Summaries Sunday: OnPoint Legal Research

One Sunday each month OnPoint Legal Research provides Slaw with an extended summary of, and counsel’s commentary on, an important case from the British Columbia, Alberta, or Ontario court of appeal.

Federation of Law Societies of Canada v. Canada (Attorney General), 2013 BCCA 147

1.CASE SUMMARY

Areas of Law: Constitutional Law; Charter of Rights and Freedoms; Solicitor-Client Privilege; Independence of the Bar; Money Laundering

~Independence of Bar recognised as principle of fundamental justice under Charter~

Discussion: Since 1989, Canada has brought in a series of statutes and regulations intended to combat money laundering. Beginning with the 2001 Anti-Terrorism Act, S.C. 2001, c. 41, these laws have attempted to impose record keeping and disclosure requirements on lawyers in respect of possible money laundering activities. This case arose out of the 2007 Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SOR/2007-293, which required lawyers to keep records of clients’ identifying information, and the details and purpose of their financial transactions. These records were subject to search without warrant by “an independent agency that collects, analyses, assesses and discloses information in order to assist in the detection, prevention and deterrence of money laundering and of the financing of terrorist activities”. Canadian law societies, through the Federation of Law Societies of Canada, objected to these requirements as interfering with the solicitor-client relationship, and as fundamentally affecting the role of lawyers with respect to the state.

Sitting in a five-judge panel, the Court of Appeal ruled in favour of the Law Societies in a decision that has broad implications beyond the application of money-laundering legislation. The decision was based on section 7 of the Canadian Charter of Rights and Freedoms (the “Charter”), which prohibits the deprivation of life, liberty or security of the person, except in accordance with the principles of fundamental justice. The Court held that the legislation clearly affected the section 7 rights of lawyers, since they were subject to imprisonment for non-compliance.

However, the Court split 3-2 on the question of whether the section 7 rights of clients were also affected. The majority held that the legislation facilitated state access to confidential information, which was directly relevant to the prosecution of criminal charges. This potential for prosecution and imprisonment due to the mandatory collection of self-incriminatory information indirectly triggered section 7: see Canada (Attorney General) v. PHS Community Services Society, 2011 SCC 44. The dissent held that the connection between a lawyer’s record-keeping and client’s incarceration was simply too tenuous; the dissent could not “accept that a liberty interest is engaged by the creation of a document which has only the potential of being used in an investigation or as evidence should a charge be laid” (at paragraph 166). For the dissent, it was untenable that section 7 should be engaged in every legally required record-keeping activity. The disagreement regarding clients’ section 7 interests had no effect on the result, since the lawyers’ rights were sufficient to found the decision.

The furthest reaching aspect of this case arose in the Court’s consideration of whether the breach of section 7 was in accordance with the principles of fundamental justice. The Court identified three aspects of the solicitor-client relationship which were affected by the legislation: solicitor-client privilege, the independence of the Bar from the state, and the duty of undivided loyalty (at paragraph 102). The chambers judge’s decision was based on the principle of solicitor-client privilege, which was recognised as a principle of fundamental justice in Descôteaux v. Mierzwinski, [1982] 1 S.C.R. 860 at 875. The Court of Appeal held that for the most part, the legislation sufficiently protected solicitor-client privilege by allowing for court applications to protect privileged materials. The Court focussed instead on the independence of the Bar from the state, which it identified as a precisely defined legal principle which was fundamental to the way the legal system ought fairly to operate. This met the test to be recognised as a principle of fundamental justice, as set out in R. v. Malmo-Levine, 2003 SCC 74.

The legislation threatened to make lawyers “a resource to be used in the criminal prosecution of their clients”, their “offices turned into archives for the use of the prosecution”: Maranda v. Richer, 2003 SCC 67 (at paragraphs 205 and 216). It created an unacceptable conflict between lawyers’ duty to their clients, and the duty to the state imposed in the legislation. This conflict eroded lawyers’ independence from the state and therefore undermined the fair administration of justice.

The law societies’ creation of parallel anti-money laundering rules was a significant factor in the Court’s decision that the legislation was not saved by section 1 of the Charter. The law societies’ steps were less drastic means of achieving the goal of the legislation in a real and substantial manner (at paragraph 140). For this reason, the legislation did not minimally impair lawyers’ and clients’ section 7 rights.

