



COURT OF APPEAL FOR ONTARIO

CITATION: Lee v. 1435375 Ontario Ltd., 2013
    ONCA 516

DATE: 20130815

DOCKET: C56363

Goudge, Simmons and Strathy JJ.A.

BETWEEN

Chang Yong Lee

Plaintiff (Respondent)

and

1435375 Ontario Ltd.

Defendant (Appellant)

Jordan Goldblatt, for the appellant

Julian Heller and Zabihullah Yaqeen, for the respondent

Heard: May 15, 2013

On appeal from the judgment of Justice Carole J. Brown of
    the Superior Court of Justice, dated November 26, 2012.

Strathy J.A.:

[1]

The purchaser of a dry cleaning business claimed rescission of the
    purchase agreement based on a mistake about the zoning of the property on which
    the business was situated. The motion judge agreed.

[2]

The vendor of the business asserts that the motion judge made a palpable
    and overriding error in finding common mistake.

[3]

For the reasons that follow, I agree, and would allow the appeal.

The Facts

(1)

The Agreement

[4]

On November 9, 2011, the appellant, 1435375 (the Vendor), and the
    respondent, Chang Yong Lee (the Purchaser), entered into an agreement of
    purchase and sale for the Vendors dry cleaning business, located in leased
    premises at 1548 Avenue Road, Toronto. The agreement was prepared by the real
    estate broker who acted for both parties and neither party was represented by
    counsel during the negotiations.

[5]

The agreement was for all the assets of the business, including the
    lease, goodwill and trade name, Gentle Lees Cleaners, at a price of $340,000.
    It was conditional on the Vendor obtaining the landlords consent for the
    assignment of the lease and the Purchaser being able to obtain a new five-year
    lease with a renewal option. It was also conditional on approval of the Purchasers
    solicitor after review of the lease. These conditions were subsequently
    satisfied or removed. The agreement was to close on January 16, 2012, but
    closing was extended, first to February 13, 2012 and then to February 21,
    2012.

[6]

The agreement was on the standard form of the Ontario Real Estate
    Association for the purchase and sale of a business in leased premises. It
    contained an entire agreement clause, stating in part that:

There is no representation, warranty, collateral agreement
    or condition affecting this Agreement other than as expressed herein.

[7]

The agreement also contained the following  acknowledgement:

The parties acknowledge that information provided by any
    real estate salesperson or real estate broker or real estate brokerage shall
    not be construed as expert legal advice, tax advice, advice on zoning changes,
    engineering advice or environmental advice, and the parties acknowledge that
    the salesperson, broker or brokerage has advised that the parties seek
    independent professional advice on any of the above matters and concerns.

[8]

Apart from this clause, there were no other provisions about zoning in
    the Agreement.

(2)

Zoning

[9]

Prior to January 27, 2010, the premises had been zoned C1, General
    Commercial, which permitted the operation of an on-site dry cleaning facility.
    By an amendment to the zoning by-law, effective January 27, 2010, the zoning
    was changed to C4, Mixed Use Commercial, which did not list such a facility as
    a permitted use. While the appropriate statutory notices of the by-law change
    had been given, the motion judge accepted the Vendors evidence that it was unaware
    of the change.

[10]

The
    Vendor had continuously operated its dry cleaning facility in the premises
    since it acquired the business in 2005. It continued to operate the business
    after the Purchaser refused to close. It adduced evidence that in each year it
    had obtained a business licence from the City to operate the business. It also
    adduced evidence that a dry cleaning business had operated in the premises
    since 1995.

(3)

Discussions Prior
    to the Agreement

[11]

There
    was no evidence of any communications between the parties, either during the
    negotiation of the agreement, or prior to closing, concerning the zoning of the
    premises. The parties admitted that they never turned their minds to the
    possibility that there was a zoning issue. Because of this, the motion judge
    found that it would be difficult to conclude that they came to any agreement,
    either expressly or impliedly, regarding what would happen if there was a
    zoning issue.

[12]

The
    motion judge found that at the time the Purchaser had considered purchasing the
    business he had advised the Vendor and the landlord that it was his intention
    to expand the business and, if he purchased it, he would undertake significant
    renovations and additions.

