ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CRIMJ(P)82/10
DATE: 20120221

B E T W E E N:

HER MAJESTY THE QUEEN

Jeremy Schaffer, for the Crown

Applicant

• and -

MAXIE MORRIS

Deryk Gravasande, for the Respondent

Respondent

HEARD: February 13-15, 2012

RULING NO. 1 – STATEMENTS OF A BANKRUPT

Wein J.

[ 1 ] Is the statement of a person who voluntarily files for bankruptcy admissible on a subsequent criminal trial against that person?

[ 2 ] Maxie Morris is charged with fraud relating to an investment that the complainant, Ms Laing, made with her in December of 2004. By August of 2005, Ms Laing contacted the Peel Regional Police because she had been unable to get her money back in accordance with the terms of the investment.

[ 3 ] After repeated phone calls, Ms Laing was ultimately able to again make contact with Ms Morris. Ms Morris advised her that she would return the money next week. After that week went by, Ms Morris again promised she would return the money by September 15, 2005.

[ 4 ] In the meantime, Ms Morris voluntarily filed for bankruptcy, and Ms Laing was advised, in September 2005, of the pending bankruptcy.

[ 5 ] In February of 2006, in accordance with the provisions of s. 161 of the Bankruptcy and Insolvency Act , Ms Morris attended for examination of a bankrupt and provided a statement under oath. The following statements were made:

Q: How did you invest the funds deposited by Eileen Laing? How much did you invest?

A: She didn’t invest any funds with me. She made a loan to my company, King Judah Financial. She made two payments as part of the loan, $10,000 and $13,643.

Q: Where are the funds now? Please Explain.

A: The funds were all used up to pay overhead expenses and other responsibilities of the company. I don’t remember the

details of the expenses. I have receipts to prove these expenses. I undertake to provide these receipts to the Trustee by March 9 th , 2006.

[ 6 ] The Crown now seeks to tender into evidence as part of the Crown’s case, or alternatively, solely for the purposes of cross-examination, the statements made by Ms Morris during this examination.

[ 7 ] The essence of the Crown’s position is that the accused bears the burden of establishing on a balance of probabilities that there has been an infringement of her Charter rights, particularly relating to s. 13 of the Charter .

[ 8 ] Section 13 provides:

A witness who testifies in any proceedings has the right not to have any incriminating evidence so given used to incriminate that witness in any other proceedings, except in a prosecution for perjury or for the giving of contradictory evidence.

[ 9 ] The Crown’s position is that because Ms Morris voluntarily declared bankruptcy, her statement was not compelled in any manner. The Crown argues that the factors animating s. 13 of the Charter militate against a finding that the s. 13 protection applies.

The Existing Jurisprudence

[ 10 ] The principle against self incrimination is a principle of fundamental justice which finds direct expression in s. 13, and is also reflected in other rights and principles, including the right to silence, the right not to be compelled to be a witness against oneself, and to some extent the right to counsel. It is a significant principle central to individual rights in our free and democratic society.

[ 11 ] The decision of the Supreme Court of Canada in R. v. Henry , 2005 SCC 76 , [2005] 3 S.C.R. 609 provides guidance concerning the parameters of s. 13 and to a large extent resolves inconsistencies that had arisen in s. 13 cases that had come before it. In the Courts’ earlier decisions including Dubois, 1985 10 (SCC) , [1985] 2 S.C.R. 350 , Mannion , [1986] 2 S.C.R. 618 , Kuldip, [1990] 3 S.C.R. 272 and Noel , 2002 SCC 67 , [2002] 3 S.C.R. 433 , the use the prosecution was making of the prior testimony was central to the determination of whether or not s. 13 applied to prevent the introduction of the evidence. If the use was to incriminate the accused directly on the basis of his or her former evidence, s. 13 applied. If the use was to impeach credibility, through using the prior statement on cross-examination to show inconsistencies, s. 13 did not apply, to an extent depending on whether the prior evidence was “innocuous”.

[ 12 ] Henry changed this approach:

In R. v. Henry , the Court eliminated the distinction between incriminating and impeaching testimony and held that the admissibility of defendants’ previous testimony under s. 13 turns on whether they: (i) testify; and (ii) were compellable at the previous proceeding. If they do not testify, their previous testimony is inadmissible for any purpose, whether or not that testimony was made under compulsion.( emphasis added)

If defendants testify, … s. 13 only excludes (for all purposes) previous testimony taken under compulsion … . The Court accordingly held that the Crown could cross-examine the defendants in Henry at their retrial on their inconsistent testimony from their first trial, not only to impeach their credibility, but also to incriminate them (thus overruling Mannion and Kuldip).

It follows from Henry that defendants may be cross-examined on their testimony from bail hearings, preliminary inquiries, and voir dires . Though these hearings may be “other proceedings” under s. 13, defendants are not compellable at them. Such testimony may not be adduced by the prosecution, however, if defendants do not testify. McWilliams Canadian Criminal Evidence , 4 th Edition, Vol. 1, Ch . 15, para. 15.20.40.20.

