Executive Summary: Key Legal and Evidentiary Issues

• Existence of a bona fide triable issue as a precondition to converting a foreclosure petition to an action or ordering hybrid procedures under the Supreme Court Civil Rules.
• Whether alleged fraud, money laundering and tax evasion in the underlying purchase and assignment transaction could legally taint an otherwise arm’s length mortgage granted by an uninvolved lender.
• Sufficiency of the mortgagors’ evidence to link the petitioner, Lanyard, to the fraudulent scheme, versus mere speculation and bald assertions.
• Application of the “fraud unravels everything” maxim, unconscionability doctrine, and ex turpi causa principles to a secured lender who relied on a standard facility letter, a contract of purchase and sale, and an appraisal.
• The requirement that any triable issue must go to the root or foundation of the mortgage itself – its validity, enforceability, or amount owing – before a foreclosure order nisi can be refused or delayed.
• Whether it is appropriate to use foreclosure proceedings as a discovery vehicle or “fishing expedition” to investigate possible claims against the lender in parallel to existing fraud litigation against other parties.

Factual background and parties

Lanyard Investments Inc., acting as general partner of LFC Hast23 Limited Partnership, was the lender and petitioner in a foreclosure petition concerning vacant development lands located at 4269 Hastings Street, Burnaby, British Columbia (the Subject Lands). The respondents/mortgagors were Royal Silver Construction Ltd., together with individual covenanters Reza Khaniarani and Sevana Navasanian. Additional respondents included Hasting & Madison Holdings Ltd., Tyche Capital Corp., John Doe and tenant/occupier respondents, but the central contest was between Lanyard and the mortgagors. The mortgage and facility letter were executed by Royal Silver, Mr. Khaniarani and Ms. Navasanian, and Lanyard advanced the full $3.9 million contemplated by the facility to fund the purchase of the Subject Lands. The mortgage was registered as a first charge over the property, and there was also a second mortgage over Mr. Khaniarani’s personal residence as further security. There was no dispute that the mortgage was validly executed, that the full loan amount was advanced, that the funds were used to purchase the Subject Lands, and that the borrowers later went into default. Nor was there any dispute that the amount claimed in the statement of relief—$2,209,936.40 as of April 23, 2026—was in fact owing and secured by the mortgage. The main dispute at the hearing did not concern the arithmetic of the mortgage debt, but whether the proceeding should be halted or transformed so that alleged fraud in the property purchase could be fully investigated before any order nisi in foreclosure was granted.

The alleged fraudulent scheme in the purchase transaction

The mortgagors alleged they had been drawn into a fraudulent scheme orchestrated by their realtor, Sam Abadian, and entities associated with him. According to their response to the petition, Mr. Abadian introduced them to the opportunity to purchase the Subject Lands and managed the negotiations during September and October 2023. Throughout, the mortgagors had no direct contact with the vendor, dealing solely through their realtor. Several versions of contracts of purchase and sale were signed, culminating in a September 23, 2023 agreement at a price of $5.1 million. On November 22, 2023, they were asked to sign a new contract reflecting a higher price of $5.325 million, which they did. The mortgors say they believe the fair market value of the Subject Lands was considerably lower than that figure. Unbeknownst to them, they allege, Mr. Abadian never presented this $5.325 million “Final Contract” to the vendor. Instead, he incorporated a numbered company that entered into its own contract with the vendor to buy the property for $4.0 million. He then represented to the mortgagors that the numbered company possessed a “pre purchased unit” that had to be assigned to them as part of closing, requiring them to pay a $1.35 million “assignment fee” to the numbered company. An assignment agreement addendum was signed on December 22, 2023. Financing was pieced together from multiple sources: the $3.9 million Lanyard loan secured by a first mortgage, a $1 million vendor take-back mortgage, and a further $500,000 loan from Tyche Capital Corp., a company linked to Mr. Abadian. When the transaction completed, the mortgagors paid the full $5.325 million purchase price, with these three funding sources covering the bulk of the price. The structure of the deal allegedly allowed $1.35 million to be paid out to the numbered company, with some or all of those funds being sent overseas or, possibly in a circular fashion, used to fund the Tyche loan. There was some indication, the mortgagors said, that Mr. Abadian had admitted the transaction amounted to “money laundering and tax evasion.” Against this backdrop, the mortgagors commenced a separate civil action against Mr. Abadian, the numbered company, Tyche Capital Corp., and an individual described as his girlfriend. In that lawsuit they seek damages for civil conspiracy and deceit, and allege that as a realtor he breached fiduciary duties owed to them.

