



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 appellants 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 Crowns appeal centred on para. 32 of the trial judges reasons
    where he set out five reasons for accepting the appellants 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. Nicolaus 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.
    Nicolaus erratic and at times irrational conduct during this trial (and
    pre-trial motions) is a testament to the many variable ways that Ms. Nicolaus
    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
    defendants 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 appellants 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 appellants
    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 appellants 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. Soares 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 appellants 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 Crowns 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 its 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 its 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 appellants 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 appellants
    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. NicolauI
    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 appellants
    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 appellants credibility. This
    evidence went to the heart of the appellants defence. The Crown was entitled
    to place the complete picture before the court and probe the legitimacy of the
    appellants 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 dont 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. Nicolaus 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 thats 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 appellants 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
    appellants credibility.

[17]

This
    aspect of the case also went to the heart of the appellants 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 appellants 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.


