In 2020, an Ontario court refused to certify a class action brought by condo purchasers against a land developer after it failed to build the promised building. In 2021, the Court of Appeal of Ontario dismissed their appeal and, last month, the purchasers filed an application to the Supreme Court of Canada for leave to appeal that decision.
Land Developer Fails to Construct Condo Building
In 2014, a land developer planned to develop a 10-storey residential condominium building in Toronto. Between 2015 and 2016, it pre-sold 179 units through pre-construction agreements of purchase and sale (the “agreements”).
However, the developer never began construction and, in late 2016, it terminated the agreements and returned the purchasers’ deposits with interest.
Purchasers Commence Class Action Against Developer
In 2018, four of the purchasers whose agreements had been terminated sued the developer for breach of contract under the Class Proceedings Act, arguing that it had failed to meet its obligations to take all commercially reasonable steps to satisfy the financing condition in the agreements. In addition, they submitted that they had lost the opportunity to obtain a residential condominium at the bargained-for price in a dramatically rising market. Thus, they applied to court seeking certification of a class action. The proposed class consisted of every individual who entered into an agreement with the developer for the purchase of a condominium unit.
In turn, the developer denied breaching the agreement. In addition, it relied on an exculpatory clause in the agreements which provided that it could not be liable for any damages or costs incurred resulting from the termination of the agreement.
Courts Refuse to Certify Class Action
Ultimately, the Ontario Superior Court of Justice refused to certify the class action and dismissed the purchasers’ claim, finding that the exculpatory clause in the agreements provided a full defence to the damages sought. The court held that the exculpatory clause applied and found no public policy reason that would override the exculpatory provision that the parties had contracted.
The purchasers appealed to the Court of Appeal of Ontario.
However, the Court of Appeal dismissed the purchasers’ appeal for the same reason, stating:
“On a plain reading of [the exculpatory clause], the [purchasers] were limited upon termination of the agreement by the [developer] to the recovery of their deposit plus interest….
[The exculpatory clause] is concerned with the allocation of risk, as between the parties to the agreement, should the agreement be terminated. The allocation of risk is achieved through the limitation upon termination of the agreement of the [developer]’s potential liability to the [purchasers]. As the motion judge held, the limitation on the [developer]’s potential liability, agreed upon by the parties in [the exculpatory clause], is not inconsistent with the letter of the [agreement addendum’s] provisions or the policy underlying those provisions.”
On June 16, 2021, an application for leave to appeal was filed with the Supreme Court of Canada. Its decision is currently outstanding.
Whether you are buying your first home, purchasing a cottage or investment property, or selling your home to downsize to a condo, the real estate lawyers at Campbells LLP can guide you through every step of your residential real estate transaction. We will explain your options, review all relevant paperwork and contracts, negotiate on your behalf, and defend your interests in any potential disputes that may arise.
At Campbells LLP, we understand that the majority of real estate transactions occur in the evenings or on weekends. One of our lawyers would be happy to meet with you, by appointment, at a time and date that works best with your schedule. To learn more about how we can make the buying and selling process less stressful, contact us online or at (905) 828-2247. We look forward to speaking with you.