Dovbush et al. v. Mouzitchka et al.

[Indexed as: Dovbush v. Mouzitchka]

Ontario Reports

Court of Appeal for Ontario,

Hoy A.C.J.O., Blair and L.B. Roberts JJ.A.

May 20, 2016

131 O.R. (3d) 474 | 2016 ONCA 381

Case Summary

Civil procedure — Appeal — Insufficient reasons — Trial judge dismissing plaintiffs' claim in very brief reasons after five-day trial which involved complex and conflicting evidence — Trial judge's reasons suggesting that he may have mischaracterized central issue — Trial judge failing to address several key issues at all and making generic boilerplate findings of credibility — Reasons not permitting meaningful and effective appellate review — Plaintiffs' appeal allowed and new trial ordered.

The plaintiffs entered into negotiations to purchase a 25 per cent interest in the defendants' business and made payments totalling $600,000 before the relationship fell apart. They sued to recover the payments. The defendants took the position that the payments were a non-refundable down payment on the plaintiffs' investment. The action was dismissed. The plaintiffs appealed.

Held, the appeal should be allowed.

The trial judge gave very brief reasons for dismissing the claim after a five-day trial which involved complex and conflicting evidence concerning the failed share purchase transaction. To the extent that they permitted review, the reasons suggested that the trial judge may have mischaracterized the central issue he had to determine. He described that issue as "the correct characterization of the transaction". However, the central issue for determination was not the correct characterization of the transaction but rather the correct characterization of the funds advanced by the plaintiffs. No one disputed that the contemplated transaction was a share purchase transaction. The trial judge also failed to address certain key issues at all and dealt only indirectly with others. His credibility findings were generic and boilerplate. The reasons did not permit a meaningful and effective appellate review. A new trial was ordered.

