SCC to hear lawyers’ privilege argument over money laundering law

Lawyers across the country will no doubt keep a close eye on what the Supreme Court of Canada will ultimately decide in Attorney General of Canada v. Federation of Law Societies of Canada, a case which involves money laundering regulations for lawyers.

Thursday morning, the top court granted the parties leave to appeal the decision of the B.C. Court of Appeal, which many feel infringes on solicitor-client privilege.

“It’s a case that has national ramifications, which is why it’s not a surprise at all that the Supreme Court granted leave,” says Ottawa University law professor Adam Dodek.

In 2000, the federal government enacted the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and in 2002 passed similar money laundering regulations. The legislation required everyone, including lawyers, to report suspicious transactions, among other things.

The Law Society of British Columbia and the Federation of Law Societies of Canada brought a challenge to this in British Columbia, arguing lawyers should be exempt from the legislation because it poses a threat to solicitor-client privilege.

“Our view has been from the beginning that requiring lawyers either to report directly or to prepare reports for the benefit of state authorities really turns them into state agents in a way that’s completely incompatible with the historic relationship of lawyers to clients and the relationship of that to the administration of justice in Canada,” says John J. L. Hunter of Hunter Litigation Chambers in Vancouver, who represents the FLSC.

After receiving an injunction from a B.C. court that prevented the legislation from applying to the legal profession, along with a series of injunctions from other provinces, the federal government agreed to treat the B.C. case as the test case.

“It has been explicitly a test case from the beginning,” says Hunter. “It was agreed by the federal government lawyers that the result of the B.C. case would apply across Canada, so it does have on the face of it national importance.”

In 2010, the government amended its money laundering regulations with provisions that specifically applied to the legal profession, such as client identification and verification rules and reporting requirements of clients’ transactions. The FLSC took issue with this provision and challenged it.

Hunter argues the solicitor-client relationship is vital to the administration of justice.

“The Supreme Court of Canada has commented on [the solicitor-client relationship] many times, that it’s in a sense the grease that allows the system to work — the knowledge of the client that they can tell their lawyer exactly what happened knowing that their lawyer is not going to turn around and tell the government and cause the police to go after the client,” he tells Legal Feeds.

On Sept. 27, 2011, B.C. Supreme Court Justice Laura Gerow struck down the provisions on the basis that they interfered with solicitor-client privilege.

Earlier this year, B.C. Court of Appeal Justice Christopher Hinkson affirmed that decision on slightly different grounds, stating it interfered with the independence of the bar to an unacceptable degree, which is a principle of fundamental justice within the meaning of s. 7 of the Charter of Rights and Freedoms.

Hunter says this was the first time that had been said by a Canadian court, which he suspects is one of the reasons the SCC decided to take on the case.

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