Executive Summary: Key Legal and Evidentiary Issues

• Foreclosure proceeding involving a $1.3 million mortgage on residential property in Coquitlam, British Columbia, with the respondent alleging predatory lending and unconscionability under both common law and the BPCPA.

• No inequality of bargaining power was established, as the respondent retained his own mortgage broker and independent legal counsel, understood the essential terms, and had alternative options available to him.

• Allegations of unilaterally inflated principal, undisclosed brokerage fees, and a secret second mortgage were all contradicted by uncontradicted contemporaneous documentary evidence signed by the respondent.

• The 9.75% interest rate and 1.25% lender fee were found not to significantly depart from market pricing for a borrower in the respondent's circumstances, including a history of unfiled taxes, prior foreclosures, and inability to qualify with conventional lenders.

• Under the BPCPA, the burden shifted to the petitioner, yet the court still found no unconscionable act or practice before, during, or after the consumer transaction.

• Order nisi redemption amount was reduced by only $500 plus interest after the petitioner conceded there was no contractual basis for a "penalty fee," leaving the remaining post-default charges intact.

Background and the parties involved

This case, Morteq Lending Corp. v. Kashani, 2026 BCSC 420, was heard before the Honourable Justice Norell in the Supreme Court of British Columbia, New Westminster Registry. Morteq Lending Corp. ("Morteq"), the petitioner, is a private lending corporation managed by PHL Capital Corp. ("PHL"). Abbas Kashani, the respondent, is the owner and operator of a renovation and home construction business and the owner of a residential property in Coquitlam (the "Property"). The respondent appeared self-represented at the hearing, while Morteq was represented by counsel S. Somers. The hearing took place over three days — November 27–28, 2025, and January 28, 2026 — with judgment delivered on March 17, 2026.

The respondent's mortgage history and financial circumstances

Mr. Kashani had a troubled mortgage history on the Property prior to his dealings with Morteq. He had not properly declared his income to tax authorities and had not filed tax returns regularly, which disqualified him from obtaining mortgage financing from conventional "A" banks offering lower interest rates. He previously held two mortgages with private lenders — Neighbourhood Holding Company Ltd. and National Holdings Ltd. — both of which went into foreclosure within approximately one year. At the time he sought funding from Morteq in early 2023, the National mortgage was actively in foreclosure, and the respondent needed to pay it out urgently to avoid losing the Property.

How the Morteq mortgage came about

The respondent retained Icon West Mortgage Corp., through its president Steve Dhillon, as his mortgage broker to secure the best available rate from "B" banks or private lenders. Mr. Dhillon approached PHL on the respondent's behalf in March 2023, and negotiations unfolded entirely between the broker and PHL's mortgage analyst, Rick Orlando. The respondent had no direct contact with Morteq during the application and negotiation phase. After initial discussions about a $1.25 million loan proved insufficient to cover the existing mortgage, fees, and an interest reserve, the parties settled on a $1.3 million loan with a six-month interest reserve. On May 3, 2023, the respondent signed a commitment letter setting out the key terms: a loan amount of $1.3 million, an interest rate of 9.75% per annum compounded monthly, a one-year term, interest-only monthly payments of $10,562.50, and total fees of $29,250 comprising lender and broker fees. The respondent also received and signed a Conflict of Interest Disclosure Statement and a Fixed Credit Disclosure Statement on May 9, 2023, which itemized all fees and disclosed the effective annual percentage rate (APR) of 11.181%. A lawyer at Buckley Hogan witnessed the respondent's signature on the Mortgage and a promissory note.

Default and the path to foreclosure

The mortgage matured in May 2024. Morteq offered to renew the mortgage at 10.25%, later reducing the offer to 9.75% and eventually 9.25% during an in-person meeting. The respondent rejected all offers, insisting on an interest rate of 4% or 5%, which in Mr. Bains' view was unreasonable. The respondent also did not accept a proposed forbearance agreement. After the interest reserve was depleted as of June 1, 2024, and no further payments were made, Morteq demanded full repayment on August 20, 2024. When no payment was received, the petitioner filed the foreclosure petition on September 10, 2024. An order nisi was granted on December 10, 2024, setting a redemption amount of $1,380,656.59 with interest at 9.75% per annum compounded monthly and a redemption period ending June 30, 2025. Notably, the order nisi included an unusual handwritten term granting the respondent leave to bring a long chambers application challenging the validity and enforceability of the mortgage.