Cases referred to

869163 Ontario Ltd. v. Torrey Springs II Associates Ltd. Partnership (2005), 2005 23216 (ON CA), 76 O.R. (3d) 362, [2005] O.J. No. 2749, 256 D.L.R. (4th) 490, 200 O.A.C. 159, 10 B.L.R. (4th) 45, 140 A.C.W.S. (3d) 650 (C.A.); Canadian Broadcasting Corp. Pension Plan (Trustee of) v. BF Realty Holdings Ltd., 2002 44954 (ON CA), [2002] O.J. No. 2125, 214 D.L.R. (4th) 121, 160 O.A.C. 72, 26 B.L.R. (3d) 180, 35 C.B.R. (4th) 198, 114 A.C.W.S. (3d) 656 (C.A.); Conner v. Bulla, [2010] B.C.J. No. 2518, 2010 BCCA 457, 297 B.C.A.C. 20, 195 A.C.W.S. (3d) 1172; [page475] De Palma v. Runnymede Iron & Steel Co., 1949 73 (ON CA), [1950] O.R. 1, [1949] O.J. No. 495, [1950] 1 D.L.R. 557 (C.A.); Diamond Auto Collision Inc. v. Economical Insurance Group, [2007] O.J. No. 2551, 2007 ONCA 487, 227 O.A.C. 51, 50 C.C.L.I. (4th) 213, 159 A.C.W.S. (3d) 281; H. (F.) v. McDougall, [2008] 3 S.C.R. 41, [2008] S.C.J. No. 54, 2008 SCC 53, 61 C.R. (6th) 1, 61 C.P.C. (6th) 1, 297 D.L.R. (4th) 193, 83 B.C.L.R. (4th) 1, [2008] 11 W.W.R. 414, 260 B.C.A.C. 74, EYB 2008-148155, J.E. 2008-1864, 60 C.C.L.T. (3d) 1, 380 N.R. 82, EYB 2008-148155, 169 A.C.W.S. (3d) 346; Longo v. MacLaren Art Centre Inc., [2014] O.J. No. 3242, 323 O.A.C. 246, 2014 ONCA 526, 242 A.C.W.S. (3d) 426; Pleasant Developments Inc. v. Iyer, 2006 10223 (ON SCDC), [2006] O.J. No. 1319, 210 O.A.C. 90, 45 R.P.R. (4th) 147, 147 A.C.W.S. (3d) 140 (Div. Ct.); R. v. Braich, [2002] 1 S.C.R. 903, [2002] S.C.J. No. 29, 2002 SCC 27, 210 D.L.R. (4th) 635, 285 N.R. 162, J.E. 2002-583, 164 B.C.A.C. 1, 162 C.C.C. (3d) 324, 50 C.R. (5th) 92, 52 W.C.B. (2d) 359; R. v. D. (J.J.R.), 2006 40088 (ON CA), [2006] O.J. No. 4749, 218 O.A.C. 37, 215 C.C.C. (3d) 252, 72 W.C.B. (2d) 1 (C.A.); R. v. M. (R.E.), [2008] 3 S.C.R. 3, [2008] S.C.J. No. 52, 2008 SCC 51, 235 C.C.C. (3d) 290, 83 B.C.L.R. (4th) 44, EYB 2008-148153, J.E. 2008-1861, [2008] 11 W.W.R. 383, 260 B.C.A.C. 40, 60 C.R. (6th) 1, 380 N.R. 47, 297 D.L.R. (4th) 577, 79 W.C.B. (2d) 321; R. v. Maharaj (2004), 2004 39045 (ON CA), 71 O.R. (3d) 388, [2004] O.J. No. 2001, 187 O.A.C. 101, 186 C.C.C. (3d) 247, 61 W.C.B. (2d) 717 (C.A.) [Leave to appeal to S.C.C. refused [2004] S.C.C.A. No. 340]; R. v. Morrissey (1995), 1995 3498 (ON CA), 22 O.R. (3d) 514, [1995] O.J. No. 639, 80 O.A.C. 161, 97 C.C.C. (3d) 193, 38 C.R. (4th) 4, 26 W.C.B. (2d) 436 (C.A.); R. v. Sheppard, [2002] 1 S.C.R. 869, [2002] S.C.J. No. 30, 2002 SCC 26, 210 D.L.R. (4th) 608, 284 N.R. 342, J.E. 2002-582, 211 Nfld. & P.E.I.R. 50, 162 C.C.C. (3d) 298, 50 C.R. (5th) 68, 52 W.C.B. (2d) 360; Stephenson v. Bromley, 1928 354 (MB CA), [1928] M.J. No. 59, [1928] 4 D.L.R. 737 (C.A.); Stockloser v. Johnson, [1954] 1 Q.B. 476, [1954] 1 All E.R. 630, [1954] 2 W.L.R. 439 (C.A.); Tang v. Zhang, [2013] B.C.J. No. 180, 2013 BCCA 52, 332 B.C.A.C. 304, 41 B.C.L.R. (5th) 69, 29 R.P.R. (5th) 192, 359 D.L.R. (4th) 104, 223 A.C.W.S. (3d) 894

Statutes referred to

Business Corporations Act, R.S.O. 1990, c. B.16 [as am.]

APPEAL from the judgment of Whitaker J., [2014] O.J. No. 5758, 2014 ONSC 6480 (S.C.J.) dismissing an action.

Sergiy Timokhov, for appellants.

Stephen M. Werbowyj, for respondents.

BY THE COURT: --

Overview

[1] Vitaliy Dovbush and his brother, Alexander Faltschuk, entered into negotiations with Bogdan and Alexandra Mouzitchka regarding the purchase of a certain percentage of IMB+Records Inc. Dovbush made several payments to the Mouzitchkas totalling $600,000. When the relationship fell apart, Dovbush and Faltschuk sued to recover those payments. The trial judge held the payments were a non-refundable down payment on the brothers' investment and dismissed their action. [page476]

[2] The brothers seek to set aside that decision, although only Dovbush is actively pursuing the appeal.

