COURT OF APPEAL FOR ONTARIO
CITATION: R. v. Nicolau, 2012 ONCA 584
DATE: 20120910
DOCKET: C54567
Rosenberg, Blair and Tulloch JJ.A.
BETWEEN
Her Majesty the Queen
Respondent
and
Doris Ender Nicolau
Appellant
Doris Ender Nicolau, in person
Danielle Robitaille, acting as duty counsel
Marie Comiskey and Ian Bell, for the respondent
Heard: August 14, 2012
On appeal from the decision of the Summary Conviction Appeal Court dated June 16, 2011 by Justice Lois B. Roberts of the Superior Court of Justice, allowing the appeal from the acquittal entered on August 28, 2009 by Justice Peter A.J. Harris of the Ontario Court of Justice.
ENDORSEMENT
[1] The appellant seeks leave to appeal and if leave is granted to appeal from the decision of Roberts J. allowing an appeal by the Crown from the decision of Harris J. dismissing charges of income tax evasion relating to the taxation years 2001 to 2003. The appellant’s defence to the charges was that she was unable to file her income tax returns during these years because of her mental state. Although she was earning substantial commission income as a real estate agent, she claimed that her depression prevented her from coming to grips with her obligations to file her income tax returns. She relied upon other evidence to support the claim, for example, that throughout the relevant period the fact that she was earning income was reported to CRA through T4A slips. The appellant was unrepresented at the trial and did not attend the summary conviction appeal. In those circumstances, it is in the interests of justice that leave to appeal be granted.
[2] The Crown’s appeal centred on para. 32 of the trial judge’s reasons where he set out five reasons for accepting the appellant’s evidence:
I have carefully evaluated all of the evidence and submissions and while I have some misgivings about certain aspects of her evidence, (such as why she was able to file GST returns in a timely fashion) I have concluded that Ms. Nicolau’s evidence of a direct causal connection between her mental health issues and her failure to file tax returns should be accepted and entitled to some credibility for the following reasons:
(1) Ms. Nicolau’s erratic and at times irrational conduct during this trial (and pre-trial motions) is a testament to the many variable ways that Ms. Nicolau’s mental health issues impact her judgment and her daily functioning; ...to suggest she was exasperatingly difficult would be a serious understatement.
(2) Further her erratic and irrational behaviour is apparent from the following: when her files were passed to Mr. Sinclair for collection and Ms. Nicolau met with him and agreed to a deadline by which date she would deliver the missing returns. She then adopted a course of action that proved disastrous – she began working on her 2004 and 2005 returns with the result that her 2001-2003 files were sent out to investigation by the enforcement office. For lengthy periods she failed to respond to correspondence or explain why she was not working on the returns in question or why she missed the deadline.
(3) As noted above, I am prepared to accept that there is some corroboration of the defendant’s mental disorder contained in the letter of Dr. Soare.
(4) Human experience tells us that the Income Tax Act is notoriously complex. It is subject to ongoing revision. No lay person is expected to know all the complexities of the tax laws. Most individuals will require some professional assistance in the preparation of tax returns. One can imagine how a shoe box of three years worth of unsorted expenses measuring 6-7” in height, could prove to be quite challenging, even intimidating, to a person suffering from a mental illness such as depression with the inevitable result that she could well become more and more delinquent in her statutory duty. Ms. Nicolau testified that as a result of her illness, her husband helped her with all the paperwork associated with real estate sales and when she found herself facing prosecution on February 15, 2007, he prepared her income tax returns. This explanation goes some distance towards an understanding of how she was able to seemingly function appropriately at work and have the three missing returns prepared in such a short period.
(5) There was never any attempt to deny her tax indebtedness to the C.R.A. In fact she was so forthright about her tax liability, the Toronto C.R.A. office accepted her income and expense figures “to the penny.”
[3] The Crown argued that the trial judge, having ruled much of the evidence referred to in these passages to be inadmissible, erred in relying on the evidence in accepting the appellant’s testimony.
[4] In allowing the Crown appeal, the appeal judge dealt only with item (3)--the letter from Dr. Soare. This letter found its way into the record through a Crown witness as part of the chronology of dealings between the appellant and CRA. The trial judge made it clear to the appellant in the course of the trial that this letter was inadmissible as proof of its contents. During a lengthy exchange with the appellant, in the course of the appellant’s testimony, the trial judge explained that the letter was not admissible for its truth, even though there was no question that the letter was authentic. Notwithstanding this exchange, in his reasons for judgment, the trial judge conducted an abbreviated analysis using the principled approach to admission of hearsay and determined that the letter “should be admitted into evidence and given some limited weight”.
