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Condo Buyers Fail in Bid to Certify Class Action Against Developer for Cancelled Project

A land developer had plans to develop a 10-storey residential condominium in Toronto. Between 2015 and 2016, it pre-sold 179 units to various purchasers under pre-construction agreements of purchase and sale. However, due to rising construction costs that ultimately rendered the project financially unviable, construction never actually commenced. Instead, the developer terminated all the agreements in 2017 and returned each of the buyers' deposits with interest, in accord with the agreement's termination provision. Importantly, the agreement also included an Exculpatory Clause, absolving the developer for liability for damages or costs arising from its decision to terminate.

A group of disappointed buyers decided to try to launch a class proceeding against the developer. While they did not contest the developer's right to terminate the deals, they claimed that as intended purchasers of condominium units in a dramatically-rising market, they each lost the opportunity to obtain a residential condominium at the bargained-for price. Essentially, they alleged breach of contract by the developer, for which they sought damages. They brought a motion to have their proceedings certified as a class action.

The developer succeeded in having these buyers' claims dismissed by the court.

One of the key issues was whether the Exculpatory Clause was enforceable in the circumstances, even though it was part of an agreement that the developer had breached in a fundamental way. The court ruled that the Exculpatory Clause was enforceable; looking at the Clause in the overall context, and using the modern approach to interpreting its wording, it was unambiguous, and was intended to apply to precisely this kind of scenario involving a valid termination. Plus, it would not be against public policy to enforce it, nor would it be unconscionable or unfair to do so.

Legally, the Exculpatory Clause was a complete defence, in that it protected the developer from all claims by the buyers for their damages and costs. In the end, the court granted the developer's summary judgment motion, and declared the request for class action certification to be moot. See Ritchie v. Castlepoint Greybrook Sterling Inc., 2020 ONSC 3840.