[3] We agree that a new trial must be ordered. It appears that the trial judge may have mischaracterized the central issue for determination. We have concluded that, unfortunately, his reasons do not permit us to conduct a meaningful appellate review to assess whether that was the case or to understand why he arrived at the findings and conclusions he did.

[4] Accordingly, for the reasons that follow, the appeal is allowed, the judgment is set aside and a new trial is ordered.

Factual Background

[5] The Mouzitchkas are the principals and shareholders of IMB, a telecom-based corporation that brings Eastern European cable network signals to North America. Dovbush and Faltschuk were interested in IMB and negotiated with the respondents to acquire a 20-25 per cent interest in it.

[6] At the end of the day, however -- after the exchange of various draft letters of intent and at least one meeting of the parties alone -- the relationship between the parties fell apart. The trial judge found that an oral agreement for the purchase and sale of shares had been reached. In the course of their dealings, the appellants paid the respondents a total of $600,000 on the potential payment of $1 million for a 25 per cent interest.

[7] At trial, the issues centred on whether the appellants were entitled to the return of the $600,000 when the relationship fell apart. Dovbush and Faltscuk say that the moneys were advanced for two purposes: (i) to demonstrate their financial wherewithal to complete the transaction; and (ii) to allow them to commence their due diligence exercise by obtaining access to IMB's financial and other records. The reason for obtaining access was to confirm IMB's worth of at least $4 million, as they say the respondents represented. They characterized the payments variously as a refundable deposit or down payment, or a loan to the respondents repayable if the transaction did not close. The Mouzitchkas, on the other hand, characterized the advances as a non-refundable partial payment of the purchase price for their shares of IMB.

[8] There appears to be little dispute that the parties were contemplating an agreement whereby the appellants would purchase what ultimately became a 25 per cent shareholding position in IMB for $1 million. On other aspects of the proposed transaction, they differed. In any event, the appellants made an initial payment of $100,000 in early January 2012, and subsequent payments for a total of $600,000 by early March. [page477]

[9] On March 3, 2012, the respondents and the appellant Dovbush signed a document, witnessed by the appellant Faltschuk and the respondents' son, Oleg Mouzitchka (the "March 3 receipt"), which stated:

We, Bogdan and Alexandra Mouzitchka, have received $600,000 from Vitaliy Dovbush as down payment of $1,000,000 total for 25% of IMB+Records.

[10] The parties were represented by solicitors throughout. During this period, there were a number of draft letters of intent exchanged between the solicitors, seemingly reflecting a different understanding of the proposed transaction (including with respect to the treatment of the funds to be advanced by the appellants). The Mouzitchkas maintained that an oral agreement was reached at their lawyer's office at a meeting between the parties, but without the lawyers, on January 19, 2012.[^1] At that meeting, the Mouzitchkas say, an agreement was finalized whereby (i) the appellants would purchase 25 per cent of the shares of IMB for a purchase price of $1 million, with the business being valued at $4 million; (ii) the appellants would work for the company for $100,000 a year; and (iii) $400,000 of the purchase price would be loaned back to the company by the Mouzitchkas as a shareholders loan. The moneys advanced were to be non-refundable payments made on account of the purchase price.

[11] With very brief reasons, the trial judge dismissed the action. He rejected what he characterized as the appellants' claim that the moneys advanced constituted a loan transaction and accepted the respondent's position that the transaction involved an agreement to purchase shares in which the moneys advanced were invested as a non-refundable down payment. Dovbush and Faltschuk have appealed that decision, although only Dovbush is actively pursuing the appeal. They seek to set aside the judgment and ask that this court either grant judgment in the appellants' favour or order a new trial.