[ 13 ] In Henry , the approach was focussed on an assessment of whether or not there had been compulsion, as opposed to the assessment of the use to be made of the earlier evidence. As a result, where the accused had been compelled to testify on the earlier occasion, the evidence was protected from use at a subsequent criminal trial, whether the use was for incrimination or simply for impeachment. The Court held:

I conclude that the prior compelled evidence, should under s. 13 as under s. 5(2), be treated as inadmissible in evidence against the accused, even for the ostensible purpose of challenging his or her credibility, and be restricted (in the words of s. 13 itself) to a single ‘prosecution for perjury or for the giving of contradictory evidence’. (at para. 49-50).

[ 14 ] Whereas earlier cases had acknowledged the difficulty that a trier of fact would sometimes have in isolating the purpose of impeaching credibility from the purpose of incrimination, Henry created a new approach to s. 13, by doing away

with the distinction between impeachment and incrimination and focussing on compulsion.

[ 15 ] The focus on compulsion in Henry has led to narrow distinctions being made concerning the meaning of compulsion. For example, since Henry, an accused who testifies at a first trial is said to do so voluntarily, because no one is compelled to testify at their trial, such that cross-examination on the evidence from the first trial can be done at the second trial. The fact that a person may tactically have had no meaningful choice except to testify, in face of a strong Crown case, has not been held to amount to legal compulsion.

[ 16 ] The issue of whether or not, for example, a defendant in a civil case was compelled to testify at the civil discovery proceeding, is the essential issue in the case of R. v. Nedelcu , 2007 9887 (ON SC) , [2007] O.J. No.1188 (S.C.J.) , reversed 2011 ONCA 143 , 2011 O.J. No. 795 (C.A.) , appeal to S.C.C. pending 2011 S.C.C.A No. 194.

[ 17 ] In Nedelcu , the Crown seeks to given an expanded definition to voluntary to avoid the affront to the administration of justice that is said to occur when a person gives inconsistent evidence under oath, as clearly occurred in Nedelcu. The principle that an accused person should not be permitted to tailor his evidence with impunity in different cases was noted with approval by the Supreme Court of Canada in Juman v. Doucet , 2008 SCC 8 , [2008] 1 S.C.R. 157 .

The Application of the Henry Principles

A) The Use of a Previous Statement as Part of the Crown's Case

[ 18 ] Previous out-of-court statements made by an accused person to other than a person in authority are admissible in evidence against that accused. Section 13 of the Charter, viewed in the context of section 11(c) and (d) of the Charter , protects individuals from being indirectly compelled to incriminate themselves. Where the prior statement has been made in the course of the person “testifying in any proceedings” , subject to the exceptions for perjury or giving contradictory evidence, the incriminating evidence may not be used as part of the Crown's case in chief. Whether or not the accused is a voluntary witness in the earlier proceeding is irrelevant: Henry , affirming Dubois , at para. 26, 27 and 40 .

[ 19 ] It has been held that the term "prior proceeding" should be given a large and liberal interpretation so as to apply to any kind of proceeding, whether adjudicative or investigative, including an inquiry by a government agency or a disciplinary proceeding before a statutory tribunal: see Sopinka, Lederman, and Bryant: the Law of Evidence in Canada 3 rd Ed. S. 8.206.

[ 20 ] In this case, the Crown, quite properly, has not argued that the statement provided under oath to the bankruptcy official pursuant to the provisions of

section 161 of the Bankruptcy and Insolvency Act does not fall within the parameters of section 13 of the Charter: it was under oath and taken in the course of bankruptcy proceedings.

[ 21 ] Charter case law on this point, all of it pre- Henry , suggests that bankruptcy statements cannot be used as part of the Crown's case: Regina v Ross, (1995). 1995 16548 (MB QB) , 31C.B.R. (3d) 273 (Man.Q.B.) , R. v. Gobuty (1997) O.J. No.200 (Ont. Gen.Div.) . The exception would be where the bankruptcy materials contained form the basis for the offense of giving false statements while under oath: R. v. Staranchuk [1985] S.C.J.No.21 .

[ 22 ] It clearly follows from Henry, confirming Dubois on this point, that the statement cannot be used as part of the Crown's case in chief . At least pending any potential expansion in the interpretation of section 13 of the Charter that may result from the decision of the Supreme Court of Canada in Nedelcu, that is the correct interpretation

B) The Use of the Previous Statement For Cross-Examination

[ 23 ] It is clear that compulsion under s. 13 relates only to legal compulsion and not to tactical compulsion: R. v. Darrach , [2002] S.C.R. 443. In assessing the issue of the application of s. 13, in the context of use in cross-examination, the overriding policy consideration is explained in Henry is to ensure that an

accused person cannot seek to shelter self-serving inconsistencies behind a Charter barrier where both the primary and the subsequent testimony is volunteered.

Bankruptcy Cases

[ 24 ] There are a number of cases dealing with the issue of whether or not bankruptcy statements are admissible under s. 13, usually where the use was for the purpose of cross-examination. Some of these yield inconsistent results. Many pre-date the Charter analysis of Henry .