Lanyard’s role, the facility letter and the mortgage

The financing from Lanyard was documented by a facility letter and a first mortgage over the Subject Lands, supported by a second mortgage over Mr. Khaniarani’s residence. The facility letter, provided to Royal Silver care of mortgage broker Michael Grudman, set out the $3.9 million loan, the requirement that it be secured by the property and additional collateral, and that it be advanced on satisfaction of standard conditions, including an appraisal and the contract of purchase and sale. From the record, Lanyard’s involvement began when mortgage broker Michael Grudman approached them with the lending opportunity. The evidence from Lanyard’s representative was that they dealt with Mr. Grudman—not with Mr. Abadian—in the origination, underwriting and advancement of the loan. Their evidence was that Lanyard had no knowledge of separate internal arrangements between the mortgagors, the realtor, the numbered company, Tyche or the vendor, beyond the contract of purchase and sale at $5.325 million and an appraisal that broadly supported that price. The mortgagors sought to challenge this by producing an email exchange dated January 31, 2025, between Lanyard’s controller and “Sam Abadian,” confirming receipt of post-dated cheques for three months of mortgage payments. They argued this showed inconsistency with Lanyard’s sworn statement that it had no dealings with Mr. Abadian. However, the email itself referred to it being “a pleasure meeting you,” which suggested this was a first meeting occurring long after the November 2023 purchase. On that basis, the court held that even if the email were admissible (a point complicated by possible implied undertaking issues from separate fraud litigation), it did not show that Lanyard knew of or participated in the alleged scheme at the time of the purchase and original loan advance. The judge accepted that Lanyard’s transaction was structured as an arm’s length commercial mortgage, advanced on the strength of a formal contract of purchase and sale and an appraisal supporting the price.

The mortgagors’ legal theories: fraud, unconscionability and triable issues

In response to the foreclosure petition, the mortgagors did not dispute that the mortgage was in default or that the quantified amount was due. Instead, they argued that the petition should be converted into an action, or that hybrid procedures should be ordered (such as disclosure and examinations for discovery), so they could investigate whether Lanyard was implicated in the fraud they allege against their realtor and related parties. Their legal position rested on several themes. First, they invoked the principle that “fraud unravels everything,” arguing that if the purchase transaction was permeated by conspiracy, deceit, money laundering and tax evasion, all related instruments, including the mortgage and facility letter, might be invalidated or rendered unenforceable. Second, they cited the doctrine of ex turpi causa non oritur actio (no cause of action arises from a base cause), suggesting that a lender should not be allowed to profit from a transaction grounded in illegality. Third, they advanced a case for unconscionability. On their theory, there was a significant inequality of bargaining power because Mr. Khaniarani was almost entirely reliant on his realtor, in whom he placed complete trust both for negotiating the acquisition and arranging the financing. That, they argued, combined with the structure of the deal, produced an improvident bargain designed to strip $1.35 million in unearned gain for the conspirators. In the mortgage context, they said, a finding of unconscionability can justify reopening the transaction and taking an account between creditor and debtor in order to protect the mortgagor’s financial interests without handing them a windfall. They also noted that the onus would be on the mortgagee to disentangle which portions of the loan, if any, were not tainted by fraud or unconscionable conduct. Finally, they relied on procedural rules and case law—specifically Supreme Court Civil Rules 16-1(18) and 22-1, as interpreted in Cepuran v. Carlton—to argue that the court had broad discretion to convert a petition into an action or to order targeted pre-trial steps within the petition itself where triable issues arise. Their position was that the degree of Lanyard’s involvement (or non-involvement) in the Abadian conspiracy was itself a triable issue that needed exploration on a fuller evidentiary record before any order nisi should be granted.

The legal framework: triable issues in foreclosure petitions

The judge reviewed the governing authorities on when a foreclosure petition should be converted to an action, sent to trial, or managed through hybrid procedures. The leading case cited was Freshwest Equities Trading Corp. v. Dosanjh, which adopts the Griffin and Boffo line of authority. The court reiterated that a petition can be converted where there is a bona fide triable issue that cannot be fairly determined on the documentary record alone and that would affect the outcome of the proceeding. The threshold for a triable issue is intentionally low: where the evidence raises a reasonable doubt or suggests a defence that deserves to be tried, the matter may be converted. However, the case law also stresses that the issue must go to the root or foundation of the foreclosure claim—such as the validity of the mortgage, the right of the mortgagee to sue under it, or the amount due and owing. The court referred to Canadian Western Bank v. 0777419 B.C. Ltd., HGE Administrative Services Ltd. v. Perrick, and TCC Mortgage Holdings Inc. v. Alysen Place Developments Inc. The judge also emphasized that some weighing of the evidence is permissible in deciding whether a genuine triable issue exists. Bald or speculative assertions, unsupported by a concrete evidentiary basis, will generally not be enough. Recent authorities like Bank of Nova Scotia v. Khoe illustrate the approach in the foreclosure context. In Khoe, the mortgagor claimed she had been victimized by a third party who induced her to take out a mortgage loan, then misused the loan proceeds. She argued the transaction was unconscionable. The court refused to convert that foreclosure petition to a trial because there was no evidence that the lender itself knew of, participated in, or should have suspected the third party’s wrongdoing. The mortgage transaction, on its face, was not improvident and did not show undue influence by the lender.

