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 Vendor’s 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 Lee’s Cleaners”, at a price of $340,000. It was conditional on the Vendor obtaining the landlord’s 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 Purchaser’s 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 Vendor’s 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 Purchaser’s 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 City’s 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 Vendor’s lawyer, setting out the Purchaser’s 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 Purchaser’s 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 City’s 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 Vendor’s 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 Vendor’s “deliveries”. Once again, there was no reference to zoning in Ms. Won’s letter and no indication that the Purchaser had any expectations of the Vendor with respect to zoning.

[20] After reading the City’s email later that day, Ms. Won wrote to the Vendor’s lawyer, instructing him that the funds and documentation were not to be released to his client until the matter was resolved. The Vendor’s 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 Vendor’s 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 Vendor’s motion for an order staying the judgment pending the hearing of the appeal, with the result that the Purchaser’s funds were returned to him.

THE JUDGMENT BELOW

[24] The Purchaser’s 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 Vendor’s 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 Purchaser’s 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 Fifoot’s 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 Fifoot’s, 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., 2001 NSSC 196, 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 Purchaser’s 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 Furnston’s 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 212 (ON CA), [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 judge’s 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), 2002 41644 (ON CA), 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 judge’s conclusion that the transaction did not close, an issue that was not strenuously argued before the motion judge or on appeal. The motion judge’s 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 judge’s 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 plaintiff’s 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 plaintiff’s 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 Vendor’s 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 Vendor’s 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 Vendor’s 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 person’s 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 Vendor’s 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 judge’s 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 Vendor’s 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 Purchaser’s 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 Purchaser’s 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.”