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Jan 27, 2022

Leave to SCC Denied in Enforcement of Exculpatory Clause Over Cancelled Condominium Development

By Steve J. Tenai, Brian Chung and Martin Henderson

On January 20, 2022, the Supreme Court of Canada denied leave to appeal from the dismissal of a proposed class action seeking $40 million in damages over a cancelled condominium development. The Court’s decision brings to an end litigation over the enforceability of a common clause in many pre-condominium development agreements of purchase and sale limiting purchasers to the return of their deposits and interest, but not loss of bargain damages, on the termination of a development.

The Ontario Court of Appeal had earlier upheld the developer’s summary judgment motion successfully dismissing claims by purchasers for damages for the higher cost, in Toronto’s rising real estate market, of buying a condominium to replace the unit they had purchased in the now cancelled development. Class members asserted that the developer had failed to discharge its duty of good faith in obtaining financing and approvals, and an exculpatory clause should not be applied in cases of breaches of good faith in contractual performance.

See our prior bulletins here and here for a summary of the underlying decisions.

The Supreme Court of Canada’s dismissal of the leave application gives developers more certainty that common exculpatory clauses foreclosing claims for monetary damages, beyond the return of deposits, will be enforced in Ontario.

Aird & Berlis represented the developer throughout this litigation.

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