Cepuran and hybrid procedure

The court then discussed Cepuran v. Carlton, where the Court of Appeal clarified that the mere existence of a triable issue is not, by itself, a sufficient reason to dispense with the petition’s summary process. Cepuran recognizes that modern civil procedure encourages tailoring processes to the needs of a case, and Rules 16-1(18) and 22-1(4) allow judges, in appropriate circumstances, to order hybrid measures such as limited discovery or cross-examination on affidavits within a petition proceeding, without first converting it to an action. However, Cepuran does not remove the initial requirement that a bona fide triable issue must exist. Instead, it shapes what the court should do after such an issue is found—deciding between full conversion, referral to trial, or a more proportionate hybrid approach. The judge in Lanyard v. Royal Silver treated Cepuran as operating at this second stage: first, the court must find a genuine triable issue going to the heart of the mortgagee’s claim; only then does it consider which procedural pathway is justified.

Application of the law to the mortgagors’ evidence

Applying these principles, the court concluded that the mortgagors had not met even the low threshold for establishing a bona fide triable issue that went to the root of the mortgage. The alleged fraud clearly related to the purchase transaction—the secret $4.0 million sale to the numbered company, the inflated $5.325 million figure, the $1.35 million assignment fee, and any associated money laundering or tax evasion. Lanyard was not a party to those agreements, and the evidence did not show they participated in or had knowledge of them when the loan was made. The only concrete evidence tying Lanyard to the broader constellation of actors was its normal contact with mortgage broker Michael Grudman and the late-in-time email exchange with Mr. Abadian in January 2025 about post-dated cheques. That limited contact did not suggest any complicity in a November 2023 fraud. On the undisputed record, Lanyard had advanced a conventional, arm’s length mortgage loan for the purchase of development lands, relying on a duly executed contract of purchase and sale and an appraisal that supported the stated price. The judge noted the parallel to Khoe: there, any wrongdoing related to how a third party used loan proceeds, not to the lender’s own transaction; here, any wrongdoing related to the purchase and assignment arrangements between the mortgagors, their realtor, the numbered company, Tyche and the vendor, not to the mortgage itself. The court held that even if the sale contract or assignment agreement were eventually unwound or declared unconscionable in separate litigation, that would not retrospectively infect the mortgage transaction with fraud or unconscionability on the current evidence. The suggestion that Lanyard might somehow be drawn into the conspiracy was, in the judge’s view, speculative. There was no specific allegation that Lanyard knew of the “pre-purchased unit” ruse, the assignment fee, the lower $4.0 million contract, or the alleged overseas transfers.

Rejection of the “fishing expedition” and procedural relief

Because no proper evidentiary foundation had been laid for a realistic claim against Lanyard, the court refused the mortgagors’ invitation to use the foreclosure petition as a platform to explore whether such a claim might exist. To allow the matter to be converted to an action, remitted to trial, or subjected to hybrid discovery processes solely to see if a triable issue could be constructed would, in the judge’s view, invert the intended sequence of a petition proceeding and undermine the summary nature of foreclosure relief. The court characterized the request as a “fishing expedition,” inconsistent with both the foreclosure jurisprudence and Cepuran’s guidance that there must be a “good reason” to depart from summary procedure beyond the mere theoretical possibility of unknown evidence. The petitioner, by contrast, bore the onus of showing there was no bona fide triable issue going to the foundation of its claim. On the admitted facts and the limited, largely speculative material advanced by the mortgagors, the judge found that Lanyard had met that burden. The mortgage remained a valid, enforceable charge, and the borrowers’ independent fraud action against other parties did not, by itself, create a defence to foreclosure.

Outcome: order nisi, redemption amount and costs

In the result, the court granted the order nisi in foreclosure on standard terms. It declared that the mortgage held by Lanyard over the Subject Lands is a valid and enforceable charge with priority over the interests of the respondents. The amount required to redeem the mortgage was fixed at $2,209,936.40 as of April 23, 2026, and a six-month redemption period was ordered from that date, expiring on October 23, 2026. Judgment was granted against the mortgagors for the redemption amount, reflecting the outstanding mortgage debt as of the hearing date. As to costs, Lanyard had sought costs on a full indemnity basis in its statement of relief, but the parties had not argued the issue at the hearing. The judge therefore left costs open. Lanyard was given the option to seek a brief further hearing to argue for full indemnity costs, in which case the order could note that costs were to be fixed later, or, alternatively, the parties could agree that costs be awarded to Lanyard on the ordinary Scale B and submit the order nisi for entry on that basis. No specific monetary sum for costs was set in the reasons, so the only quantified amount conclusively ordered in favour of the successful party is the judgment sum equal to the redemption amount. Overall, Lanyard Investments Inc., as the arm’s length mortgagee, succeeded in obtaining an order nisi and a judgment in the amount of $2,209,936.40 against the mortgagors, with any additional costs entitlement to be determined on further application or by agreement rather than fixed in this decision.