(4)

Events Leading Up
    To the Scheduled Closing

[13]

By
    January 19, 2012, the landlord had agreed to the extension of the lease and the
    Purchasers lawyer, Ms. Won, proceeded with the necessary searches. On January
    27, 2013, she filed a Permitted Use Request with the City. It described the
    existing use of the premises as Dry Cleaning Plant (on-site dry cleaning and
    laundering) and sought the Citys confirmation that the proposed use for that
    purpose was permitted.

[14]

On
    February 13, 2012, about a week before closing, Ms. Won wrote to the Vendors
    lawyer, setting out the Purchasers requisitions. She made no reference to
    zoning. Nor did Ms. Won request any information or documentation from the Vendor
    or its lawyer with respect to zoning.

[15]

By
    February 17, 2012, all the Purchasers investigations and searches, other than
    the Permitted Use Request, had been satisfactorily resolved. Ms. Won followed
    up with the City. She contacted the licensing office and confirmed that the
    business had been licensed by the City to operate as a dry cleaning plant. She
    also confirmed that before a licence is issued the licensing department conducts
    a zoning search, to confirm that the licensed use is compatible with the
    zoning.

[16]

On
    the date set for closing, February 21, 2012, Ms. Won continued to follow up
    with the City, by email and by telephone, to obtain an answer to her Permitted Use
    Request.

[17]

By
    email sent at 3:49 p.m. on February 21, 2012, the City responded. It stated
    that the dry cleaning and laundry business was not a permitted use under the
    2010 by-law. The email added that the response only addressed the current
    zoning designation and did not account for any legal non-conforming status of
    the building or legal non-conforming status of the use.

[18]

The
    Citys response indicated that Ms. Won could submit a request for a Preliminary
    Project Review or a Zoning Certificate, which would require the submission of
    documentation supporting the existing uninterrupted use to establish a legal
    non-conforming use.

[19]

Ms.
    Won, however, did not see the email until later that afternoon.  Thinking she
    had received no answer by 4:00 p.m., she sent the Vendors solicitor the
    purchase documents and the balance of the purchase money, which she asked him
    to hold in escrow until she notified him of her satisfaction with the Vendors
    deliveries. Once again, there was no reference to zoning in Ms. Wons letter
    and no indication that the Purchaser had any expectations of the Vendor with
    respect to zoning.

[20]

After
    reading the Citys email later that day, Ms. Won wrote to the Vendors lawyer,
    instructing him that the funds and documentation were not to be released to his
    client until the matter was resolved. The Vendors lawyer responded that the
    use as a dry cleaning plant was a legal non-conforming use, but Ms. Won took
    the position that this was not sufficient, that the transaction had not closed,
    and that it would not close unless the issue was resolved.

[21]

The
    Vendors solicitor continued to hold the funds in escrow and the Vendor
    remained in possession of the business and continued to operate it.

[22]

On
    March 30, 2012, the Purchaser commenced an action for, among other things,
    rescission, damages and a mandatory injunction for the return of the purchase
    price. The Vendor counterclaimed for damages for breach of contract.

[23]

On
    January 21, 2013, a single judge of this court dismissed the Vendors motion
    for an order staying the judgment pending the hearing of the appeal, with the
    result that the Purchasers funds were returned to him.

THE JUDGMENT BELOW

[24]

The
    Purchasers action was initially for rescission, based on innocent
    misrepresentation, or alternatively, a declaration that the contract was null
    and void due to negligent misrepresentation. After hearing the summary judgment
    motion, the motion judge asked the parties for submissions on mistake and a
    second hearing was held. At the commencement of that hearing, the Purchaser was
    granted leave to amend the statement of claim to plead mistake.

[25]

The
    motion judge found there was no misrepresentation, either innocent or
    negligent, on the part of the Vendor, that would permit the Purchaser to avoid
    the agreement. She dismissed the claims for rescission based on
    misrepresentation. She found that the parties had not turned their minds to the
    possibility that the zoning of the property was not in order.

[26]

The
    motion judge found that there were no representations, warranties or other
    express conditions regarding zoning in the agreement. She also found that the acknowledgement
    that the real estate broker had not given zoning advice, quoted in paragraph 7

above, could not be regarded as a condition, representation or warranty regarding
    zoning, but was simply a disclaimer by the parties to protect the real estate
    agent concerning zoning changes and places responsibility therefore on the
    parties.

