Canada (Attorney General) v. Federation of Law Societies of Canada

Canada (Attorney General) v. Federation of Law Societies of Canada
Collection
Supreme Court Judgments
Date
2015-02-13
Neutral citation
2015 SCC 7
Report
[2015] 1 SCR 401
Case number
35399
Judges
McLachlin, Beverley; LeBel, Louis; Abella, Rosalie Silberman; Cromwell, Thomas Albert; Moldaver, Michael J.; Karakatsanis, Andromache; Wagner, Richard
On appeal from
British Columbia
Subjects
Constitutional law
Notes
SCC Case Information: 35399
Decision Content
SUPREME COURT OF CANADA
Citation: Canada (Attorney General) v. Federation of Law Societies of Canada, 2015 SCC 7, [2015] 1 S.C.R. 401
Date: 20150213
Docket: 35399
Between:
Attorney General of Canada
Appellant
and
Federation of Law Societies of Canada
Respondent
- and -
Criminal Lawyers’ Association (Ontario), Canadian Civil Liberties Association,
Law Society of British Columbia, Canadian Bar Association, Advocates’ Society,
Barreau du Québec and Chambre des notaires du Québec
Interveners
Coram: McLachlin C.J. and LeBel, Abella, Cromwell, Moldaver, Karakatsanis and Wagner JJ.
Reasons for Judgment:
(paras. 1 to 117)
Partially Concurring Joint Reasons:
(paras. 118 to 121)
Cromwell J. (LeBel, Abella, Karakatsanis and Wagner JJ. concurring)
McLachlin C.J. and Moldaver J.
canada (a.g.) v. federation of law societies, 2015 SCC 7, [2015] 1 S.C.R. 401
Attorney General of Canada Appellant
v.
Federation of Law Societies of Canada Respondent
and
Criminal Lawyers’ Association (Ontario),
Canadian Civil Liberties Association,
Law Society of British Columbia,
Canadian Bar Association,
Advocates’ Society,
Barreau du Québec and
Chambre des notaires du Québec Interveners
Indexed as: Canada (Attorney General) v. Federation of Law Societies of Canada
2015 SCC 7
File No.: 35399.
2014: May 13; 2015: February 13.
Present: McLachlin C.J. and LeBel, Abella, Cromwell, Moldaver, Karakatsanis and Wagner JJ.
on appeal from the court of appeal for british columbia
Constitutional law — Charter of Rights — Right to liberty — Fundamental justice — Search and seizure — Solicitor-client privilege — Lawyer’s duty of commitment to client’s cause — Whether Canada’s anti-money laundering and anti-terrorist financing legislation, as it applies to legal profession, infringes right to be free of unreasonable searches and seizures — Whether legislation infringes right not to be deprived of liberty otherwise than in accordance with principles of fundamental justice — If so, whether infringements justifiable — Canadian Charter of Rights and Freedoms, ss. 1 , 7 , 8 — Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17, ss. 5 (i), 5 (j), 62 , 63 , 63.1 , 64 — Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, SOR/2002-184, ss. 11.1, 33.3, 33.4, 33.5, 59.4.
To reduce the risk that financial intermediaries may facilitate money laundering or terrorist financing, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17 , and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, SOR/2002-184, impose duties on financial intermediaries, including advocates and notaries in Quebec and barristers and solicitors in all other provinces. The legislation requires financial intermediaries to collect, record and retain material, including information verifying the identity of those on whose behalf they pay or receive money. It puts in place an agency to oversee compliance, the Financial Transactions and Reports Analysis Centre of Canada, and allows that agency to search for and seize that material. It imposes fines and penal consequences for non-compliance. Sections 5(i) and 5(j) of the Act make professions specified in the Regulations subject to the record keeping and verification requirements. Section 33.3 of the Regulations makes legal counsel subject to the Act when receiving or paying funds or giving instructions to pay funds other than in respect of professional fees, disbursements, expenses or bail or when doing so on behalf of their employer. Sections 33.4 and 33.5 of the Regulations impose record keeping requirements. Section 59.4 of the Regulations imposes identification requirements. Section 11.1 of the Regulations sets out the information that must be collected and retained in the course of verifying identity. Sections 62, 63 and 63.1 of the Act provide for search and seizure powers. Section 64 provides limitations on the search and seizure powers in relation to material for which solicitor-client privilege is claimed.