[5] The appeal judge reasoned as follows:
Correctly holding at paragraph 30 of his Trial Judgment that Dr. Soare's letter was "inadmissible hearsay", Justice Harris nevertheless determined that it should be admitted into evidence, referencing the analysis set out by the Supreme Court of Canada in R. v. Khelawon, without holding a voir dire as required under that analysis to determine reliability and necessity, or otherwise giving the Crown the opportunity to make submissions, including whether or not Dr. Soare was truly unavailable as claimed by Ms. Ender Nicolau.
Ms. Ender Nicolau admitted knowing that she was required to serve Dr. Soare with a summons to witness but gave no particulars of her efforts to locate Dr. Soare, including a simple search on the website of the College of Physicians and Surgeons of Ontario. There was no reliable evidence to support Justice Harris' conclusion that the criterion of necessity had been demonstrated because Dr. Soare was unavailable.
If Dr. Soare's note was being tendered as a medical report, trial fairness required that the respondent should have given the requisite notice to the Crown to enable it to seek to cross-examine Dr. Soare. The respondent failed to do this and the Crown was deprived of its right to cross-examine Dr. Soare or call an expert medical witness to rebut the respondent's contentions.
The Crown's right to test Dr. Soare's note was particularly important because Dr. Soare's note by itself is not corroborative of Ms. Ender Nicolau's position that her mental health problems prevented her from filing her returns in a timely manner. The note merely states that she has been suffering from "mood changes", "mostly depression", without indicating the extent and effect of those issues on her ability to function. Justice Harris erred by reading more into the note than was written or could be reasonably inferred.
Moreover, while, as indicated in Dr. Soare's note, Ms. Ender Nicolau may have suffered from "mood changes" and "mostly depression", the evidence at trial, including the testimony of Ms. Ender Nicolau, does not establish that she suffered from any mental health issues that prevented her from filing her returns in a timely manner.
Given the trial judge's stated difficulty with Ms. Ender Nicolau's credibility, without Dr. Soare's note, it is unlikely that the trial judge would have accepted the respondent's defence. Ms. Ender Nicolau's evidence about her alleged mental health issues was conflicting and contradictory and by itself would not have supported her defence.
[6] We agree with the appeal judge that the trial judge erred in admitting the letter. We also agree with her reasons. It may be, as Ms. Robitaille argued, that the admission of the letter alone would not be grounds for setting aside the acquittal, since the letter did not make a causal connection between the appellant’s mood changes and her ability to file her returns. And, the Crown did not challenge the fact that the appellant did suffer from some type of mental disorder.
[7] The full text of Dr. Soare’s letter is as follows:
This is to confirm that Ms. Nicolau has been suffering of mood changes (mostly depression) in the last 7 years.
[8] That the appellant suffered from some kind of mental illness, which she described in her testimony as depression, was never an issue in the case. Crown counsel did not challenge the appellant on this issue even after the trial judge conducted his own probing questioning of the appellant. In that questioning, the trial judge asked the appellant about her mental state, when she started seeing Dr. Soare, whether she was taking medication and why she was able to be a successful real estate agent during this time, despite her mental state. After this questioning, the trial judge asked Crown counsel if she wished to question the appellant and she declined.
[9] The concern is, however, that, as the appeal judge noted, the trial judge gave more weight to the letter than it could reasonably bear.
[10] In any event, the respondent Crown seeks to uphold the order allowing the appeal on the basis that the trial judge erred in law in respect of some of the other reasons for accepting the appellant’s testimony. We now turn to those issues.
(1) The 2004 and 2005 returns
[11] The Crown sought to admit evidence at trial that the appellant had filed her 2004 and 2005 returns. The Crown’s theory was that whatever mental health concerns the appellant had, she was able to file those returns, for years when she owed only small amounts of money. The trial judge held that the evidence was inadmissible:
It was argued that to prove that Ms. Nicolau could file if she really wanted to and was not so debilitated by mental health concerns that she could not file in 2004 and 2005. In my view that analysis is problematic because it’s just as likely that Ms. Nicolau became aware of an investigation into her 2001 to 2003 returns or lack of returns and obtained assistance, family assistance or whatever, to file the 2004 and 2005 year returns, motivated by concern about being under investigation.
So because there is no way of eliminating the effect of the investigation on the motivation to file for 2004 and 2005 it’s virtually impossible, in my view, to argue subsequent good conduct in relation to the failure to file offence can rebut a defence of lack of intent due to mental health issues, especially where the investigation, as I say, would likely be a significant factor in the 2004 and 2005 filings.
This evidence is simply not probative of anything and prejudicial and will be excluded. So I am going to leave that exhibit before the Court. I am just not going to give it any effect. That is the Exhibit Number One (H).
