Buyers tried to walk away from contracts - court shuts it down
A Canadian court on May 19, 2026, dismissed a bid that could have allowed condo buyers to cancel contracts and seek deposit repayments in a major restructuring.
In a decision with implications for creditor-led restructurings, the Quebec Superior Court granted a motion by a banking syndicate represented by Bank of Montreal to summarily dismiss an application brought by a court-appointed representative counsel for condominium purchasers. The application sought declarations that a developer had defaulted under some 171 preliminary contracts tied to the Phillips Square Phase I project, and that purchasers could terminate those agreements and obtain reimbursement of deposits through a defined notice process.
The court found that the application went beyond a proper request for directions. Instead, it sought broad declaratory relief and enforcement of contractual rights, which are subject to the stay of proceedings under the Companies’ Creditors Arrangement Act unless prior court authorization is obtained. No such authorization had been secured.
The restructuring began on January 14, 2026, when the court issued an initial order at the request of a banking syndicate represented by Bank of Montreal. The proceedings involve multiple Montreal development projects, including those at Phillips Square and a condominium project on Mansfield Street, which the debtors were no longer able to complete due to insufficient financial resources.
At that time, the lending syndicate was owed more than $493 million. The court also authorized interim financing of more than $44 million to allow construction to continue and to facilitate completion of the projects.
The dismissed application sought to establish that purchasers could resolve their contracts by sending a written notice to the controller, the developer, the notary, and Travelers Insurance, and then obtain repayment of their deposits. The court noted that granting such relief could affect not only the 171 purchasers at issue but also a broader pool of approximately 592 preliminary contracts across the projects.
The court emphasized that allowing such claims could cause significant prejudice and seriously jeopardize the restructuring process. It highlighted that the restructuring framework was designed to allow completion of construction, delivery of units, and an orderly treatment of claims under court supervision, rather than through parallel enforcement actions.
The ruling also clarified the limits of the representative counsel’s mandate. While appointed to facilitate participation of purchasers in the proceedings, the court stated that this role does not authorize the pursuit of a blanket declaratory judgment applying uniformly to all 171 purchasers. Instead, individual claims must be addressed through the claims process established by the court.
In granting the motion and summarily dismissing the application, the court reaffirmed that claims against the debtors must proceed within the structured process already in place, including the stay of proceedings and the court-supervised claims mechanism.