The Federation of Law Societies commenced a constitutional challenge to the legislation as it applies to the legal profession. The application judge of the Supreme Court of British Columbia held that the challenged provisions violate s. 7 of the Charter and the infringement is not saved under s. 1 of the Charter . She did not address whether the provisions infringe s. 8 of the Charter . She read down ss. 5(i), 5(j), 62, 63 and 63.1 of the Act and s. 11.1 of the Regulations to exclude legal counsel and legal firms. She struck down s. 64 of the Act, and ss. 33.3, 33.4, 33.5 and 59.4 of the Regulations. The British Columbia Court of Appeal dismissed an appeal.
Held: The appeal should be allowed in part. That part of the application judge’s order declaring that ss. 5(i) and 5(j) of the Act are inconsistent with the Constitution of Canada and are of no force and effect to the extent that the reference in those subsections to “persons and entities” includes legal counsel and law firms should be set aside. Sections 5 (i) and 5 (j) should be struck from that part of the application judge’s order declaring that ss. 5(i), 5(j), 62, 63 and 63.1 of the Act are read down to exclude legal counsel and law firms from the operation of those sections. The appeal should otherwise be dismissed.
Per LeBel, Abella, Cromwell, Karakatsanis and Wagner JJ.: Sections 5(i) and 5(j) of the Act simply authorize the making of regulations and do not on their own infringe the Charter .
Sections 62, 63 and 63.1 of the Act, to the extent that they apply to documents in the possession of legal counsel and legal firms, and s. 64 of the Act infringe s. 8 of the Charter . These provisions have a predominantly criminal law character rather than an administrative law character. They facilitate detecting and deterring criminal offences, and investigating and prosecuting criminal offences. There are penal sanctions for non-compliance. These provisions authorize sweeping searches of law offices which inherently risks breaching solicitor-client privilege. The expectation of privacy in solicitor-client privileged communications is invariably high regardless of the context and nothing about the regulatory context of the Act or the fact that a regulatory agency undertakes the searches diminishes that expectation. The principles governing searches of law offices set out in Lavallee, Rackel & Heintz v. Canada (Attorney General), 2002 SCC 61, [2002] 3 S.C.R. 209, apply and these provisions do not comply with those standards. Solicitor-client privilege must remain as close to absolute as possible. There must be a stringent norm to ensure protection and legislative provisions must interfere with the privilege no more than absolutely necessary. These provisions wrongly transfer the burden of protecting solicitor-client privilege to lawyers. Nothing requires notice to clients and a client may not be aware that his or her privilege is threatened. There is no protocol for independent legal intervention when it is not feasible to notify a client. A judge has no discretion to assess a claim of privilege on his or her own motion. Unless the search is of a lawyer’s home office, nothing requires prior judicial authorization. Searches are not contingent upon proof that there are no reasonable alternatives. The provisions allow warrantless searches, which are presumptively unreasonable. Examining and copying documents proceeds until privilege is asserted — an approach that greatly elevates the risk of a breach of privilege. Claiming privilege requires revealing a client’s name and address even though this information may be subject to privilege. The search powers in ss. 62 , 63 and 63.1 as applied to lawyers, along with the inadequate protection of solicitor-client privilege provided by s. 64 , constitute a very significant limitation of the right to be free of unreasonable searches and seizures.
Section 11.1 of the Regulations, to the extent that it applies to legal counsel and legal firms, and the other provisions of the Regulations in issue in this appeal infringe s. 7 of the Charter . The liberty interests of lawyers are infringed because lawyers are liable to imprisonment if they do not comply with the requirements of the Act and Regulations. It is not necessary to determine whether the liberty interests of clients are infringed.
It should be recognized as a principle of fundamental justice that the state cannot impose duties on lawyers that undermine their duty of commitment to their clients’ causes. Principles of fundamental justice have three characteristics. They must be a legal principle; there must be significant societal consensus that they are fundamental to the way in which the legal system ought fairly to operate; and, they must be sufficiently precise so as to yield a manageable standard against which to measure deprivations of life, liberty or security of the person. The lawyer’s duty of commitment to the client’s cause meets this test. First, it is a normative legal principle and a basic tenet of our legal system. It has been recognized as a distinct element of a lawyer’s broader common law duty of loyalty. Second, jurisprudence demonstrates that the principle is sufficiently precise to provide a workable standard. It does not countenance a lawyer’s involvement in, or facilitation of, illegal activities and it is consistent with a lawyer taking appropriate steps to ensure that his or her services are not used for improper ends. Third, there is 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. The duty is fundamental to the solicitor-client relationship and how the state and the citizen interact in legal matters. The lawyer’s duty of commitment to the client’s cause is essential to maintaining confidence in the integrity of the administration of justice.