[12] Notwithstanding this ruling, the fact that the appellant did file her 2004 and 2005 returns became a key part of her defence. She testified that the impact of her mental illness was manifested by the fact that even though she knew she was under investigation for her 2001 to 2003 returns she devoted her resources to filing the 2004 and 2005 returns, thus further delaying her completing the 2001 to 2003 returns. Crown counsel at trial, not Ms. Comiskey, asked the trial judge to revisit his ruling in light of the appellant’s evidence. The trial judge indicated that he would entertain submissions on the issue, after the appellant finished testifying in-chief. However, the trial judge, rather than hearing submissions, told Crown counsel that he was going to ignore that part of the appellant’s evidence:
Well, if it helps you at all I am prepared to maintain the consistency of the earlier rulings and just ignore anything in Ms. Nicolau—I have not admitted this into evidence yet.
No. I just allowed Ms. Nicolau to read everything because it was easier because of the flow of her evidence. But where it pertains to matters I have ruled on I simply will follow and be consistent with those rulings.
[13] That being said, when in her cross-examination the appellant again referred to her “catastrophic mistake” in working on the 2004 and 2005 returns, Crown counsel did conduct a limited cross-examination, primarily focused on the fact that in 2005 to 2007, the appellant was working on her 2001 return. Crown counsel did not again ask the trial judge to revisit his ruling on the 2004 and 2005 returns, no doubt because the trial judge had made it clear that he was ignoring that evidence.
[14] Notwithstanding his ruling, the trial judge nevertheless relied, as item #2, on the appellant’s “disastrous” action in filing the 2004 and 2005 returns. This was an error in law. Having ruled the evidence inadmissible, it was not open to the trial judge to then use that same evidence to support the appellant’s credibility. This evidence went to the heart of the appellant’s defence. The Crown was entitled to place the complete picture before the court and probe the legitimacy of the appellant’s defence.
(2) The Honesty of the 2001 to 2003 returns
[15] The Crown also sought to adduce evidence that when she did eventually file her 2001 to 2003 returns, the appellant failed to report all her income, and in particular rental income. The trial judge ruled this evidence was inadmissible:
The third piece of questioned evidence on which I have reserved, relates to alleged rental income which is said to have been unreported on any return. This is what is called similar fact or discreditable conduct evidence, which is not, in my view, relevant to any issue. It does not tend to establish whether the failures to file returns were by design or unintentional or to rebut the defence of lack of capacity to file returns. It is not a matter of likelihood that a person who had failed to report income, if she did at all, and I don’t find that at this stage that she has, but it is not a matter of a likelihood that a person who would fail to report income would also likely fail to file returns.
There is no similarity to the different acts that could raise a probative inference. In other words, there is nothing similar between failing to report income and failing to file income tax returns.
In addition, the rental income issue could result in significant prejudice as Justice Binnie noted in R. v. Handy, Supreme Court of Canada, this evidence could have radically changed the trial that Mr. Handy was facing over an incident to which he pleaded not guilty but was confronted with, in that case, eight different incidents of which seven were not the subject matter of any charge.
Here Mr. Karlos accepted Ms. Nicolau’s reported income and closed the books on those years, 2004, 2005 and those earlier years once she had filed returns. And it is my view that Ms. Nicolau should not have to defend dissimilar allegations about whether her returns were dishonest or not. This is what I would classify as bad character evidence from which it is argued she is more likely to have committed the offence with which she is charged, in other words, propensity reasoning that’s impermissible. This evidence of unreported rental income will be excluded from evidence on the basis that it is not relevant to any issues and its probative value is outweighed by the prejudicial effect of that evidence.
So once again what I would be doing is simply not giving any weight and basically ignoring the evidence of Mr. Karlos to the extent that he referred to an allegation of unreported income.
[16] Yet when the trial judge came to determining the appellant’s credibility, he took into account as item #5 that the appellant was “so forthright about her tax liability, the Toronto C.R.A. office accepted her income and expense figure ‘to the penny’”. This was an error in law; having ruled evidence inadmissible as to whether the appellant had filed accurate returns, the trial judge could not then assume that those returns were accurate and use this evidence to support the appellant’s credibility.
[17] This aspect of the case also went to the heart of the appellant’s defence. She claimed that she never attempted to hide her income; that it was all revealed in her T4As. The evidence that the Crown wanted to introduce, if believed, would have undermined that element of the defence.
DISPOSITION
[18] We are satisfied that these errors justify the order for a new trial. These errors were central to the appellant’s defence and had the trial judge properly directed himself, his judgment dismissing the charges would not necessarily have been the same. Accordingly, the appeal is dismissed.
“M. Rosenberg J.A.”
“R.A. Blair J.A.”
“M. Tulloch J.A.”