Federation of Law Societies of Canada v Canada (Attorney General), 2011 BCSC 1270 (27 September 2011)
In the context of international pressure on states to combat anti-money laundering and terrorism financing, the Supreme Court of British Columbia has held that limitations on solicitor-client privilege imposed by anti-money laundering legislation violate principles of fundamental justice in contravention of the Canadian Charter of Rights and Freedoms. The decision will remove the legal profession from the operation of two pieces of anti-money laundering and terrorist financing legislation in Canada.
The case was brought by the Federation of Law Societies of Canada (FLSC). The FLSC’s petition challenged the constitutionality of Canadian anti-money laundering and terrorism financing legislation, namely, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000, and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, SOR/2002-184.
The impugned legislation provided that members of the legal profession must comply with stringent client identification, verification, recording and reporting obligations for the purpose of combating money-laundering activities in Canada and, in its most extreme, permitted warrantless searches of lawyers’ offices. The maximum punishment specified for non-compliance with these provisions was imprisonment.
The FLSC argued that such requirements, in so far as they apply to the legal profession, breach both sections 7 and 8 of the Canadian Charter, because they (a) impinge upon solicitor-client confidentiality, which is a principle of fundamental justice; and (b) cannot be demonstrably justified in a free and democratic society.
Was there an infringement of s 7 of the Canadian Charter?
The Court concluded that the impugned provisions infringed s 7 of the Canadian Charter. That section states:
Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.
The Court held that the test for determining whether there has been a breach of s 7 is two-fold. First, there must be a deprivation of life, liberty or security of the person. Secondly, it must be shown that the deprivation does not accord with the principles of fundamental justice.
The risk that lawyers could be imprisoned as a penalty for non-compliance with the impugned legislation appeared sufficient to engage the first limb of the test. In addition, the Court considered that the underlying purpose of the legislation, being the advancement of the “criminal law interest of deterring, investigating and prosecuting crimes committed by lawyers’ clients”, put the liberty of lawyers’ clients at risk.
The Court held that to satisfy the second limb of the test, it must be established that:
- there is a legal principle;
- there is a consensus that the rule or principle is fundamental to the way in which the legal system ought fairly to operate; and
- the principle is capable of being identified with sufficient precision so as to yield a manageable standard against which to measure deprivations of life, liberty or security of the person.
The FLSC submitted that the fundamental legal principle of solicitor-client confidentiality and privilege was violated by the anti-money laundering and terrorism financing legislation. The Court agreed, citing authority that “the solicitor-client privilege is a principle of fundamental justice and civil right of supreme importance in Canadian law”.
In reaching this conclusion the Court focused on the purpose underlying the impugned legislative requirements. The Court considered it apparent that the legislation required lawyers to collect client information for the purpose of creating a paper trail for the benefit of law enforcement agencies. This infringed solicitor-client privilege to an unacceptable degree.
Was the infringement reasonable under s 1 of the Canadian Charter?
The Court held that the infringement could not be justified under sectio 1 of the Canadian Charter, which provides that Charter rights may be subject only to such reasonable limits “as can be demonstrably justified in a free and democratic society”. Although the Court recognised that the objectives of combating money laundering and terrorist financing in Canada are pressing and substantial, it did not consider the impugned legislation was proportionate to those objectives.
The Court considered that the extent of self-regulation already practised by the legal profession provides sufficient protection against money laundering and terrorism financing, and that the profession is better suited to provide this protection than a state entity. Moreover, the protective measures monitored by the law societies were considered to satisfy Canada’s international obligations to address money laundering and terrorism financing issues within the legal profession. In concluding that the impugned provisions would disproportionately impair the human right to liberty under section 7 of the Canadian Charter, the Court also noted the public interest in a self-regulated, independent bar, free from state interference.
Relevance to the Victorian Charter
Section 21(3) of the Victorian Charter provides:
A person must not be deprived of his or her liberty except on grounds, and in accordance with procedures, established by law.
The right to liberty is the essence of both s 21(3) of the Victorian Charter and s 7 of the Canadian Charter. The Victorian provision, which requires a deprivation of liberty to accord with grounds and procedures established by law, is however narrower than its Canadian counterpart, which requires any deprivation of liberty to accord with “principles of fundamental justice”.
In the Canadian case, it was the failure to accord with a principle of fundamental justice, not simply procedures established by law, which the Court found objectionable. Certainly the case supports the special nature of solicitor-client confidentiality and the lengths to which courts will go to preserve the trust imbued in that relationship. However, unless principles of fundamental justice are considered to fall within the definition of a “procedure, established by law”, this case is unlikely to be directly relevant to the application of section 21(3) of the Victorian Charter.
The decision can be found online at: http://canlii.ca/en/bc/bcsc/doc/2011/2011bcsc1270/2011bcsc1270.html
Anna Martin is a solicitor with the Mallesons Stephen Jaques Human Rights Law Group.