Subject to justification, the state cannot impose obligations on lawyers that undermine their compliance with the duty, either in fact or in the perception of a reasonable person. The legal profession has developed practice standards relating to the subjects addressed by the Act and Regulations that are narrower in scope. Although these standards cannot set the constitutional parameters for legislation, they are evidence of a strong consensus in the profession as to what ethical practice in relation to these issues requires. Viewed in this light, the legislation requires lawyers to gather and retain considerably more information than the profession thinks is needed for ethical and effective client representation. This, coupled with the inadequate protection of solicitor-client privilege, undermines a lawyer’s ability to comply with the duty of commitment to the client’s cause. The lawyer is required to create and preserve records not required for ethical and effective representation, in the knowledge that solicitor-client confidences contained in these records are not adequately protected against searches and seizures authorized by the legislation. A reasonable and informed person, thinking the matter through, would perceive that these provisions are inconsistent with the lawyer’s duty of commitment to the client’s cause. The scheme taken as a whole limits the liberty of lawyers in a manner that is not in accordance with the principle of fundamental justice relating to the lawyer’s duty of committed representation.
The infringements of ss. 7 and 8 of the Charter are not justified under s. 1 of the Charter . Sections 62, 63, 63.1 and 64 of the Act fail the minimal impairment test. There are other less drastic means to pursue the objectives of combating money laundering and terrorist financing. The provisions of the Regulations in issue in this appeal fail the proportionality test.
Per McLachlin C.J. and Moldaver J.: There is agreement with Cromwell J.’s reasons insofar as they relate to s. 8 of the Charter . However, to the extent that the s. 7 interests of the lawyer are engaged, the lawyer’s duty of commitment to the client’s cause lacks sufficient certainty to constitute a principle of fundamental justice. The lawyer’s commitment does not provide a workable constitutional standard because it will vary with the nature of the retainer and other circumstances. Solicitor-client privilege has already been recognized as a constitutional norm and breach of this principle of fundamental justice is sufficient to establish the potential deprivation of liberty that violates s. 7 of the Charter .
Cases Cited
By Cromwell J.
Applied: Lavallee, Rackel & Heintz v. Canada (Attorney General), 2002 SCC 61, [2002] 3 S.C.R. 209; referred to: R. v. Malmo-Levine, 2003 SCC 74, [2003] 3 S.C.R. 571; Schachter v. Canada, [1992] 2 S.C.R. 679; Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 S.C.R. 425; R. v. Fitzpatrick, [1995] 4 S.C.R. 154; R. v. Oakes, [1986] 1 S.C.R. 103; R. v. Kokesch, [1990] 3 S.C.R. 3; Little Sisters Book and Art Emporium v. Canada (Minister of Justice), 2000 SCC 69, [2000] 2 S.C.R. 1120; Canada (Attorney General) v. Bedford, 2013 SCC 72, [2013] 3 S.C.R. 1101; Blencoe v. British Columbia (Human Rights Commission), 2000 SCC 44, [2000] 2 S.C.R. 307; R. v. Rodgers, 2006 SCC 15, [2006] 1 S.C.R. 554; R. v. Mills, [1999] 3 S.C.R. 668; Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39, [2013] 2 S.C.R. 649; R. v. Gruenke, [1991] 3 S.C.R. 263; R. v. McClure, 2001 SCC 14, [2001] 1 S.C.R. 445; Smith v. Jones, [1999] 1 S.C.R. 455; Anderson v. Bank of British Columbia (1876), 2 Ch. D. 644; Finney v. Barreau du Québec, 2004 SCC 36, [2004] 2 S.C.R. 17; R. v. D.B., 2008 SCC 25, [2008] 2 S.C.R. 3; R. v. Anderson, 2014 SCC 41, [2014] 2 S.C.R. 167; Re B.C. Motor Vehicle Act, [1985] 2 S.C.R. 486; Canadian Foundation for Children, Youth and the Law v. Canada (Attorney General), 2004 SCC 4, [2004] 1 S.C.R. 76; R. v. Neil, 2002 SCC 70, [2002] 3 S.C.R. 631; Rodriguez v. British Columbia (Attorney General), [1993] 3 S.C.R. 519; Andrews v. Law Society of British Columbia, [1989] 1 S.C.R. 143; Attorney General of Canada v. Law Society of British Columbia, [1982] 2 S.C.R. 307; Pearlman v. Manitoba Law Society Judicial Committee, [1991] 2 S.C.R. 869.
