Court of Appeal Upholds Dismissal of Condominium Class Action Based on a Limitation of Liability Clause

This is an update to our July 3, 2020 bulletin summarizing Justice Perell’s decision in Ritchie et al. v. Castlepoint Greybrook Sterling Inc., 2020 ONSC 3840. In that decision, he dismissed a proposed class action seeking damages on behalf of purchasers under purchase agreements to a cancelled pre-development condominium on the basis of an exclusion clause limiting damages in the agreement.

On appeal, the appellants argued that the Tarion addendum, which prescribes a compulsory framework for closings imposed under the Ontario New Home Warranties Plan Act, does not allow parties to limit their obligations under the addendum, including the duty to exercise reasonable efforts to satisfy a financing condition and bring the development to completion.

The Court of Appeal unanimously dismissed the appeal and upheld Justice Perell’s decision holding that the Tarion addendum does not alter the clear and unambiguous exclusion clause limiting claims for damages: 2021 ONCA 214. The Tarion addendum expressly provides for parties to be able to enter into termination agreements and releases provided that they do not exclude the rights of purchasers to the return of their deposits plus prescribed interest.

This is an important decision for many developers involved in pre-construction developments as most pre-construction condominium agreements include comparable exclusion clauses. The decision affirms that including exclusion clauses in pre-construction agreements limiting damages is a proper risk allocation strategy.