[27]

The
    motion judge accepted the Vendors submission that a provision concerning zoning
    could not be imported into or implied in the agreement, because of the entire
    agreement clause and because the Purchasers lawyer agreed on cross-examination
    that it was common to negotiate such a provision. Because no such term had been
    negotiated in this case, she found that it would not make commercial sense to
    imply one.

[28]

While
    the Purchaser put his amended claim in both mutual mistake and common mistake,
    the motion judge held that it was a case of common mistake, rather than mutual
    mistake. She noted that mutual mistake exists when the parties misunderstand
    each other and are at cross purposes  where both parties are mistaken, but
    about different things and are therefore not on the same page: referring to
    M.P. Furnston,
Cheshire and Fifoots Law of Contract
,
9
th
ed. (London: Butterworths, 1976) at pp. 206-20 and
Ron Ghitter Property
    Consultants Inc. v. Beaver Lumber Co. Ltd
.
, 2003 ABCA 221, 330 A.R.
    353, at para. 10. Common mistake, she observed, is one in which both parties
    make the same mistake. Each party knows what the other party wants, but the
    parties are mistaken about some underlying and fundamental fact: referring
    to
Cheshire and Fifoots
, at p. 206.

[29]

The
    motion judge found that the parties made a false and fundamental assumption
    going to the root of the contract: referring to
Eastern Canadian Coal Gas
    Venture Ltd. v. Cape Breton Development Corp.
, 200 N.S.R. (2d) 201, at
    para. 31.

[30]

The
    motion judge found that the parties contracted on the basis of a shared
    erroneous assumption, which amounted to a common mistake fundamental to their
    agreement, that the property was properly zoned, such that the dry-cleaning
    business was a permitted use. She also found that the Purchaser had not
    expressly or impliedly accepted the risk that this assumption might be untrue.

[31]

The
    motion judge would also have granted relief on equitable grounds, citing Lord
    Denning in
Solle v. Butcher
, [1950] 1 K.B. 671 (C.A.), at p. 693, under
    this principle:

A contract is also liable in equity to be set aside if the
    parties were under a common misapprehension either as to facts or as to their
    relative and respective rights, provided that the misapprehension was
    fundamental and that the party seeking to set it aside was not himself at fault.

[32]

She
    found that, balancing the values of contractual stability on the one hand and
    preventing unjust enrichment due to mistake on the other, it would not be just
    to force the Purchaser to proceed with the purchase of the business, because the
    Vendor would be enriched by obtaining a price that was based on the assumption
    that it was properly zoned. She found it would not be equitable to force the Purchaser
    to proceed with the purchase when there was uncertainty about the permitted
    use. Returning the parties to their original position would not adversely
    affect either party.

[33]

Having
    found that the transaction did not close, and in any case that the agreement should
    be rescinded on the basis of common mistake or equitable mistake, the motion
    judge ordered the purchase funds to be returned to the Purchaser.

THE POSITIONS OF THE PARTIES

[34]

The
    positions of the parties can be briefly stated. The Vendor submits that the
    motion judge made a central and overriding error in concluding that the Purchaser
    received something less than what he bargained for. The parties assumptions
    were consistent with the existence of a legal non-conforming use that would
    permit the Purchaser to operate the business as it had been operated by the Vendor
    in the past. The Purchaser wrongly believed that the business was subject to
    being shut down at any time by the municipal authorities. He did not establish
    that this was likely to happen. The motion judge also erred, the Vendor says,
    in applying the doctrine of
caveat emptor
.

[35]

The
    Purchasers position is that the motion judge correctly found that the weight
    of evidence did not support a finding that the business could operate as a dry
    cleaning plant. He submitted, alternatively, that if it could operate as a
    legal non-conforming use, this was different from a permitted use as that
    term was employed in the zoning by-law and both parties acted under the
    assumption that a dry cleaning business was a permitted use. Thus, there was a
    common mistake. Even if the agreement did close, the Purchaser was entitled to
    rescission.

Applicable legal principles

[36]

It
    will be helpful at this stage to provide a brief overview of the law with
    respect to common mistake, equitable mistake and non-conforming uses.

(1)

Common Mistake

[37]

The
    formation of a legally binding contract requires a meeting of the minds 
consensus
    ad idem
. When the meeting of the minds is based on a common error as to
    some fundamental fact, the parties agreement, viewed objectively, is robbed
    of all efficacy:
Ron Ghitter Property Consultants
, at para. 13,
    referring to M.P. Furnston,
Cheshire, Fifoot and Furnstons Law of Contract,
14th ed. (London: Butterworths, 2001).