By McLachlin C.J. and Moldaver J.
Referred to: R. v. Malmo-Levine, 2003 SCC 74, [2003] 3 S.C.R. 571.
Statutes and Regulations Cited
Canadian Charter of Rights and Freedoms, ss. 1 , 7 , 8 .
Criminal Code, R.S.C. 1985, c. C-46, ss. 83.02 , 83.03 , 462.31 , 488.1 .
Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17, ss. 2 “legal counsel”, 3, Part 1, 5(i), (j), 6, 6.1, 7, 9, 9.1, 9.6, 10.1, 11, 62, 63, 63.1, 64, 65, 65.1, 74.
Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, SOR/2002-184, ss. 1(2) “funds”, “receipt of funds record”, 11.1, 33.3, 33.4, 33.5, 59.4, 64 to 67, 68, 69, 70.
Authors Cited
Council of Bars and Law Societies of Europe. Charter of Core Principles of the European Legal Profession, in Charter of Core Principles of the European Legal Profession and Code of Conduct for European Lawyers, edition 2013, 5 (online: http://www.ccbe.eu/index.php?id=32&L=0).
Federation of Law Societies of Canada. Model Rule on Client Identification and Verification Requirements, adopted March 20, 2008, and modified December 12, 2008 (online).
International Bar Association. International Principles on Conduct for the Legal Profession, adopted May 28, 2011 (online: http://www.ibanet.org/Publications
/publications_IBA_guides_and_free_materials.aspx).
Mill, J. S. On Liberty and Considerations on Representative Government, by R. B. McCallum, ed. Oxford: Basil Blackwell, 1946.
Stewart, Hamish. Fundamental Justice: Section 7 of the Canadian Charter of Rights and Freedoms. Toronto: Irwin Law, 2012.
United Nations. Basic Principles on the Role of Lawyers, in Eighth United Nations Congress on the Prevention of Crime and the Treatment of Offenders: Havana, 27 August — 7 September 1990. U.N. Doc. A/CONF.144/28/Rev.1. New York: United Nations, 1991, 118.
APPEAL from a judgment of the British Columbia Court of Appeal (Finch C.J.B.C. and Frankel, Neilson, Garson and Hinkson JJ.A.), 2013 BCCA 147, 41 B.C.L.R. (5th) 283, 335 B.C.A.C. 243, 573 W.A.C. 243, 359 D.L.R. (4th) 1, 48 Admin. L.R. (5th) 181, 297 C.C.C. (3d) 429, 2 C.R. (7th) 324, 278 C.R.R. (2d) 273, [2013] 5 W.W.R. 1, [2013] B.C.J. No. 632 (QL), 2013 CarswellBC 812 (WL Can.), affirming a decision of Gerow J., 2011 BCSC 1270, 25 B.C.L.R. (5th) 265, 339 D.L.R. (4th) 48, 48 Admin. L.R. (5th) 285, 89 C.R. (6th) 80, 244 C.R.R. (2d) 129, [2012] 2 W.W.R. 758, [2011] B.C.J. No. 1779 (QL), 2011 CarswellBC 2436 (WL Can.). Appeal allowed in part.
Christopher Rupar and Jan Brongers, for the appellant.
John J. L. Hunter, Q.C., and Roy W. Millen, for the respondent.
Michal Fairburn and Justin Safayeni, for the intervener the Criminal Lawyers’ Association (Ontario).
Mahmud Jamal, David Rankin and Pierre-Alexandre Henri, for the intervener the Canadian Civil Liberties Association.
Leonard T. Doust, Q.C., and Michael A. Feder, for the intervener the Law Society of British Columbia.
Craig A. B. Ferris and Laura Bevan, for the intervener the Canadian Bar Association.
Paul D. Stern and Robert A. Centa, for the intervener the Advocates’ Society.
Raymond Doray and Loïc Berdnikoff, for the interveners Barreau du Québec and Chambre des notaires du Québec.
