The Proceeds of Crime (Money Laundering) and Terrorist Financing Act required law firms to verify the identity and record the identity of clients for whom they acted as "financial intermediaries," collect and retain financial records when receiving or paying funds for purposes other than professional fees, disbursements, expenses or bail, and allowed the anti-money laundering a federal agency (FINTRAC) to make warrantless reviews of such records subject to the firm following a specified procedure for claiming solicitor-client privilege.
The Court largely confirmed the findings below that the provisions should be variously struck (in the case of the search and seizure provisions), or read down to exclude lawyers (for record keeping etc.). The impugned provisions breached the clients' rights against unreasonable search and seizure. The statutory accommodations for privilege in the Act were less robust than conventional solicitor-client privilege. For example, privilege could be lost if not asserted on a timely basis, which was found in Lavallee to be unacceptable. The Minister argued that Lavallee applied where law enforcement officials were seeking evidence of criminal wrongdoing, and not in connection with a regulatory compliance regime. The immediate problem with this position was that the Act was expressly aimed at finding criminal wrongdoing, and threatened imprisonment of lawyers for non-compliance.
Moreover, the bar in Lavallee against erosions of privilege was not confined to a criminal context. Cromwell J stated (at para. 38) "the reasonable expectation of privacy in relation to communications subject to solicitor-client privilege is invariably high, regardless of the context," and quoted with approval the statement of Arbour J in Lavalee that "all information protected by the solicitor-client privilege is out of reach for the state."
He further noted (at para. 55) that one of the objectionable features of the procedure for claiming privilege under the Act was that it had to be asserted on behalf of a named client (stating that "the name of the client may itself be (although is not always) subject to solicitor-client privilege") and further stated that "the same ... 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."