In its recent decision in Canada (Attorney General) v. Federation of Law Societies of Canada, the Supreme Court of Canada (Court) held that the government cannot “turn lawyers into state agents”; it cannot require lawyers to act against their clients’ legitimate interests. The Court also affirmed the near-absolute protection of all solicitor-client privileged information. On these grounds, the Court struck down as unconstitutional federal legislation that would have required lawyers to record and retain information about their clients for the purposes of facilitating the detection, investigation and prosecution of criminal offences. This decision provides clients with assurance that their lawyers will not be forced to choose between their clients’ interests and conflicting duties to the government.

Background

Global anti-money laundering initiatives gained momentum in the 1990s. In 2000, Parliament adopted the Proceeds of Crime (Money Laundering) Act, renamed after 9/11 the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Act). The Act and related regulations impose on financial institutions and professionals such as realtors and accountants duties to report “suspicious” transactions about their clients that may be related to money laundering or terrorist financing, report cash transactions of C$10,000 or more, and make client information available to federal officials upon demand at any time without a warrant.

The Federation of Law Societies of Canada (Federation), umbrella body for the law societies that regulate all legal professionals in Canada (including notaries in Quebec), challenged the provisions affecting lawyers. In 2001-2002, courts in numerous provinces agreed with the Federation that lawyers cannot be required to gather information about their clients and report it to the government to facilitate criminal investigations. The government subsequently exempted lawyers from the reporting provisions.

In 2004, the Federation drafted a Model Rule prohibiting lawyers from accepting C$7,500 or more in cash in the course of a single transaction, subject to limited exceptions. In 2008, the Federation adopted a Model Rule requiring client identification and verification by lawyers. Both rules were implemented by all Canadian law societies.

Notwithstanding these law society rules, in 2008, the government imposed regulations under the Act to require lawyers to record client information and make it available to government officials without a warrant. The Federation renewed its constitutional challenge to the legislation. Pending the final Court decision, the legislation was not applied to lawyers.

Court Decisions

The Federation argued that the legislation infringed section 7 of the Canadian Charter of Rights and Freedoms (Charter) (the right not to be deprived of life, liberty or security of the person, except in accordance with the principles of fundamental justice) and section 8 of the Charter (the right to be secure against unreasonable search and seizure). In response, government officials said the legislation required lawyers to create a “paper trail” of lawyers’ “specific knowledge of their clients’ activities,” which would “assist law enforcement in investigating and prosecuting” crime. The B.C. Supreme Court struck down the legislation because it amounted to an unjustified intrusion on the solicitor-client relationship. Similarly, the B.C. Court of Appeal held that the legislation violated the independence of the bar by turning lawyers into agents of the state.

The Supreme Court of Canada unanimously held that the legislation applicable to lawyers is unconstitutional. The solicitor-client relationship is a “specially protected zone.” The Act authorized state officials to “roam at large within law offices” and “examine and seize any record or data found therein”. This is inappropriate, as it creates a very high risk that solicitor-client privilege will be lost. On this basis, the Court held that the search and seizure provisions of the Act violate section 8 of the Charter.

The Court also held that the legislation violates section 7 of the Charter. Trust is essential to the solicitor-client relationship. Clients and the public must feel confident that lawyers are committed to serving their clients’ legitimate interests, free of other obligations that might interfere with that duty. This duty is fundamental to the Canadian legal and justice system, and recognized internationally.

Significantly, the Court held that the Federation’s Model Rules reflect a strong consensus in the profession as to appropriate ethical standards. By imposing requirements on lawyers that go beyond what is necessary for ethical and effective client representation, the federal legislation would require lawyers to act contrary to their clients’ interests. Lawyers would be acting on behalf of the state, collecting and retaining client information for potential disclosure to state officials. Nevertheless, the Court noted that it would be possible for Parliament to amend the legislation in a manner that respects the constitutional limits outlined in the judgment.

Significance

Over the past 15 years the Supreme Court of Canada has affirmed numerous aspects of the solicitor-client relationship, including:

  • Solicitor-client privilege: communications between lawyer and client for the purpose of seeking or giving legal advice are constitutionally protected from disclosure without the client’s consent
  • The duty of loyalty: subject to limited exceptions, lawyers may not concurrently represent clients whose legal interests are directly adverse, without first obtaining their consent
  • Lawyers’ duty of commitment to clients’ causes stated in this decision: governments may not interfere with lawyers’ obligation to advance their clients’ legitimate interests

As the Court noted, lawyers are not above the law. However, the Canadian system of justice requires that clients be able to trust lawyers to protect client confidential information and act in accordance with client interests and appropriate ethical standards. This case is significant in that it is the first time the Court has affirmed the constitutional nature of this important principle.