The judgment of LeBel, Abella, Cromwell, Karakatsanis and Wagner JJ. was delivered by
Cromwell J. —
I. Introduction
[1] Lawyers must keep their clients’ confidences and act with commitment to serving and protecting their clients’ legitimate interests. Both of these duties are essential to the due administration of justice. However, some provisions of Canada’s anti-money laundering and anti-terrorist financing legislation are repugnant to these duties. They require lawyers, on pain of imprisonment, to obtain and retain information that is not necessary for ethical legal representation and provide inadequate protection for the client’s confidences subject to solicitor-client privilege. I agree with the British Columbia courts that these provisions are therefore unconstitutional. They unjustifiably limit the right to be free of unreasonable searches and seizures under s. 8 of the Canadian Charter of Rights and Freedoms and the right under s. 7 of the Charter not to be deprived of liberty otherwise than in accordance with the principles of fundamental justice.
II. Overview and Background
A. Overview
[2] There is a risk that financial intermediaries — those who handle funds on behalf of others — may facilitate money laundering or terrorist financing. To reduce that risk, Canada’s anti-money laundering and anti-terrorist financing legislation imposes duties on financial intermediaries, including lawyers, accountants, life insurance brokers, securities dealers and others. They must collect information in order to verify the identity of those on whose behalf they pay or receive money, keep records of the transactions, and establish internal programs to ensure compliance. The legislation also subjects financial intermediaries, including lawyers, to searches and seizures of the material that they are required to collect, record and retain.
[3] Lawyers object to these provisions and the Federation of Law Societies of Canada (“Federation”), supported by several interveners, challenges them on constitutional grounds. The Federation says that the scheme makes lawyers unwilling state agents. They are required to obtain and retain information about their clients. They must do this within a scheme that authorizes unreasonable searches and seizures and provides inadequate protections for solicitor-client privilege. This, the Federation argues, turns law offices into archives for use by the police and prosecution. The provisions therefore violate both s. 7 and s. 8 of the Charter .
[4] The British Columbia courts agreed with the Federation that the provisions violate s. 7 of the Charter but they did not address the s. 8 challenge.
[5] The Attorney General of Canada appeals and the Chief Justice has stated constitutional questions which I have reproduced at the conclusion of my reasons. The issues raised by the appeal and my resolution of them are as follows:
1. Do the provisions infringe the s. 8 Charter right to be free of unreasonable searches and seizures?
[6] In my opinion, the search provisions in the legislation do not provide the constitutionally required protection for solicitor-client privilege and, as a result, infringe the s. 8 Charter right to be free of unreasonable searches and seizures.
2(a). With respect to s. 7 of the Charter , do the provisions limit lawyers’ and/or clients’ right to liberty?
[7] The provisions limit the liberty interests of lawyers. It is not necessary to decide whether clients’ liberty interests are also engaged.
2(b). Is that limitation in accordance with the principles of fundamental justice in relation to (i) solicitor-client privilege or (ii) the independence of the bar?
[8] The provisions, taken as a whole, interfere with the lawyer’s duty of commitment to the client’s cause, which, I conclude, is a principle of fundamental justice. Given my conclusion concerning s. 8 , there is no need to conduct a separate analysis relating to the proposed principle of fundamental justice relating to solicitor-client privilege.
3. Are any limitations of rights under ss. 7 or 8 demonstrably justified as required by s. 1 of the Charter ?
[9] The Attorney General failed to demonstrate that these limitations of Charter rights are demonstrably justified in a free and democratic society and they are therefore not saved by s. 1 of the Charter .
B. The Legislation
[10] The legislative scheme out of which this appeal arises is complex and a good grasp of how its provisions affect lawyers and clients is necessary in order to understand the issues on appeal.
[11] Laundering the proceeds of crime and financing terrorist activity are serious crimes: Criminal Code, R.S.C. 1985, c. C-46, ss. 462.31 , 83.02 and 83.03 . The Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17 , seeks to detect and deter these crimes and to facilitate their investigation and prosecution: s. 3 . The Act pursues these objectives in three main ways: by establishing record keeping and client identification standards, by requiring reporting from financial intermediaries, and by putting in place an agency to oversee compliance — the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”).
