The rule excluding hearsay
Hearsay evidence is presumptively inadmissible primarily because, absent contemporaneous cross-examination of the declarant, the party against whom the evidence is offered cannot effectively test the reliability and veracity of the out-of-court statement.
Hearsay evidence is excluded both to protect the integrity of the truth seeking function of the trial and to preserve the fairness of the trial:
See Khelawon, at paras. 48, 63; and R. v. Couture, 2007 SCC 28 (CanLII),
 2 S.C.R. 517, at para. 77.
The principled exception to the rule excluding hearsay
The principled exception to the hearsay rule was discussed by the Supreme Court of Canada in the cases of R. v. Khan, 1990 CanLII 77 (SCC),  2 S.C.R. 531, R. v. Smith, 1992 CanLII 79 (SCC),  2 S.C.R. 915 and R. v. Khelawon, 2006 SCC 57 (CanLII),  2 S.C.R. 787.
In essence, the Supreme Court of Canada has found that hearsay evidence can be admitted if, on a balance of probabilities, the hearsay evidence meets the twin requirements of necessity and reliability.
Today’s blog will deal only with the approach to assessing the reliability of a hearsay statement.
The modern approach to assessing the threshold reliability of a hearsay statement – two lines of inquiry
The principled exception to the rule excluding hearsay evidence recognizes that some hearsay is sufficiently reliable to warrant its admissibility and consideration by the trier of fact even though the declarant of the statement was not subject to cross-examination when the statement was made. The case law identifies two lines of inquiry relevant to the assessment of the reliability of hearsay evidence:
(1) the presence of adequate substitutes for testing truth and accuracy (procedural reliability); and
(2) sufficient circumstantial guarantees of reliability or an inherent trustworthiness (substantive reliability).
In addition, probative value and prejudicial effect must be balanced at the end of the analysis in some cases.
1. Procedural reliability
The first line of inquiry asks whether there are sufficient other means available to test the reliability of the hearsay statement so as to render unnecessary the requirement of contemporaneous cross-examination of the declarant. For example, the availability of the declarant for meaningful cross-examination at trial can go a long way to providing an adequate substitute for contemporaneous cross-examination of the declarant:
Khelawon, at paras. 63, 76; and R. v. Devine, 2008 SCC 36 (CanLII),  2 S.C.R. 283, at paras. 22-28.
Under this line of inquiry, the truth of the contents of the hearsay statement is irrelevant to the reliability inquiry:
2. Substantive reliability
The second line of inquiry looks to determine whether the circumstances in which the hearsay statement was made provide sufficient comfort of its truth to justify its consideration by the trier of fact despite the absence of contemporaneous cross-examination of the declarant. Records made in the usual and ordinary course of business provide a good example of inherently trustworthy hearsay declarations. In determining whether hearsay is sufficiently inherently trustworthy to warrant its admission, the court may consider not only the circumstances surrounding the making of the statement but other evidence properly before the trier of fact supporting or undermining the accuracy of the out-of-court statement:
See Khelawon, at paras. 4, 56-63; R. v. Blackman, 2008 SCC 37 (CanLII),  2 S.C.R. 298, at para. 35; R. v. Couture, 2007 SCC 28 (CanLII),  2 S.C.R. 517 at para 80;; Devine, at para. 22; and R. v. S.S., 2008 ONCA 140 (CanLII), (2008) 232 C.C.C. (3d) 158, at paras. 24-25.
The two lines of inquiry described above are not mutually exclusive, but are considered together in assessing the reliability of hearsay evidence for the purposes of determining its admissibility: see Blackman, at para. 35.
There is, however, one important distinction between the two inquiries, as I mentioned above. If the hearsay evidence is said to be reliable because there are other suitable substitutes for contemporaneous cross-examination, the truth of the contents of the hearsay statement is irrelevant to the reliability inquiry:
see R. v. Couture, 2007 SCC 28 (CanLII),  2 S.C.R. 517, at para. 77 at para. 87.
If, however, the evidence is said to be sufficiently reliable because of the circumstances in which it was made or the other evidence before the trier of fact, the reliability assessment requires a consideration of the truth of the hearsay statement. The court will admit the hearsay statement only if satisfied that the circumstances provide sufficient confidence of the truth of the statement to justify admitting the statement even though it will go largely, if not entirely, untested. As explained in Couture, at para. 99:
Because there are no adequate substitutes for testing the evidence on the facts of this case, there must be some compelling feature about the statement that commands sufficient trust in its truth and accuracy to warrant its admission regardless.
See R. v. Dupe, 2016 ONCA 653