Discussion

[12] There are two particular bases for our conclusion that a new trial must be ordered. First, from a review of the brief reasons delivered by the trial judge, it appears that he may [page478] have mischaracterized the central issue to be determined. Second, the reasons provided do not permit us to conduct a meaningful appellate review to determine whether that was indeed the case and, if so, whether the mischaracterization undermined the trial judge's ultimate determination. We do not know the basis for his findings, including his credibility findings that were central to the resolution of the dispute. We have no satisfactory explanation for his conclusions or the reasons for them.

[13] The appellants sued to recover the $600,000 they had advanced to the respondents during the course of their dealings, less the sum of $190,000 that the respondents had returned. They also claimed relief under the oppression remedy provisions, and other sections of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (the "OBCA"). By way of counterclaim, the respondents sought injunctive relief restraining the appellants from soliciting business from IMB customers and from competing with IMB's business, damages, and, in the alternative, specific performance of the alleged agreement of purchase and sale.

[14] The trial lasted five days. It involved complex and conflicting evidence concerning a failed share purchase transaction. The trial judge dismissed the appellants' claim in very brief reasons. The counterclaim, although not part of these appeal proceedings, was dismissed in one line: "The cross claim is dismissed."

The mischaracterization of the issue

[15] To the extent they permit review, the trial judge's brief reasons suggest that he may well have mischaracterized the central issue he was to determine and that this mischaracterization may have skewed his assessment of the case by leading him to focus on the wrong question. At paras. 3-6 of his reasons, the trial judge said:

The issue between the parties is the correct characterization of the transaction.

The plaintiffs say they advanced a loan to the defendants, on demand and at their discretion.

The defendants say the plaintiffs invested money in their company and the funds invested cannot be recalled under the agreement.

I find the financial transaction is a share and purchase agreement and not a loan.

[16] The central issue for determination by the trial judge was not "the correct characterization of the transaction", however. The central issue was the correct characterization of the moneys [page479] advanced by the appellants during the parties' dealings in connection with the transaction. Were those advances (i) non-refundable partial payments on account of the purchase price, as the respondents contended; or (ii) a refundable deposit/down payment or a loan pending completion of the transaction repayable in the event of non-completion, as the appellants submitted?

[17] No one disputed that the contemplated transaction was a share purchase transaction. The appellants never argued that the moneys were being advanced to either the Mouzitchkas or IMB by way of a "loan transaction" in the sense that they were to be creditors rather than shareholders. Yet the trial judge appears to have treated the dispute as if it were a resolution of that dichotomy, placing some emphasis, at paras. 14-15, on the fact that "no loan documents were prepared or executed" while omitting the fact that neither was any share purchase agreement documentation prepared or executed. This turned his attention away from the real question: the characterization of the advances.

[18] Moreover, even if an oral agreement for the purchase and sale of shares had been reached by the parties on January 19, as the trial judge accepted, the question still remained: how were the funds that had been advanced to be treated if the transaction of purchase and sale did not close? By focusing on whether there was an oral agreement reached, the trial judge appears to have lost sight of the principal question that remained to be determined.

The insufficiency of reasons

[19] While the trial judge expressed conclusions and made findings that may or may not have been open to him on the record, we reluctantly conclude that his reasons are insufficient to permit meaningful appellate review and that appellate intervention is warranted in the circumstances.

The applicable principles

[20] Trial judges are called upon to make difficult decisions, often in difficult circumstances. They preside as the particular dynamics of the trial unfold. Inadequate reasons therefore pose a particular challenge for appellate review.

[21] On the one hand, as Rothstein J. noted in H. (F.) v. McDougall, [2008] 3 S.C.R. 41, [2008] S.C.J. No. 54, 2008 SCC 53, at para. 99, "an appeal court cannot intervene merely because it believes the trial judge did a poor job of expressing herself. Nor, is the failure to give adequate reasons a free standing basis for appeal." On the other hand, beginning with [page480] the companion cases of R. v. Sheppard, [2002] 1 S.C.R. 869, [2002] S.C.J. No. 30, 2002 SCC 26 and R. v. Braich, [2002] 1 S.C.R. 903, [2002] S.C.J. No. 29, 2002 SCC 27, Canadian jurisprudence has confirmed the importance of trial judges providing adequate reasons for their decisions, and accepted that if the insufficiency of the reasons prevents meaningful appellate review, appellate intervention may be justified: see, also, R. v. M. (R.E.), [2008] 3 S.C.R. 3, [2008] S.C.J. No. 52, 2008 SCC 51, at paras. 10-35.