[12] Regulations made under the Act particularize how the legislative scheme applies to legal counsel: the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, SOR/2002-184. The Act defines “legal counsel” to mean an advocate or a notary in the province of Quebec and in every other province a barrister or solicitor: s. 2 . I will use the term “lawyer” to refer to all legal professionals who are subject to the regime. The relevant provisions of the Act and the Regulations are set out in the Appendix. The rationale for requiring lawyers to comply with client identification and record keeping requirements, according to the Attorney General’s submissions, is to deter illicit transactions and, if such transactions occur, to help establish a paper trail that, with the proper judicial authorization, could be accessed by law enforcement: A.F., at para. 17. The record keeping requirements deter illicit transactions in at least two ways. They help ensure that lawyers do not become unwitting dupes of clients who wish to use them to facilitate illicit transactions and make it harder for clients to engage in such activities through their lawyers.
[13] Here is an overview of the most relevant provisions of the Act and Regulations affecting lawyers.
(1) Gathering Information to Verify Identity
[14] Turning first to verification, the Act requires lawyers to identify persons and entities on whose behalf they act as financial intermediaries: s. 6.1; Regulations, s. 33.3. In summary, a lawyer must verify the identity of persons or entities on whose behalf the lawyer receives or pays funds other than in respect of professional fees, disbursements, expenses or bail. There are detailed rules about how to do this verification upon receipt of $3,000 or more. Briefly, verification requires presentation of government-issued documents. Individuals must present proof of identity such as passports or drivers’ licences. In the case of corporations, the lawyer must obtain the corporation’s name and address, as well as the names of its directors, by means of a record that confirms the corporation’s existence: Regulations, s. 65. Other entities, such as partnerships, are identified by records confirming their existence: Regulations, ss. 33.3, 33.4, 59.4 and 64 to 67.
[15] This verification scheme also requires lawyers to collect information which varies according to whether the transaction is being conducted on behalf of a person, a corporation or some other entity: Regulations, s. 11.1. For a corporation, this includes the names of all directors and the names and addresses of certain shareholders: Regulations, s. 11.1(1)(a). With respect to trusts, the names and addresses of all trustees, beneficiaries and settlors are required: Regulations, s. 11.1(1)(b). The lawyer must obtain “information establishing the ownership, control and structure of the entity”: Regulations, s. 11.1(1)(d). The lawyer is required to ensure accuracy of the information obtained (Regulations, s. 11.1(3)), and if he or she is unable to either obtain or confirm the information sought, he or she will be subject to other requirements: Regulations, s. 11.1(4).
(2) Record Keeping
[16] Section 33.4 of the Regulations provides that a “receipt of funds record” must be created by a lawyer when $3,000 or more in funds are received in a transaction, unless the amount is received from a financial entity or public body. (“Funds” include cash, currency or securities, or negotiable instruments or other financial instruments, in any form: Regulations, s. 1(2).) The information required in the “receipt of funds record” includes the name, address, date of birth, and nature of the principal business or occupation of the person or entity from whom the amount is received; the date of the transaction; the number of any account that is affected by the transaction; the type of that account; the name of the account holder and the currency in which the transaction is conducted; the purpose and details of the transaction; the manner in which the funds were delivered if they were delivered in cash (armoured car, in person, by mail, etc.); and the amount and currency of funds received: Regulations, s. 1(2). Some information does not have to be included where the funds are received from another lawyer’s trust account: Regulations, s. 33.5. Section 33.4 also requires, where the person or entity is a corporation, the lawyer to keep a copy of corporate records relating to the power to bind a corporation in respect of transactions with the lawyer.
[17] The records must be kept for at least five years after the completion of the transaction (Regulations, ss. 68 and 69) and the Regulations mandate that they can be produced to FINTRAC within 30 days of a request: s. 70.
(3) Search and Seizure
[18] FINTRAC has broad access to the information which lawyers (and others) are required to collect, record and retain. Section 62(1) of the Act authorizes FINTRAC to “examine the records and inquire into the business and affairs” of any lawyer. This includes the power to search through computers (s. 62(1)(b)) and to print or copy records (s. 62(1)(c)). Section 63.1 empowers FINTRAC to make requests for information to lawyers and obliges lawyers to comply.
