Supreme Court strikes down provisions of Money Laundering Act as they apply to Lawyers

The Supreme Court of Canada decided last week in the case of Attorney General of Canada v. Federation of Law Societies of Canada 2015 SCC 7, that the government should not interfere with a lawyer’s commitment to his or her client’s cause.  In doing so, the court held that  commitment to the client’s cause, was fundamental to the solicitor-client relationship.  Lawyers across the country welcomed the decision as a victory for the public and in providing clarity to how the legal profession should deal with its clients.

 

The case involved an act cumbersomely entitled “Proceeds of Crime (Money Laundering) and Terrorist Financing Act” (“Money Laundering Act”).  Parts of the Money Laundering Act and certain regulations under the Money Laundering Act sought to require lawyers and law firms to collect confidential information about their clients that could be subject to search and seizure by the government.  Alarmed by the prospect, the Federation of Law Societies of Canada sought to a declaration from the court that such legislation was unconstitutional.  Several lawyers’ associations including The Advocates’ Society, the Canadian Bar Association and the Canadian Civil Liberties Association intervened in the case.

 

The Money Laundering Act requires financial intermediaries (including lawyers) to collect, record and retain material, including information verifying the identity of those on whose behalf lawyers pay or receive money.  It put an agency in place to oversee compliance with the legislation and allowed that agency to search for and seize material.  The Money Laundering Act imposed fines and penal consequences for non-compliance.

 

Sections of the regulations made lawyers subject to the Money Laundering Act when receiving or paying funds or giving instructions to pay funds (other than in respect of professional fees, disbursements, expenses or bail).  Other sections of the regulations imposed record-keeping requirements and yet other sections of the regulations imposed identification requirements.

 

The Federation of Law Societies commenced a constitutional challenge to the Money Laundering Act as it applied to lawyers.  The challenge was brought in British Columbia and matter made its way to the Supreme Court of Canada.

 

The majority of the court struck down the sections of the Money Laundering Act and the regulations that applied to documents in the possession of lawyers and law firms.  The majority held that those provisions had a predominately criminal law character rather than an administrative law character.  They facilitated detecting and deterring criminal offences and investigations in prosecuting criminal offences.  There were penal sanctions for non-compliance.  The provisions authorized sweeping searches of law offices which inherently risked breaching solicitor-client privilege.  The court held that the public's expectation of privacy in solicitor-client privileged communications was high regardless of the context and nothing about the regulatory context of the Money Laundering Act or the fact that a regulatory agency undertook the searches diminished that expectation.

 

In addition, the court found that the impugned provisions wrongly transferred the burden of protecting solicitor-client privilege to lawyers.  Nothing in the legislation required notice to be given to clients and clients may not even be aware that their privilege was threatened.  Unless the search was of a lawyer’s home office, nothing required prior judicial authorization.  Searches were not contingent upon proof that there were no reasonable alternatives.  The court held that the provisions allowing warrantless searches are presumptively unreasonable, examining and copying documents proceeded until privilege was asserted and approached that greatly elevated risk of a breach of privilege.

 

The search powers in the Money Laundering Act as applied to lawyers along with the inadequate protection of solicitor-client privilege constituted a very significant limitation of the right to be free of unreasonable searches and seizures. 

 

The court held that principles of fundamental justice have three characteristics:

 

1. there must be a legal principle;
2. there must be a significant societal consensus that they are fundamental to the way in which the legal system ought to operate; and
3. they must be sufficiently precise so as to yield a manageable standard against which to measure deprivations of life.

 

The court found that the lawyer’s duty of commitment to the client’s cause meets this test.  There was overwhelming evidence of a strong and wide-spread consensus concerning the fundamental importance in democratic states of protection against state interference with the lawyer’s commitment to his or her client’s cause.  That duty was fundamental to the solicitor-client relationship and how the state and the citizen interact in legal matters.  The lawyer’s duty of commitment to his or her client’s cause is essential to maintaining confidence in the integrity of the administration of justice. 

 

The Court concluded that the Money Laundering Act required lawyers to gather and retain considerably more information that the profession thought was needed for ethical and effective client representation.  This coupled with the inadequate protection of a solicitor-client privilege undermined a lawyer’s ability to comply with the duty of commitment to the client’s cause. 

Those offending sections of the legislation were unconstitutional and should be struck.  Other sections that simply authorized the making of regulations were administrative, not criminal, in nature and did not infringe the Charter of Rights and Freedoms.

Regards,

Blair