The respondent's claims of unconscionability and predatory lending

Mr. Kashani alleged that Morteq engaged in predatory lending and that the mortgage was unconscionable under both the common law and sections 8 and 9 of the Business Practices and Consumer Protection Act (BPCPA). His specific allegations included that Morteq unilaterally inflated the principal amount from what he needed to $1.3 million, added undisclosed brokerage fees, placed an unregistered second mortgage in favour of a related company called Oakhill Lending Corp. without his knowledge or consent, charged interest on the interest reserve to artificially increase his debt, charged an interest rate through Oakhill higher than the agreed 9.75%, violated section 6 of the federal Interest Act, and imposed excessive interest rates, fees, and security requirements. He further alleged that post-mortgage conduct — including the renewal offer at a higher rate, the forbearance proposal, and the petitioner's claims of attempted contact — were all part of a coordinated scheme to keep him in a cycle of debt and ultimately acquire his Property.

The court's analysis on unconscionability under common law

Justice Norell applied the two-part test for common law unconscionability as set out in Uber Technologies Inc. v. Heller, 2020 SCC 16, and summarized in Pearce v. 4 Pillars Consulting Group Inc., 2021 BCCA 198. This requires proof of inequality of bargaining power and an improvident bargain. On the first element, the court found no evidence that the respondent was unable to protect his interests. The commitment letter and credit disclosure statement clearly set out all terms, and the respondent admitted understanding the essential terms. He had not been subjected to aggressive negotiation tactics; his own broker had twice approached the petitioner. He had retained both a broker and a lawyer, and there was no evidence that the advice received was limited. Although the respondent faced financial pressure due to the existing foreclosure, the court noted this circumstance was not created by the petitioner and that the respondent had available alternatives, including filing proper tax returns to qualify for conventional financing, selling the Property, or seeking financing elsewhere.

On the second element — whether the mortgage was an improvident transaction — the court rejected each of the respondent's factual allegations. The documentary evidence showed that the $1.3 million principal was requested by the respondent through his broker, not unilaterally imposed. The fees were clearly disclosed in the commitment letter signed six days before the mortgage documents. The partial assignment of the mortgage to Oakhill was expressly authorized by a clause in the commitment letter, did not result in additional charges to the respondent, and the internal allocation of interest between Morteq and Oakhill produced the same total amount at the agreed 9.75% rate. The Interest Act argument failed because the mortgage required interest-only payments and was not a blended or sinking fund arrangement. As for the overall cost of the mortgage, the court found that the 9.75% rate and APR of 11.181% did not significantly depart from what other private lenders had been offering to someone in the respondent's position, noting that his previous private lenders had offered rates ranging from approximately 6.7% up to 13%–14% upon renewal.

The court's analysis on unconscionability under the BPCPA

The court noted that the essential elements of unconscionability are the same under both the common law and the BPCPA, with the key difference being that under the BPCPA, the burden of proof shifts to the supplier to demonstrate it did not commit an unconscionable act or practice. Justice Norell systematically addressed each statutory factor under section 8(3) of the BPCPA and found that: the petitioner did not subject the respondent to undue pressure; the respondent himself confirmed he was not alleging incapacity under section 8(3)(b); the total price did not grossly exceed comparable market pricing; there was a reasonable probability of full payment given the substantial equity in the Property and the respondent's stated exit strategy; and the terms were not so harsh as to be inequitable. The court also rejected the respondent's allegations about post-mortgage conduct, finding no evidentiary basis that the renewal offer, the forbearance agreement, or the petitioner's communications were part of any predatory scheme.

Post-default charges and the final ruling

Mr. Kashani also challenged several post-default charges included in the order nisi redemption amount: a $500 lender "penalty fee," a Prolink insurance premium of $11,518.50, NSF fees of $1,050, and a $750 lender demand fee. The court found contractual support for the insurance premium, NSF fees, and demand fee within the mortgage terms. However, counsel for Morteq conceded at the hearing that there was no contractual basis for the $500 penalty fee.

Ultimately, the court dismissed the respondent's application to set aside or vary the order nisi on the basis of unconscionability under both the common law and the BPCPA. The order nisi was varied only to reduce the redemption amount by $500, bringing it to $1,380,156.59 as of December 10, 2024, with interest continuing to accrue at 9.75% per annum compounded monthly. The successful party was Morteq Lending Corp., which prevailed on all substantive issues. The parties were directed to agree on costs or return to court if unable to do so.