORE. Those serious consequences included the fact that KORE is a public company and raises money for its exploration activities in the public markets, including most recently in December 2025 and February 2026. The costs of defending this matter had been and would continue to be substantial. If KORE successfully defended this proceeding, non-recovery of any costs award against Hawthorn would impact its financial health. Accordingly, the Court found that KORE had established the necessary prima facie case that Hawthorn would be unable to pay costs if this proceeding did not succeed.

Hawthorn did not provide any financial statements to support its argument that it had sufficient exigible assets to satisfy an award of cost. The Court agreed that it was apparent that Hawthorn had access to significant funds in respect of its efforts against KORE and Imperial. However, the expenditure of these funds did not create any exigible assets held by Hawthorn. It could hardly be said that, if Hawthorn were unsuccessful in this proceeding, its expenditure of legal fees had created any asset to which KORE might look to be paid any costs award. It was also possible that whoever funded these amounts was to be repaid by Hawthorn on a secured or unsecured basis. There was no guarantee that “access to funds” asserted by Hawthorn from some unknown source would be available to satisfy any costs award in favour of KORE. The Court was not satisfied that Hawthorn had met its burden to establish that it had sufficient exigible assets, either here or in California, to satisfy any award of costs against it.

The Court exercised its discretion to grant an order that Hawthorn be required to post security for costs in this proceeding, in the amount of $175,000, to be paid within 30 days. The proceeding was stayed until that amount is posted.

Judge: The Honourable Madam Justice Fitzpatrick

Professionals involved:

• Tevia Jeffries of McMillan for KORE Mining Ltd.

• Karen Fellowes and Jenna Velji of Stikeman Elliott for Hawthorn Avenue Ventures II, LLC