[22] Although originally developed in the criminal law context, the same rationale that underpins the duty to provide adequate reasons applies in the civil context as well, with necessary modifications: Canadian Broadcasting Corp. Pension Plan (Trustee of) v. BF Realty Holdings Ltd., 2002 44954 (ON CA), [2002] O.J. No. 2125, 160 O.A.C. 72 (C.A.), at paras. 64 and 114; Diamond Auto Collision Inc. v. Economical Insurance Group, [2007] O.J. No. 2551, 2007 ONCA 487, 227 O.A.C. 51, at paras. 10-14; and Longo v. MacLaren Art Centre Inc., [2014] O.J. No. 3242, 2014 ONCA 526, 323 O.A.C. 246, at paras. 62-64. The rationale is that reasons are necessary (i) to justify and explain the result; (ii) to tell the losing party why he or she lost; (iii) to provide public accountability and satisfy the public that justice has been done and is seen to have been done; and (iv) to permit effective appellate review: H. (F.) v. McDougall, at para. 98.

[23] What makes reasons run afoul of this rationale? In the end, for purposes of appellate intervention, it turns on the overarching principle of whether the reasons permit meaningful and effective appellate review. Appellate courts will take a contextual and functional approach to addressing whether reasons meet this standard. The exercise has been variously described as one of determining whether the reasons demonstrate "the path taken by the trial judge through confused or conflicting evidence" (Sheppard, at para. 46); or that "the trial judge came to grips with the issues and explained sufficiently his . . . conclusions and the reasons and basis for them" (Canadian Broadcasting Corp. Pension Plan, at para. 114); or the "what" and the "why" of the result (M. (R.E.), at paras. 17-20).

[24] In M. (R.E), at paras. 17-18, the Supreme Court of Canada adopted the reasoning of Doherty J.A. in R. v. Morrissey (1995), 1995 3498 (ON CA), 22 O.R. (3d) 514, [1995] O.J. No. 639 (C.A.) with respect to the object of a trial judge's reasons. The court said:

Doherty J.A. in Morrissey, at p. 525, puts it this way: "In giving reasons for judgment, the trial judge is attempting to tell the parties what he or she has decided and why he or she made that decision" (emphasis added). What is required is a logical connection between the "what" -- the verdict -- and [page481] the "why" -- the basis for the verdict. The foundations of the judge's decision must be discernable, when looked at in the context of the evidence, the submissions of counsel and the history of how the trial unfolded.

Explaining the "why" and its logical link to the "what" does not require the trial judge to set out every finding or conclusion in the process of arriving at the verdict. Doherty J.A. in Morrissey, at p. 525, states:

A trial judge's reasons cannot be read or analyzed as if they were an instruction to a jury. Instructions provide a road map to direct lay jurors on their journey toward a verdict. Reasons for judgment are given after a trial judge has reached the end of that journey and explain why he or she arrived at a particular conclusion. They are not intended to be, and should not be read, as a verbalization of the entire process engaged in by the trial judge in reaching a verdict. [Emphasis added.]

[25] In M. (R.E.), as well, at para. 29, the court underlined its earlier comment in Sheppard, at para. 55, emphasizing the importance of the need for adequate reasons when "a trial judge is called upon to address troublesome principles of unsettled law or to resolve confused and contradictory evidence on a key issue" (emphasis added).

