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Today, in Canada (Attorney General) v. Federation of Law Societies of Canada, 2015 SCC 7,the Supreme Court confirmed that one of the hallmarks of the legal profession, namely, solicitor-client privilege is one of the fundamental principles of justice worthy of constitutional sanction under s. 7 of the Charter. In reviewing the federal government’s anti-terrorism and anti-money laundering legislation, the Court also ruled that, to the extent the legislation required lawyers to obtain and keep information about their clients for the government, it constituted an unreasonable search and seizure contrary to s. 8 of the Charter.

Justice Cromwell wrote the reasons for judgment for the majority (Abella, LeBel, Karakatsanis and Wagner JJ concurring) (McLachlin CJC and Moldaver J partially concurring). The headnote for the decision outlines the background facts:

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/2002184, 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 (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 recording 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.

Justice Cromwell opened his reasons with the following summary of his decision [para. 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.

He proceeded to assess the legislation in light of the constitutional protection against unreasonable search and seizure under s. 8 of the Charter. He relied heavily upon the earlier decision of the Court in Lavallee, Rackel & Heintz v. Canada (Attorney General), 2002 SCC 61. He noted that in Lavallee, the Court required that solicitor-client privilege be maintained as close to absolute as possible [para. 44]:

The core principle of the decision is that solicitor-client privilege “must remain as close to absolute as possible if it is to retain relevance”: Lavallee, at para. 36. This means that there must be a “stringent” norm to ensure its protection, such that any legislative provisions that interfere with the privilege more than “absolutely necessary” will be found to be unreasonable: para. 36.

He observed that, in Lavallee, the Court provided Parliament with a checklist to consider when legislating in respect of law office searches. He concluded that the legislation before him did not pass muster [paras. 53-57]:

53. The Court in Lavallee also set out a number of general principles that govern the legality of law office searches designed in part to guide the legislative options that Parliament may wish to address. These general principles, while not a checklist, were intended “to reflect the present-day constitutional imperatives for the protection of solicitor-client privilege”: para. 49. Two of these general principles are particularly relevant here.

54. One of these principles is that, before searching a law office, the authorities must satisfy a judicial officer that there exists no other reasonable alternative to the search. Sections 62 and 63.1 do not require prior judicial authorization, let alone impose a statutory requirement that there be no other reasonable alternative. However, s. 63 is less problematic in this respect. It requires judicial pre-authorization to search a lawyer’s home office, including demonstration that entry into the dwelling-house is necessary for any purpose that relates to ensuring compliance with Part 1 of the Act.

55. A second general principle in Lavallee is that “all documents in possession of a lawyer must be sealed before being examined or removed from the lawyer’s possession” unless otherwise specifically authorized by a warrant: para. 49. In contrast, under s. 64, examining and copying in a law office by the official stops only at the point at which a claim of solicitor-client privilege is asserted by a lawyer on behalf of a named client. Thus, examining and copying proceeds until there is a specific assertion of privilege — an approach that greatly elevates the risk that privileged material will be examined. Moreover, the name of the client may itself be (although is not always) subject to solicitor-client privilege: para. 28. In a situation in which it is, the Act requires the lawyer to breach that privilege in order to claim the privilege attaching to the material sought by the official. The same, in my view, may be said about the obligation of the lawyer under s. 64(10) to provide the authorities with the latest known address for the client.

56. Lavallee concerned law office searches that were judicially pre-authorized and therefore addressed a scheme that was, in that respect, different from the scheme that is in issue here. Warrantless searches, such as those permitted under this scheme, are presumptively unreasonable. Moreover, the judicial pre-authorization requirement is, in itself, an important protection against improper search and seizure of privileged material. However, I do not foreclose the possibility that Parliament could devise a constitutionally compliant inspection regime without a judicial pre-authorization requirement.

Summary

57. In my view, 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 guaranteed by s. 8 of the Charter.

He then turned his attention to s. 7 of the Charter and whether fundamental justice protected solicitor-client privilege. He noted that lawyers’ liberty interests were engaged by the legislation – he did not therefore need to assess their clients’. He determined that fundamental justice included a requirement for the respect of solicitor-client privilege [paras. 81-84]:

81. The duty of lawyers to avoid conflicting interests is at the heart of both the general legal framework defining the fiduciary duties of lawyers to their clients and of the ethical principles governing lawyers’ professional conduct. This duty aims to avoid two types of risks of harm to clients: the risk of misuse of confidential information and the risk of impairment of the lawyer’s representation of the client (see, e.g., Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39, [2013] 2 S.C.R. 649, at para. 23).