[38]

The
    motion judge accepted the test set out by Lord Atkin in the famous decision of
    the House of Lords in
Bell v. Lever Bros. Ltd
.
, [1932] A.C. 161,
    at p. 225
:

The proposition does not amount to more than this that, if
    the contract expressly or impliedly contains a term that a particular assumption
    is a condition of the contract, the contract is avoided if the assumption is
    not true.

[39]

In
R. v. Ontario Flue-cured Tobacco Growers Marketing Board
, [1965] 2
    O.R. 411, (C.A.), at para. 24, this court accepted the following definition
    taken from William R. Anson,
Principles of the English Law of Contract and
    of Agency in Relation to Contract
, 21st ed. by A.G. Guest (Oxford:
    Clarendon Press, 1959):

Where the parties contract under a false and fundamental
    assumption, going to the root of the contract, and which both of them must be
    taken to have had in mind at the time they entered into it as the basis of
    their agreement, the contract is void.

[40]

The
    Vendor does not take issue with the motion judges statement of the law of
    common mistake, but asserts that she erred in her application of the law by
    using common mistake to re-allocate the risk contractually assumed by the
    Purchaser.

(2)

Equitable
    Mistake

[41]

The
    motion judge also relied on the jurisdiction of the court to relieve against
    common mistake where it would be inequitable to enforce the contract. She
    referred to the observation of Lord Denning in
Solle
, at p. 693, quoted
    above, which was accepted by this court in
Miller Paving Ltd. v. B.
    Gottardo Construction Ltd
.
, 2007 ONCA 422, 86 O.R. (3d) 161.

[42]

In
Miller Paving
, this court observed that while the doctrine of
    equitable mistake may have been abandoned in England as a result of the
    decision of the Court of Appeal in
Great Peace Shipping v. Tsavliris
    Salvage
,
[2003] Q.B. 679, that decision had not yet been adopted in
    Canada. This court observed, however, at para. 27:

. In considering whether to apply the doctrine of common
    mistake either at common law or in equity, the court should look to the
    contract itself to see if the parties have provided for who bears the risk of
    the relevant mistake, because if they have, that will govern.

[43]

I
    will return to that observation later in these reasons.

(3)

Legal
    Non-Conforming Use

[44]

The
    doctrine of legal non-conforming use has been described as a shield against
    interference with acquired rights:
Ottawa (City) v. Capital Parking Inc.
(2002), 59 O.R. (3d) 327 (C.A.), at para. 36.

[45]

It
    is codified in s. 34(9)(a) of the
Planning Act
¸ R.S.O. 1990, c. P.13:

(9)
No
    by-law passed under this section applies,

(a) to prevent the use of any land, building or structure
    for any purpose prohibited by the by-law if such land, building or structure
    was lawfully used for such purpose on the day of the passing of the by-law, so
    long as it continues to be used for that purpose

[46]

In
    order to prove a legal non-conforming use, a party must establish that:

(a) the use of the
    land, building or structure was lawful at the time of the enactment of the
    relevant zoning restriction; and

(b) the previously
    lawful use has continued thereafter.

See
Feather v. Bradford West Gwillimbury
, 2010
    ONCA 440, 268 O.A.C. 239, at para. 27;
Saint-Romuald (Ville) v. Olivier
,
    2001 SCC 57, [2001] 2 S.C.R. 898;
Rotstein v. Oro-Medonte (Township)
, 34
    M.P.L.R. (3d) 266 (Ont. S.C.).

[47]

The
    principle applies even to the extent of permitting the intensification of a
    use, provided that the intensified use does not result in a difference in the
    kind of use. The point was made in
Saint-Romuald
,
at paras.
    25-26:

In general, merely continuing the precise pre-existing
    activity, even at an intensified level, is clearly protected, but the
    intensification may be of such a degree as to create a difference in kind. A
    family farm which has a few pigs on the fringe of a town may continue as a
    legal non-conforming use, but the result may be otherwise if it is sought to
    expand its pork operation into "factory in the country" type
    intensive pig farming. While in one sense the "use" has continued, in
    another sense its character has been so altered as to become, in terms of its
    impact on the community, an altogether different use.

