On February 13, 2015, the Supreme Court of Canada reiterated
that in Canada, the legal professional privilege must remain nearly
absolute, and recognized as a principle of fundamental justice that
the government cannot impose duties on lawyers that undermine their
duty of commitment to their client.1
The Supreme Court struck down certain search and production
provisions of anti-money laundering and anti-terrorist financing
legislation2 to the extent that they apply to lawyers on
the basis that they violate ss. 7 and 8 of the Canadian Charter
of human right and freedoms.3 The sections of the
Act and Regulations were declared unconstitutional on the basis
that they violate both the protection against unreasonable searches
and seizures and the right to liberty in accordance with the
principles of fundamental justice.
Canada's anti-money laundering and anti-terrorist legislation
requires financial intermediaries, including lawyers, to collect,
record, retain and verify certain information regarding, inter
alia, the identity of their clients, funds received from them
and corporate and trust ownership, control and structure. The
legislative provisions, whose constitutionality was challenged by
the Federation of Law Societies of Canada, permit the Financial
Transactions and Reports Analysis Centre of Canada (FINTRAC) to
perform warrantless searches of premises other than a
dwelling-house to examine records required under the Act and use
any computer and system for that purpose. The same powers are
granted to FINTRAC for searches of dwelling-houses, however, a
warrant has to be obtained beforehand. FINTRAC can also serve a
notice to a person subject to an inspection to require the
provision of information relevant to the administration of the
Act.
While the provisions of the Act do provide some protection of the
solicitor-client privilege by granting a reasonable time to make a
solicitor-client privilege claim before examination or copying of
the material, the Supreme Court found that such protection fell
short of the high-level protection required for material subject to
solicitor-client privilege. In light of this conclusion, the
Supreme Court concluded that the search powers under the impugned
provisions of the Act "constitute a very significant
limitation of the right to be free of unreasonable searches and
seizures."4
Interestingly, the Supreme Court observed that information subject
to solicitor-client privilege should not be more vulnerable in the
course of a search and seizure by FINTRAC than they would be for a
search and seizure conducted by any other enforcement authority. In
a competition law context, this would mean that searches and
seizures performed by the Competition Bureau are subject to the
same high-level protection of the solicitor-client privilege.
As the Supreme Court reiterated, the existence of a violation of
the right of liberty, life or security under s. 7 of the Charter
contemplates a two-prong test. First, there must be a limitation of
the liberty, life or security interest of the person and second,
this limitation must be contrary to a principle of fundamental
justice. For the first part of the analysis, since the regime
imposes penal sanctions for failure to comply with the Act, the
Supreme Court held that it undisputedly limited the lawyers'
liberty interest under s. 7 of the Charter.
The core of the Supreme Court's analysis rested on the second
part, that is whether the limitation of the liberty interest was
contrary to a principle of fundamental justice. The Federation of
Law Societies of Canada argued that the provisions violated the
right to liberty in a way contrary to the fundamental principle of
the "independence of the bar". The respondent and the
interveners maintained that the legislative provisions violated
this principle by allowing the government to directly interfere in
the way in which the lawyer delivers legal services and by
requiring the lawyer to become "an archive for the use of the
prosecution",5 thus undermining the lawyer-client
trust at the foundation of the solicitor-client relationship.
The Supreme Court understood that there are two versions of that
principle, namely a broad one according to which lawyers "are
free from incursions from any source, including from public
authorities" and a narrow one, which relates to the
interference of the government with the lawyers' commitment to
their clients' cause. The Supreme Court elected to apply the
latter in this case. Contrary to what the Attorney General argued,
the Supreme Court found that the recognition of this principle was
sufficiently precise "to provide a workable standard in that
it can be applied in a manner that provides guidance as to the
appropriate result"6 and that there was
"overwhelming evidence of a strong and widespread
consensus"7 concerning its existence.
The Supreme Court concluded that in effect, the information
collection and record-holding scheme of the legislation deprived
lawyers of their right to liberty in a way that is not in
accordance with this principle, by requiring lawyers to hold more
records than their profession believe is necessary for the
effective and ethical representation of their clients, the whole in
the knowledge that such records are not sufficiently protected
against searches and seizures.
In the words of the Supreme Court, "[c]lients would thus
reasonably perceive that lawyers were, at least in part, acting on
behalf of the state in collecting and retaining this information in
circumstances in which privileged information might well be
disclosed to the state without the client's
consent."8 The Supreme Court agreed with the lower
courts that the violations are not demonstrably justified in a free
and democratic society under s. 1 of the Charter.
1 Canada (Attorney General) v. Federation of Law Societies of Canada
, 2015 SCC 7.
2 Namely, ss. 62, 63 and 63.1 of the Proceeds of
Crime (Money Laundering) and Terrorist Financing Act (S.C.
2000, c. 17) (the "Act"), to the extent that they apply
to law firms and legal counsel, and s. 64 thereof. Sections 33.3,
33.4 and 59.4 of the Proceeds of Crime (Money Laundering)
and Terrorist Financing Regulations (SOR/2002-184) (the
"Regulations"), as well as s. 11.1, to the extent that it
applies to law firms and legal counsel, were also declared to
infringe the Charter.
3 The Constitution Act, 1982, Schedule B to the
Canada Act 1982 (UK), 1982, c 11 (the
"Charter").
4 Paragraph 57 of the decision.
5 Paragraph 75 of the decision.
6 Paragraph 92 of the decision.
7 Paragraph 102 of the decision.
8 Paragraph 109 of the decision.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2015