82. The Court has recognized that aspects of these fiduciary and ethical duties have a constitutional dimension. I have already discussed at length one important example. The centrality to the administration of justice of preventing misuse of the client’s confidential information, reflected in solicitor-client privilege, led the Court to conclude that the privilege required constitutional protection in the context of law office searches and seizures: see Lavallee. Solicitor-client privilege is “essential to the effective operation of the legal system”: R. v. Gruenke, [1991] 3 S.C.R. 263, at p. 289. As Major J. put it in R. v. McClure, 2001 SCC 14, [2001] 1 S.C.R. 445, at para. 31: “The important relationship between a client and his or her lawyer stretches beyond the parties and is integral to the workings of the legal system itself” (emphasis added).

83. The question now is whether another central dimension of the solicitor-client relationship — the lawyer’s duty of commitment to the client’s cause — also requires some measure of constitutional protection against government intrusion. In my view it does, for many of the same reasons that support constitutional protection for solicitor-client privilege. “The law is a complex web of interests, relationships and rules. The integrity of the administration of justice depends upon the unique role of the solicitor who provides legal advice to clients within this complex system”: McClure, at para. 2. These words, written in the context of solicitor-client privilege, are equally apt to describe the centrality to the administration of justice of the lawyer’s duty of commitment to the client’s cause. A client must be able to place “unrestricted and unbounded confidence” in his or her lawyer; that confidence which is at the core of the solicitor-client relationship is a part of the legal system itself, not merely ancillary to it: Smith v. Jones, [1999] 1 S.C.R. 455, at para. 45, citing with approval, Anderson v. Bank of British Columbia (1876), 2 Ch. D. 644 (C.A.); McClure. The lawyer’s duty of commitment to the client’s cause, along with the protection of the client’s confidences, is central to the lawyer’s role in the administration of justice.

84. We should, in my view, recognize as a principle of fundamental justice that the state cannot impose duties on lawyers that undermine their duty of commitment to their clients’ causes. Subject to justification being established, it follows that the state cannot deprive someone of life, liberty or security of the person otherwise than in accordance with this principle.

Justice Cromwell examines solicitor-client privilege from the perspective of a lawyer’s absolute commitment to his or her client. Aft reviewing the jurisprudence and international norms, he concluded at paras. 102-103:

102. I conclude that there is overwhelming evidence of a strong and widespread 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.

103. The duty of commitment to the client’s cause ensures that “divided loyalty does not cause the lawyer to ‘soft peddle’ his or her [representation]” and prevents the solicitor-client relationship from being undermined: Neil, at para. 19; McKercher, at paras. 43-44. In the context of state action engaging s. 7 of the Charter, this means at least that (subject to justification) the state cannot impose duties on lawyers that undermine the lawyer’s compliance with that duty, either in fact or in the perception of a reasonable person, fully apprised of all of the relevant circumstances and having thought the matter through. The paradigm case of such interference would be state-imposed duties on lawyers that conflict with or otherwise undermine compliance with the lawyer’s duty of commitment to serving the client’s legitimate interests.

He concluded that the legislative scheme did not accord with this duty of commitment and thus was contrary to a principle of fundamental justice [paras. 109-110]:

109. I also conclude that a reasonable and informed person, thinking the matter through, would perceive that these provisions in combination significantly undermine the capacity of lawyers to provide committed representation. The reasonable and well-informed client would see his or her lawyer being required by the state to collect and retain information that, in the view of the legal profession, is not required for effective and ethical representation and with respect to which there are inadequate protections for solicitor-client privilege. Clients 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. This would reduce confidence to an unacceptable degree in the lawyer’s ability to provide committed representation.

110. I conclude that 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.

While Justice Cromwell did not strike down two of the provisions of the Act that the trial judge had, he did hold that numerous provisions contravened the Charter and could not be saved under s. 1.

This is yet another example of the Court stepping up to maintain vigorously Canada’s constitutional principles. Perhaps, after so many litigated defeats, the federal government may want to steer more in the middle of Canada’s constitutional mainstream. Cutting close to the wire does not appear to be reaping rewards.

I remain,

Constitutionally yours,

Arthur Grant