In the more usual type of situation, a non-conforming
    commercial use in a residential neighbourhood that enjoys increasing business
    should not ordinarily be penalized for its success by losing its "acquired
    right" to operate, even if a by-product of that success is some increased
    traffic and noise.

[48]

Against
    this background of the facts and law, I return to the reasons of the motion
    judge.

analysis

[49]

In
    my view, the motion judge made three interconnected errors that warrant the
    intervention of this court.

[50]

First,
    she made a palpable and overriding error in her assessment of the evidence in
    finding that the parties had a common assumption that a dry cleaning business
    was a permitted use under the zoning by-law.

[51]

Second,
    she erred in law by putting an onus on the Vendor to demonstrate that the
    business was able to continue to operate as a dry cleaning business  the onus should
    have been on the Purchaser to show that it could not continue to operate.

[52]

Third,
    in so doing, she erred in law by reversing the rule of
caveat emptor

and

put the risk of mistake on the Vendor, rather than on the Purchaser,
    where it belonged.

[53]

These
    errors affected her conclusions on both common mistake and equitable mistake. I
    will deal with each below.

[54]

I
    would not, however, disturb the motion judges conclusion that the transaction
    did not close, an issue that was not strenuously argued before the motion judge
    or on appeal. The motion judges conclusion was based on her assessment of all
    the evidence and the Vendor has identified no palpable and overriding error in
    that regard.

(1)

No Basis for Finding
    Common Mistake on Permitted Use

[55]

There
    is no evidence to support the motion judges central finding that:

the parties shared the underlying assumption that the
    property was properly zoned such that the dry-cleaning business was a permitted
    use.

[56]

It
    is clear that in referring to permitted use, the motion judge was using the
    term in its technical sense  that is, a use described as a permitted use
    under the zoning by-law  and not in the lay sense of a lawful use.

[57]

The
    Purchaser stated in his affidavit:

I was never advised by the vendor that the premises were not
    properly zoned to operate a dry cleaning plant. I would have never even
    considered viewing the business, let alone spending my savings and those of my
    wife in purchasing the business had I been advised that the premises were not
    appropriately zoned to operate a dry cleaning plant.

[58]

And
    further:

I simply wanted to purchase a dry cleaning plant and I
    obviously wanted the dry cleaning plant to be in compliance with zoning by-laws
    so that I could operate it without any problems.

[59]

He
    added:

I am not a sophisticated business person, I am [a] small
    business owner looking to run a lawful, uncomplicated business.

[60]

He
    said that dry cleaning being a non-conforming use, rather than a permitted use,
    would give rise to additional risks, costs and uncertainties and would lower
    the value of the business.

[61]

The
    motion judge stated:

I accept the plaintiffs evidence that he would not have
    contemplated the purchase of the dry cleaning business had he known that it was
    not a permitted use.

[62]

She
    later said:

I have taken into consideration the strong evidence
    contained in the plaintiffs sworn Affidavit that he would not have entered
    into the contract but for the mistaken assumption (i.e., if he had known about
    the zoning issue).

[63]

The
    uncontroverted evidence of the Vendors principal was that he made no
    representations to, and had no discussions with, the Purchaser concerning the
    zoning of the premises. He swore that he had operated the business since 2005
    and had no knowledge of any zoning issues and had never received any complaints
    or inquiries from the City with respect to the operation of the business. He
    swore that he was not aware of the change in zoning in 2010 and had not seen
    any public notices of the change.

[64]

The
    motion judge focussed on the cross-examination of the principal of the Vendor,
    in which he had stated, in her words:

[H]e was not aware that the zoning by-law had been changed
    and that his dry-cleaning business was no longer a permitted use pursuant to
    the by-law. He testified on cross-examination on his Affidavit that such
    knowledge would have been important to him and that he would not have wanted to
    buy the previous dry-cleaning business if it was not permitted to run a
    dry-cleaners by the City of Toronto. He further admitted that the legal
    entitlement to carry on the business of the dry-cleaning plant is very
    important to anyone buying the business.

[65]

Later
    in her reasons, she stated:

The evidence of the defendant/vendor was that he was unaware
    of any zoning issues with respect to the business and was shocked and
    stunned that a dry-cleaning business was not a permitted use pursuant to the
    relevant zoning by-laws. Based on the evidence, the purchaser believed he was
    purchasing and the vendor believed he was selling a business zoned to operate a
    dry-cleaning plant.

