An Ontario Superior Court judge has ordered the removal of a certificate of pending litigation that for nearly eight years has encumbered a luxury Toronto condominium owned by Rhonda Niles, the wife of a businessman accused of a multi-million dollar fraud1. In a decision released on September 12, 2025, Justice A. Kaufman found that the plaintiff company failed to provide full, fair, and frank disclosure of material facts when it obtained the legal hold on the property without notice back in December 2017.
The case traces its roots to a 2004 joint venture to operate a private bariatric surgery clinic in Toronto. The plaintiff, an investment company named 4291425 Canada Inc., entered into a business relationship with Michael Scot-Smith and his corporation, ATF Financial Inc. The plaintiff company is solely owned and directed by July Bergeron, who is identified in court documents as the wife of a professional hockey player. The venture involved the creation of a company, Sixty Four Prince Arthur Inc., in which the plaintiff and ATF each held a 50 percent share, to operate the clinic located at 64 Prince Arthur Avenue.
In a lawsuit filed in November 2017, the plaintiff company alleged that Mr. Scot-Smith orchestrated a complex and concealed scheme to defraud his business partners. The core of the allegation centers on the property lease for the clinic. According to the plaintiff’s claim, Mr. Scot-Smith misrepresented another one of his companies, 64 Holdings Ltd., as the landlord. The plaintiff alleges that 64 Holdings was in fact an intermediary, leasing the property from the true landlord and then subleasing it to the clinic’s operating company at a significant markup. This arrangement allegedly allowed 64 Holdings to secretly collect over $12.5 million in basic and additional rent, far exceeding the amount it paid to the actual owner of the property. The plaintiff further claimed that Mr. Scot-Smith never disclosed his conflicting roles as a director of both the intermediary company and the clinic’s operating company. A separate allegation involved the 2017 sale of the clinic’s accounts receivable, valued at $9.3 million, with the proceeds allegedly being diverted to Mr. Scot-Smith’s company, ATF Financial Inc., instead of the clinic itself.
The lawsuit’s allegations were extended to Mr. Scot-Smith’s wife, Rhonda Niles, specifically concerning a condominium she owns at 55 Avenue Road in Toronto. The plaintiff company claimed that funds misappropriated from the joint venture by Mr. Scot-Smith were used to purchase this property. On this basis, the plaintiff successfully sought a certificate of pending litigation, or CPL, in an ex parte motion before Justice O’Bonsawin on December 8, 2017. A CPL is a legal notice registered on title to a property, warning potential buyers or lenders that the property is the subject of a court dispute. An ex parte motion is a hearing where only one party is present, placing a heightened duty of candour and full disclosure on the party making the request.
Ms. Niles brought a motion to discharge the CPL, arguing that the plaintiff failed to meet this stringent disclosure requirement. She maintained she had no involvement in the business transactions at the heart of the lawsuit. Her court filings detailed the history of the Avenue Road property, noting that Mr. Scot-Smith had held an interest in it since the mid-1990s through an offshore corporation, well before the joint venture with the plaintiff began in 2004. The property was formally transferred to her name in 2007 for a purchase price of $1,050,000, a transaction which involved her assuming a mortgage of $729,000.
In his analysis, Justice Kaufman identified three significant failures of disclosure in the affidavit of July Bergeron, which was used to obtain the CPL. First, Ms. Bergeron swore in her affidavit that she had personal knowledge of the facts, when her evidence was primarily based on information provided by her husband. The court noted that while an affidavit can be based on information and belief, the rules require the deponent to specify the source of the information. By claiming direct personal knowledge, Ms. Bergeron’s affidavit created a “misleading impression that her evidence warranted greater weight than it deserved.”
Secondly, the judge found that Ms. Bergeron’s affidavit unfairly characterized Ms. Niles’s financial situation. The affidavit described Ms. Niles as operating a “modest interior design business” and being reliant on her husband for funds. This created the impression that she could not have afforded the condominium without the aid of misappropriated funds. In response, Ms. Niles provided evidence of a successful 25 year career, including her own design company and a previous career as a model with a leading New York City agency. Justice Kaufman concluded that the plaintiff failed to present this information in a fair and balanced manner, as the duty of candour required Ms. Bergeron to admit she had no knowledge of Ms. Niles’s other sources of income or the financial details of her business.
The third and most critical omission related to the details of the condominium purchase itself. Ms. Bergeron’s affidavit mentioned the $1,050,000 purchase price but failed to disclose that title transfer records showed Ms. Niles paid $325,000 in cash while assuming a mortgage of over $725,000. More importantly, the affidavit failed to state that Mr. Scot-Smith’s offshore company had acquired the property in 1998, six years before the plaintiff’s business dealings began. Justice Kaufman found this fact significantly undermined the claim that the property was purchased with funds misappropriated from the joint venture. He also noted that simply attaching a title search as an exhibit is insufficient; material facts must be highlighted in the body of the affidavit itself.
The plaintiff company argued that Ms. Niles’s motion to discharge the CPL should be dismissed regardless of any disclosure issues, because she waited over seven years to bring it. Court rules require that a motion to set aside an order obtained without notice must be brought promptly. The court was satisfied that the plaintiff had properly served Ms. Niles with the CPL documents in December 2017.
Despite the significant delay, Justice Kaufman exercised his discretion to grant Ms. Niles’s request. He gave several reasons for overlooking the delay. He pointed to the plaintiff’s own failure to meet the heightened obligation of candour as a “serious matter.” He also delivered a sharp critique of the plaintiff’s handling of the lawsuit, describing its progress as moving at a “glacial pace” and noting that after nearly eight years, it remained essentially at the initial pleadings stage. He found the plaintiff’s explanations for the delay, such as the need to assemble records and the COVID-19 pandemic, did not justify such a prolonged period of inactivity.
Finally, and most importantly, the judge concluded that the connection between the alleged fraud and Ms. Niles’s condominium remained “tenuous at best.” He gave little weight to the plaintiff’s concerns about enforcing a potential judgment against the defendants, who are U.S. residents, noting the plaintiff’s own evidence showed the couple possessed considerable means.
The court ordered the certificate of pending litigation to be discharged from the title of the Avenue Road property. As the successful party on the motion, Ms. Niles was awarded her legal costs in the all-inclusive amount of $27,500.
Read more about real estate cases in Canada here.