[19] There are some protections for solicitor-client privilege. Lawyers, when they are providing legal services, are not subject to the reporting requirements that apply to other professions: Act, s. 10.1. Nothing in the Act requires legal counsel to disclose any communication subject to solicitor-client privilege: s. 11. Most significantly, s. 64 of the Act sets up a procedure to protect against disclosure of privileged material in the course of a search. It provides that where a lawyer claims a document in his or her possession is subject to solicitor-client privilege it cannot be examined or copied. However, this provision requires the lawyer to seal, identify and retain the document and to claim privilege in court within 14 days. FINTRAC has the authority under the regime to disclose to law enforcement information of which it becomes aware under the search provisions if it suspects that it would be relevant to investigating or prosecuting an offence arising out of a contravention of the verification or record keeping obligations: Act, s. 65. Under very recently amended provisions, law enforcement may only use this information as evidence of a contravention of the verification, retention and reporting obligations in Part 1 of the Act or for purposes related to compliance with those provisions: s. 65(3). Finally, s. 65.1 of the Act allows FINTRAC to disclose information to foreign state agencies analogous to FINTRAC for the purposes of ensuring compliance with verification and record keeping obligations.
(4) The Challenged Provisions
[20] It will be helpful to list and describe the provisions that are challenged. The provisions fall into two groups, those relating to verifying identity and record keeping and those relating to search and seizure.
[21] Sections 5(i) and 5(j) of the Act make the professions specified in the Regulations subject to the verification and record keeping requirements in Part 1 of the Act. Section 33.3 of the Regulations makes legal counsel subject to Part 1 of the Act when receiving or paying funds or giving instructions to pay funds (other than those received or paid in respect of professional fees, disbursements, expenses or bail or when doing so on behalf of their employer). Section 33.4 of the Regulations sets out the record keeping requirements. Section 33.5 of the Regulations relaxes these requirements where funds are received from the trust account of a legal firm or legal counsel. Section 59.4 of the Regulations imposes the identification requirements. Section 11.1 of the Regulations sets out the information that must be collected and retained in the course of verifying identity.
[22] Sections 62, 63 and 63.1 of the Act provide for search and seizure powers. Section 64 provides limitations on the search and seizure powers in relation to material for which solicitor-client privilege is claimed.
C. Judicial History
(1) The Proceedings
(a) Background
[23] Lawyers first became subject to the Act in 2001 when they were required to report to FINTRAC “suspicious transactions” involving their clients: s. 7 . The Federation, as well as several law societies, launched constitutional challenges to the Act as a result. In 2002, the Attorney General reached an agreement with the Federation to facilitate the constitutional challenges by way of a national “binding test case” before the courts in British Columbia. Interlocutory injunctions currently preclude the Act from applying to lawyers. As a result, none of the regime’s anti-money laundering requirements have been enforced against lawyers pending the outcome of the case. In the interim, the Federation has encouraged Canadian provincial and territorial law societies to adopt rules prohibiting lawyers from conducting large cash transactions and requiring client identification, verification, and record keeping measures when lawyers effect certain financial transactions on behalf of clients.
[24] The Attorney General contends that these measures are insufficient to combat money laundering and terrorist financing. He argues that criminal sanctions are needed to back up these requirements in the case of non-compliance and that leaving enforcement to the law societies risks a lack of uniformity.
(b) British Columbia Supreme Court, 2011 BCSC 1270, 25 B.C.L.R. (5th) 265 (Gerow J.)
[25] The application judge held that the challenged provisions are contrary to s. 7 of the Charter . She concluded that both lawyers’ and clients’ liberty interests are engaged by the Act because it places both lawyers and their clients in jeopardy of potential incarceration. She was of the view that solicitor-client privilege is a principle of fundamental justice and that the recording and retention requirements are contrary to this principle because they “result in having lawyers’ offices turned into archives for the use of the prosecution” (para. 144).
[26] Turning to whether this Charter infringement could be justified under s. 1 , the judge concluded that the means chosen were not proportionate to the objectives because regulation of lawyers by law societies already provides effective and constitutional anti-money laundering and anti-terrorist financing regimes. She found no proof that there is a rational connection between the legislative objective and the infringement of s. 7 , that the statutory regime interferes as little as possible with s. 7 rights, or that the salutary effects of the measures outweigh their deleterious effects.
[27] As a remedy, the application judge read down ss. 5(i), 5(j), 62, 63 and 63.1 of the Act and s. 11.1 of the Regulations to exclude legal counsel and legal firms, and struck down s. 64 of the Act and ss. 33.3, 33.4, 33.5 and 59.4(1) of the Regulations.