The principles applied

[26] Here, there was confused and contradictory evidence on a number of key issues, with no explanation of the basis upon which those conflicts were resolved, if at all. These included, amongst others, the following questions:

(i) whether an oral agreement for purchase and sale of the shares had in fact been reached on January 19, 2012 at the lawyer's office -- as the trial judge found, accepting the respondents' position;

(ii) why, if that were the case, the appellants' solicitor prepared two further draft letters of intent setting out differing versions of the transaction (the first on January 19 -- the same day the Mouzitchkas insist an oral agreement was reached -- and the second on July 27), why they elicited no response, and what impact, if any, they had on the trial judge's decision;

(iii) whether the advances made were contingent upon the appellants being satisfied as to the financial value of IMB (said to have been represented by the respondents to be $4 million);

(iv) whether the share certificate for 100 common shares, apparently issued to Dovbush and Faltschuk on January 19, was intended to be an outright transfer of the shares to [page482] them as shareholders, or simply a transfer to provide security for repayment of the advances if the transaction were not completed;

(v) whether the corporate documentation and the respondents' subsequent treatment of the appellants properly reflected the appellants "share certificate as security" claim or the respondents "partial purchase price of issued shares" claim (e.g., the appellants were not provided with notice of shareholders meetings or with audited financial statements prior to the commencement of the litigation, nor were they paid dividends); and

(vi) whether the appellants had been "oppressed" as that term is understood in the OBCA.

[27] The trial judge did not address questions (ii), (v) and (vi) at all and only indirectly dealt with questions (iii) and (iv). Each party submitted lengthy written submissions addressing these and other issues -- not surprisingly, from differing perspectives. The trial judge did not refer to them. The trial judge's reasons needed to show that he had at least applied his mind to, and come to grips with, these various questions. Regrettably, they do not.

[28] In the face of these conflicts and the contradictory testimony relating to them, his entire consideration of the central credibility issues consisted of the following, at para. 13:

I found the Mouzitchkas credible. On the contrary, I found Dovbush and his brother, Faltschuk, to be incredible. They (the brothers) made assertions of fact which simply made no sense in the normal course of business conduct. Where the evidence differs as between the brothers and the Mouzichaka's, I prefer the latter.

[29] Generic boilerplate findings of credibility of that nature are not helpful. A trial judge owes the losing party an explanation for rejecting the evidence of a key witness or witnesses (particularly when the key witnesses are, themselves, the losing parties), and, while the absence of such an explanation is not necessarily dispositive, it may go a long way toward putting the reasons beyond the reach of meaningful appellate review: R. v. D. (J.J.R.), 2006 40088 (ON CA), [2006] O.J. No. 4749, 218 O.A.C. 37 (C.A.), at para. 36, citing R. v. Maharaj (2004), 2004 39045 (ON CA), 71 O.R. (3d) 388, [2004] O.J. No. 2001, 186 C.C.C. (3d) 247 (C.A.), at paras. 26-29, leave to appeal to S.C.C. refused [2004] S.C.C.A. No. 340.

[30] The terse comment [at para. 13] the "[t]hey (the brothers) made assertions of fact which simply made no sense in the normal course of business conduct" does not assist without some [page483] indication of what those assertions were and why they made no business sense. If the reference is to the appellants' position that the moneys advanced were by way of a loan repayable in the event that the transaction were not completed because the purchasers were not satisfied following due diligence inquiries, we do not think this "[makes] no sense in the normal course of business conduct". A share purchase transaction could be structured in such a fashion. The assertion makes no less business sense than the respondents' contention that the appellants advanced $600,000 on account of a $1 million purchase price with no prospect of recovering any of that 60 per cent amount if the transaction failed and without any due diligence or other conditions in favour of the appellants -- factors not alluded to by the trial judge.