[66]

The
    motion judge rejected the Vendors submission that the use of the premises as a
    dry cleaning plant, while not permitted under the 2010 zoning by-law, was a
    legal non-conforming use and that the Purchaser was entitled to continue that
    use. She found that there was uncertainty about the use to which the premises
    could be put and the City had not determined that it was a non-conforming
    use. In her findings on common mistake, she stated, Based on the evidence
    before me, I am not able to find that the premises can lawfully operate as a
    dry cleaning business.

[67]

In
    my view, the motion judge attributed to the Vendor, and to some extent to the Purchaser,
    an assumption about the use of the premises that is not borne out by the
    evidence. She concluded that the Vendor assumed that the operation of a dry
    cleaning plant was a permitted use in the technical sense, under the existing
    by-law, when the evidence, fairly understood, was that the Vendors principal simply
    assumed that the business could be lawfully operated, as it had been by the
    Vendor for the previous seven years and by its predecessors for some years
    before that.

[68]

The
    evidence supports the conclusion that both parties had a lay persons
    understanding that the Purchaser would be able to continue to operate the
    business as it had been operated by the Vendor in the past. The evidence does
    not support the conclusion that both parties understood the distinction between
    a permitted use as a term of art in the 2010 by-law and a legal
    non-conforming use.

[69]

Nor
    does the evidence support the conclusion that both parties assumed that the
    operation of a dry cleaning business was a permitted use as that term was
    used in the by-law.

[70]

For
    these reasons, I conclude that if there was a common assumption, it was not
    about the permitted use in the technical sense used in the zoning by-law. On
    the face of it, the Vendors use of the premises as a dry cleaning business was
    a legal non-conforming use and he believed that the premises could continue to
    be used for that purpose.

[71]

If
    the Purchaser had a more technical understanding of the permitted use, it was
    a case of unilateral mistake, not common mistake. If he was operating under the
    same assumption as the Vendor, the question is whether this was in fact a
    mistake, and who bore the onus of proof.

(2)

Onus

[72]

The
    motion judges conclusion about the nature of the mistake caused her to put
    the onus on the Vendor to demonstrate that the business could operate as a dry
    cleaning plant. For example, she stated:

While the defendant argues that there was no mistake as to
    the underlying assumption that the business was properly zoned to operate a
    dry-cleaning plant, given that the plant was currently operating and was
    clearly a non-conforming use, I do not accept this argument. Based on the
    evidence before me, I am not able to find that the premises can lawfully
    operate as a dry cleaning business; nor do I find, as urged by the defendant,
    that the current zoning of the premises is immaterial to the objective of the
    Agreement. In my view, the objective was not simply the transfer of assets of a
    dry-cleaning business, but rather the plaintiff intended to purchase a
    dry-cleaning business that was legally zoned to operate as such.

[73]

When
    dealing with equitable mistake, she found that it would not be just to force
    the Purchaser to proceed with the purchase when the operation of a dry cleaning
    business was not a permitted use under the by-law:

In the circumstances of this case, and based on all of the
    evidence, I find that it would not be just to force the plaintiff to proceed
    with the purchase of a dry-cleaning business which has been found not to be a
    permitted use pursuant to the applicable bylaw. While the City may find it to
    be a non-conforming use, it has not done so to date and neither party has made
    application to determine whether the business can continue to run as a legal
    non-conforming use. There is no evidence to suggest that, in the eyes of the City,
    it is a legal non-conforming use.

[74]

Instead,
    the motion judge should have required the Purchaser, as the party seeking to
    rescind the agreement, to show that the business could not operate as a dry
    cleaning plant. In light of the Vendors evidence concerning the longstanding
    lawful use of the premises, which pre-dated the change in zoning in 2010 and
    was continuous thereafter, the onus was on the Purchaser, seeking rescission,
    to prove that the parties common assumption was wrong and that the premises could
    not lawfully be used for that purpose.

[75]

The
    Vendor established, at least
prima facie
, that the use of the premises
    for the purpose of a dry cleaning business was a legal non-conforming use. The
    fact that the City had not formally determined it to be a non-conforming use,
    or that neither party had made application for confirmation that it was legal
    non-conforming, did not mean that it was not so.