[ 25 ] For example, in R. v. Langille ¸ [1986] NSJ No. 255 (C.A.) cross-examination on the bankruptcy statement was permitted. The Court held that to prevent such cross-examination would be to invite witnesses to tell one story at one time with the full knowledge that the story could be changed with impunity in another proceedings, subject only to a prosecution for perjury and for the giving of contradictory evidence.

[ 26 ] This is the concern that will be addressed in Nedelcu , where the Crown seeks to have the Supreme Court of Canada expand the scope of Henry .

[ 27 ] In R. v. Ross , [1995] M.J. No. 129 (Q.E.) the Manitoba Court held that while there was a violation of s. 13 through the inclusion of the examination of a

bankrupt in a search warrant, statements were admissible under s. 24(2) of the Charter and cross-examination on the bankruptcy affidavit was permissible.

[ 28 ] The factors set out in the pre- Henry case of R. v. Fitzpatrick , 1995 44 (SCC) , [1995] 4 S.C.R. 154 , remain valid as providing a framework for the assessment of whether or not a statement is voluntary as opposed to legally compelled. These four factors are the existence of coercion, whether or not there is an adversarial relationship, the prevention of unreliable confessions, and abuse of power.

Existence of Coercion

[ 29 ] It is clear that the Bankruptcy and Insolvency Act has two purposes: to ensure the equitable distribution of a bankrupt debtor’s assets and to allow the financial rehabilitation of insolvent individuals: Husky Oil Ltd. v. Canada , 1995 69 (SCC) , [1995] S.C.J. No. 77 at para. 7 .

[ 30 ] There are two statutory methods by which a debtor may become bankrupt. A debtor may voluntarily declare bankruptcy or alternatively, a creditor may petition the debtor into bankruptcy proceedings. In either event, the Act provides a comprehensive scheme for the discovery assessment and disbursement of assets, including the power to compel the attendance of the debtor and other persons to provide evidence under oath.

[ 31 ] In this case, because it is acknowledged that Ms Morris voluntarily declared bankruptcy, the broader issue of whether or not a person petitioned into bankruptcy is protected from subsequent use of statements under oath, by s. 13 of the Charter , is not before this Court.

[ 32 ] It is stressed by the defence that if a person fails to provide information pursuant to the requirements of s. 161(1) of the Act , an investigation may be commenced pursuant to s. 10 of the Act . Nonetheless, the Crown stresses that the starting point is the voluntary declaration of bankruptcy, from which all other consequences flow. The Crown analogizes to the situation where an accused voluntarily decides to testify, even if tactically compelled in a particular case, with the result that he or she will be subject to cross-examination and the subsequent evidence may be used in a subsequent trial as determined by Henry . In this case, as it happens, Ms Morris also has clear knowledge of the effects of declaring bankruptcy and the processes that result, since she had previously declared bankruptcy in 2002. I do not, however, find that fact essential in any way to the determination in this case of whether or not this was a voluntary bankruptcy.

[ 33 ] In the case of the voluntary declaration of bankruptcy, the information subsequently obtained in accordance with the legislation is somewhat comparable to the reports required in Fitzpatrick , in the sense that they are not

required in a void, without any action being taken by the individual, but rather flow from the individual’s decision to enter into the regulatory ambit of the legislation in question.

Adversarial Relationship

[ 34 ] The Bankruptcy and Insolvency Act provides a regulatory scheme to manage insolvency. Although there can be elements of an adversarial relationship, for example if a bankrupt is compelled to attend or compelled to provide documents, the essence of the relationship is not adversarial.

Unreliable Confessions

[ 35 ] In many cases where a person provides information to the authorities, there can be said to be an incentive to provide false information. As the case in Fitzpatrick , supra , where there is already an offence under the relevant legislation to combat the falsification of reports, this concern is minimized. The parallel holds true with respect to the Bankruptcy Act .

Abuse of State Power

[ 36 ] Particularly in cases where there is a voluntary referral into bankruptcy, but also in all cases of bankruptcy, the underlying purpose of the legislation is regulatory, and to assist persons in financial difficulty. In these circumstances there is no substantive concern that the use of bankruptcy statements would

increase the likelihood of abuse by the state. Persons cannot be petitioned into bankruptcy without an underlying basis for the petition, and are unlikely to be petitioned into bankruptcy by the state.

[ 37 ] Accordingly, I find that the statement given by Ms. Morris in the bankruptcy proceedings was voluntarily given.

[ 38 ] It is quite clear from Henry that the anomaly that would exist if a person who chooses to give evidence in one proceeding were permitted to give completely different evidence in another proceeding, without being examined on the inconsistency, is not a result contemplated by section 13 of the Charter.

[ 39 ] In accordance with that analysis, the statements of Ms. Morris made in bankruptcy proceeding may be used by the crown in cross-examination of her, should she choose to testify at this trial.

[ 40 ] In summary, the statement may be used in the cross-examination of Ms. Morris, but may not be introduced by the Crown as part of its case.

Wein J.

Released: February 21, 2012

COURT FILE NO.: CRIMJ(P)82/10
DATE: 20120221

ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: HER MAJESTY THE QUEEN Applicant - and – MAXIE MORRIS Respondent RULING NO. 1 – STATEMENTS OF A BANKRUPT Wein J.

Released: February 21, 2012