(c) British Columbia Court of Appeal, 2013 BCCA 147, 41 B.C.L.R. (5th) 283 (Hinkson J.A., Finch C.J.B.C. and Neilson J.A. Concurring; Concurring in the Result, Frankel J.A., Garson J.A. Concurring)
[28] The Court of Appeal unanimously held that the obligations imposed on lawyers by the provisions breach s. 7 of the Charter and that they are not saved by s. 1 . Although the court found that the provisions sufficiently protect solicitor-client privilege, it concluded that “independence of the Bar” is a principle of fundamental justice and that the provisions are not consistent with it. The Court of Appeal held that legal advisors are placed in an unacceptable conflict of interest between clients’ interests, the state’s interests, and their own liberty interests, and that the provisions turn some lawyers into agents of the state.
[29] On the question of whether clients’ liberty interests are engaged by the provisions, the Court of Appeal divided. Hinkson J.A. (as he then was) (writing for a majority of the court on this point) held that the clients’ liberty interests are engaged because the provisions facilitate access to confidential information that may be disclosed to law enforcement for any purpose including pursuing criminal charges. Frankel J.A. (Garson J.A. concurring) held that clients’ liberty interests are not engaged by these provisions because the causal connection between the provisions and any potential loss of clients’ liberty is too remote.
[30] The Court of Appeal unanimously held that the limitation of s. 7 rights was not justified under s. 1 of the Charter because the Attorney General failed to prove that the provisions are minimally impairing. The rules of the professional governing bodies already provide effective and constitutional anti-money laundering and anti-terrorist financing regimes in relation to lawyers, law firms and notaries across Canada.
III. Analysis
A. Do the Provisions Infringe Section 8 of the Charter ?
(1) Introduction
[31] The issue here is whether the search and production provisions of the scheme infringe the right to be free from unreasonable searches and seizures guaranteed by s. 8 of the Charter . The relevant provisions are these. Section 62 provides that a person authorized by the Director of FINTRAC may enter premises other than a dwelling-house, examine the records required under the Act and, for that purpose, use any computer system and reproduce any record. There is no warrant requirement. Section 63 gives the same powers with respect to rooms in a dwelling-house which the authorized person reasonably believes are being used to carry on a business, profession or activity which is subject to the Act, but a warrant is required. This provision implicates lawyers who have home offices. Section 63.1 permits the authorized person to serve a notice that requires the person or entity which is the subject of the inspection to provide information relevant to the administration of the Act in the form of electronic data, a printout or other intelligible output. Finally, s. 64 provides some protection of solicitor-client privilege in the course of exercising these powers.
[32] The Attorney General concedes that s. 62 and s. 63.1 authorize searches and seizures within the meaning of s. 8 . It is self-evident that the same must be said about s. 63 . These provisions do not simply require production of a particular type of document but permit an authorized person to “examine the records and inquire into the business and affairs of any person or entity [subject to the Act] for the purpose of ensuring compliance with Part 1” (s. 62(1)), as well as to make and take away copies (s. 62(1)(c)).
[33] Neither of the British Columbia courts addressed the s. 8 issue, but I have found it helpful to address it first. This is the better approach to considering the constitutionality of the law office inspection provisions, in my view. If these procedures constitute unjustified and unreasonable searches and seizures, they are unconstitutional by virtue of s. 8 and there is no need to undertake an independent s. 7 analysis depending on a proposed principle of fundamental justice in relation to solicitor-client privilege: Lavallee, Rackel & Heintz v. Canada (Attorney General), 2002 SCC 61, [2002] 3 S.C.R. 209, at paras. 34-35.
[34] The Federation says that these provisions violate s. 8 of the Charter , mainly because they permit the search of law offices in ways that are not consistent with the principles set out by the Court in Lavallee. The Attorney General, on the other hand, argues that the searches and seizures authorized by the scheme are reasonable: they relate to a limited class of documents for a narrow, regulatory purpose and there are appropriate safeguards to protect solicitor-client privilege.
[35] I respectfully do not accept the Attorney General’s position. The regime authorizes sweeping law office searches which inherently risk breaching solicitor-client privilege. It does so in a criminal law setting and for criminal law purposes. In my view, the constitutional principles governing these searches are set out in the Court’s decision in Lavallee, and this scheme does not comply with them.
(2) Protection of Solicitor-Client Privilege
[36] A law office search power is unreasonable unless it provides a high level of protection for material subject to solicitor-client privilege: Lavallee. The Attorney General submits, however, that Lavallee does not dictate the outcome here: the Court in that case was only considering the question of what safeguards are constitutionally required in situations where law enforcement officials are seeking evidence of criminal wrongdoing, not as here, in connection with an