[31] The Mouzitchkas and Dovbush signed the March 3 receipt characterizing the $600,000 as "a down payment" on the $1 million purchase price. The trial judge does not refer to this document. There are authorities to the effect that a down payment is generally refundable, in the absence of evidence to the contrary: see Conner v. Bulla, [2010] B.C.J. No. 2518, 2010 BCCA 457, at para. 10; Stephenson v. Bromley, 1928 354 (MB CA), [1928] M.J. No. 59, [1928] 4 D.L.R. 737 (C.A.). Even if the amount paid is characterized as a non-refundable deposit, where the sum of the deposit is out of all proportion to the losses suffered, the court may order the deposit be returned: Stockloser v. Johnson, [1954] 1 All E.R. 630, [1954] 1 Q.B. 476 (C.A.); 869163 Ontario Ltd. v. Torrey Springs II Associates Ltd. Partnership (2005), 2005 23216 (ON CA), 76 O.R. (3d) 362, [2005] O.J. No. 2749 (C.A.), at para. 25; Tang v. Zhang, [2013] B.C.J. No. 180, 2013 BCCA 52, 41 B.C.L.R. (5th) 69, at para. 27; Pleasant Developments Inc. v. Iyer, 2006 10223 (ON SCDC), [2006] O.J. No. 1319, 210 O.A.C. 90 (Div. Ct.), at para. 13.

[32] In their closing submissions at trial, the appellants cited an old decision of this court in De Palma v. Runnymede Iron & Steel Co., 1949 73 (ON CA), [1950] O.R. 1, [1950] O.J .No. 495, [1950] 1 D.L.R. 557 (C.A.), which discusses the distinction between down payments or part payments and deposits and the ordinary assumptions that apply to each. This issue was not addressed by the trial judge and we do not know how the interplay between the principles applying to refundable and non-refundable down payments, and returnable and non-returnable deposits, would have played out on the record had he done so.

[33] Indeed, at para. 15, the trial judge appears to have been under the impression that "[t]he only paper suggesting this was a loan was written by the plaintiff just prior to the commencement of the litigation", a reference to a demand letter sent by [page484] the appellants' solicitor at that time. However, each of the January 12, January 19 and July 27 draft letters of intent prepared by that solicitor makes specific reference to the moneys advanced being loans made personally to the Mouzitchkas. The trial judge does not refer to any of these draft letters of intent or explain why they did not have a bearing on his decision.

Conclusion and Disposition

[34] On the bases outlined above, we conclude that the judgment below must be set aside. The trial judge may have mischaracterized the central issue that he was to determine and this mischaracterization may have undermined his ultimate determination. We cannot tell on the record, however, because the reasons provided do not show us the pathway taken through the conflicting evidence to arrive at his result or provide an adequate explanation for the "why" of the result. In the same way, the reasons do not show that the trial judge came to grips with the other important issues dividing the parties, including the central credibility issues. In the end, they do not permit us to conduct a meaningful and effective appellate review.

[35] For those reasons, the appeal must be allowed, the judgment below set aside in its entirety and a new trial ordered.

[36] At the very close of argument, following an exchange as to costs, the respondents' counsel submitted that even if the appeal is allowed and the judgment below set aside, the decision should only affect the appellant Dovbush and the judgment should remain in effect as it relates to the appellant Faltschuk. This submission was based on the fact that only Dovbush was actively pursuing the appeal. We reject it. While Dovbush may have been the only active appellant, the notice of appeal was filed on behalf of both appellants and no notice of abandonment was ever filed on behalf of Faltschuk. In any event, we see no basis on which the judgment below could be set aside on the grounds set out above in favour of one of the appellants/plaintiffs and not the other.

[37] In accordance with the agreement of counsel, costs of the appeal are awarded to the appellants as the successful party, fixed in the amount of $20,000, inclusive of disbursements and HST. The costs of the trial are remitted to the judge hearing the new trial.

Appeal allowed.

[page485]

Notes

[^1]: It is accepted that the parties arrived at the respondent's solicitor's offices unannounced and their solicitor refused to meet without the appellants' lawyer being present; the respondents' solicitor called the appellants' solicitor, and the appellants spoke to their solicitor; and the meeting proceeded with the parties only present.

End of Document