2. a). COMMENT BY COUNSEL FOR THE INTERVENOR, the Canadian Bar Association, Ron A. Skolrood, QC:

“The decision of the BC Court of Appeal in Federation of Law Societies of Canada v. Canada (Attorney General) is the latest development in a long-running legal saga that dates back to 2001 when the federal government first took steps to bring lawyers under the anti-money laundering regime. At that time, lawyers were made subject to the Suspicious Transaction Regulations enacted under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17 (the “Act”). Those regulations would have required lawyers to report to a federal agency whenever they had a suspicion that their clients were engaged in money laundering activities. The legal profession, represented both by the regulators, in the form of the Law Society of BC and the Federation of Law Societies of Canada, and by the Canadian Bar Association, as the representative of practising lawyers, opposed the measures as an undue interference with the solicitor-client relationship. The legal bodies challenged the measures in court and obtained an interim injunction in the Supreme Court of British Columbia (2001 BCSC 1593) which was subsequently upheld by the BC Court of Appeal (2002 BCCA 49). Similar orders were granted in numerous other provinces which ultimately caused the federal government to back away from its attempts to have the legislation apply to lawyers.

That is where matters stood until 2008 when the federal government amended the regulations under the Act to require lawyers to collect and maintain certain information about their clients and the clients’ activities. While these measures may not be as obviously offensive on their face as the previous suspicious transaction reporting requirements, the various legal bodies nonetheless opposed the measures again on the basis that they undermine the solicitor-client relationship.

One of the principal objections raised by the legal profession from the outset has been a concern about the lack of adequate protection for solicitor-client privilege and solicitor-client confidentiality given the potential under the Act and regulations for information held by lawyers to be shared with state agencies. As noted in the case summary, it was this concern about solicitor-client privilege that formed the basis for the Chambers Judge’s decision that the measures violate section 7 of the Charter.

The Court of Appeal, while upholding the Chambers judge’s decision, took a somewhat different approach. Mr. Justice Hinkson, writing for the majority, found that in fact there were adequate provisions in the Act for protecting privilege. However, he found that the legislation interferes with the solicitor-client relationship to such a degree as to undermine the independence of the Bar, which he found to be a principle of fundamental justice under section 7 of the Charter. This is arguably the most interesting and far-reaching aspect of the Court’s decision in that it essentially accords constitutional protection to the role played by lawyers in the administration of justice. While this is of importance to the legal profession, it is even more significant for the clients who require legal services and who must have confidence that their lawyers are acting independently and in their best interests. The Court of Appeal’s findings validate the efforts of the legal profession over the past many years to oppose the application of the Act to lawyers and to uphold the integrity of the solicitor-client relationship.

At the time of writing, the federal government had not yet decided whether to seek leave to appeal further to the Supreme Court of Canada.”

2). b). COMMENT BY COUNSEL FOR THE RESPONDENT, The Federation of Law Societies of Canada, Roy Millen:

“This case has undergone an interesting evolution over the past twelve years. It started in 2001 when the federal government brought into force regulations that would have required lawyers to report “suspicious transactions” involving their clients. The Law Society of BC, supported by the Federation of Law Societies of Canada, challenged the provisions as an interference with the independence of the bar. The petitioners characterized the independence of the bar as an unwritten constitutional principle, which back in 2001 was a more viable argument than it would be today. On an interlocutory application, Justice Allan of the BC Supreme Court agreed, and suspended the operation of the suspicious transaction reporting regulations as against lawyers.

The government repealed those regulations, and later brought in the “client identification” regulations that were then subject to a renewed challenge. At the BC Supreme Court, Justice Gerow held the regulations to be unconstitutional by virtue of infringing solicitor-client privilege. Privilege is a long-established principle of fundamental justice under s. 7 of the Charter, so it was a somewhat “safer” route to unconstitutionality. However, Justice Gerow considered the impact to be on more than simply privilege; at least in part she was concerned about the impact on the solicitor-client relationship.

At the Court of Appeal, the panel – prompted, it appeared, by a mid-hearing question from the Chief Justice – returned the focus explicitly to the independence of the bar. Prior to the Court of Appeal decision, there had been numerous cases espousing the importance of the independence of the bar, but none that had found it was a principle of fundamental justice under section 7. If this case goes further, one issue will likely be the scope of s. 7 principles of fundamental justice.

In respect of section 1 of the Charter, in the court below, the government had placed some emphasis on the fact that some foreign governments had enacted similar provisions, to the effect that Canada needed to “keep up with the Joneses”. This argument got no traction in the Court of Appeal. By contrast, both the chambers judge and the Court of Appeal accepted that there now exist law society rules across Canada that ensure appropriate record-keeping by lawyers without turning lawyers into state agents.

A final argument that received no analysis in either court thus far concerned s. 8 of the Charter. Having found the regulations inconsistent with s. 7, both courts saw no need to address s. 8.

It remains to be seen whether the Supreme Court of Canada will be asked to weigh in. In 2002, as part of an agreement that the BC proceedings would have national effect, the Federation of Law Societies of Canada and the Attorney General agreed that the successful party at the Court of Appeal would not oppose an application by the unsuccessful party for leave to appeal to the Supreme Court of Canada. The government’s deadline to apply for leave is shortly.”