[76]

There
    was no evidence adduced at trial that the non-conforming use could not be
    continued or that the Purchasers plans to expand the business would be impacted.
    While the Purchaser testified that he had concerns that the costs would be
    greater, and that the business could be less marketable and therefore less
    valuable, this evidence was speculative and did not reach the level of
    establishing that the ongoing use of the business would be prevented.

(3)

Caveat Emptor

[77]

Related
    to the issue of onus is the question of risk. The motion judge found that the Purchaser
    did not expressly or impliedly assume the risk that the commonly assumed facts
    [that the dry cleaning operation was a permitted use] were untrue.

[78]

This
    had the effect of putting the risk of the Purchasers erroneous assumption on
    the Vendor. Instead of
caveat emptor
, it became
caveat venditor
.

[79]

The
    law of mistake cannot be used to place a risk on a party where the contract has
    allocated that risk to another party. It will be recalled that, in
Miller
    Paving
,
this court observed, at para. 27:

Before turning to the application of any of these tests to
    the facts of this case, it must be noted that
Great Peace
does provide
    one useful reminder that is of significance here, whether or not its approach
    to common mistake is adopted in Canada. It is that in considering whether to
    apply the doctrine of common mistake either at common law or in equity, the
    court should look to the contract itself to see if the parties have provided
    for who bears the risk of the relevant mistake, because if they have, that will
    govern. [Citations omitted.]

See also
Wm. Sindall PLC v. Cambridgeshire C.C.
,
    [1994] 1 W.L.R. 1016 (C.A.);
0707448 B.C. Ltd. v. Cascades Recovery Inc.
,
    2011 BCSC 1065, at paras. 118-122.

[80]

In
    this case, the Purchaser did not make the agreement conditional on zoning,
    notwithstanding the evidence of his solicitor that it was sometimes done. In
    fact, the only clause in the agreement of purchase and sale that spoke to the
    issue was an acknowledgement that the real estate broker had advised the
    parties to seek independent professional advice with respect to zoning changes.
    In apparently ignoring this advice, and signing the agreement without any
    condition as to zoning, the Purchaser implicitly assumed the risk that the zoning
    would not permit his contemplated use. Having found that there were no
    representations, warranties or implied terms concerning zoning, the trial judge
    should have found that the agreement precluded any understanding other than
    what the parties had expressed in their agreement and that the risk of any
    misunderstanding had been allocated to the Purchaser, not to the Vendor.

(4)

Equitable
    Mistake

[81]

In
    my view, there is no scope for the application of the doctrine of equitable
    mistake. First, for the reasons I have outlined, there was no common
    misapprehension of the facts. Second, to rely on equitable mistake, the party
    seeking to set aside the contract must show that he or she was not at fault.
    The trial judge concluded that the Purchaser did not assume the risk of a
    mistaken assumption about zoning and, inferentially, that he was not at fault.

[82]

He
    was at fault, however. He failed to take reasonable measures to protect himself,
    either by investigating the zoning before he signed the agreement or by making
    the agreement conditional on zoning. He, not the Vendor, should be visited with
    the consequences. There is nothing inequitable in holding him to the contract, particularly
    in the absence of any evidence that the use of the premises for their intended
    purpose is impossible.

CONCLUSION

[83]

In
Miller Paving
, this court referred at para. 20 to an article by
    Professor John D. McCamus, Mistaken Assumptions in Equity: Sound Doctrine or
    Chimera? (2004) 40 Can Bus. L.J. 46, at 47:

In determining whether an agreement should be considered
    unenforceable by reason of the mistaken assumption that infects its creation,
    courts must engage in a delicate exercise of balancing the competing values of
    contractual stability and the provision of relief in cases of severe injustice.

[84]

If
    there were any mistake in this case, it was a unilateral mistake on the part of
    the Purchaser and it is not at all unjust that he should bear the consequences.

[85]

For
    the foregoing reasons, I would allow the appeal, and dismiss the motion for
    summary judgment, with costs in this court and before the motion judge. The
    costs in this court are fixed at $11,873.91, all inclusive. The costs before
    the motion judge, if not agreed upon, shall be referred to her for determination.

Released:

AUG 15 2013                                   G.R.
    Strathy J.A.

STG                                                          I
    agree S. Goudge J.A.

I
    agree Janet Simmons J.A.


