A recent Mediation Settlement from the BC Privacy Commissioner
has raised an issue of particular interest to law firms, and other
organizations which must meet "Know Your Client"
requirements. The item is brief (it is reproduced in its entirety
below), but seems to suggest that free legal advice doesn't
trigger the "Know Your Client" provisions imposed by
various Law Societies for compliance with the Proceeds of Crime
(Money Laundering) and Terrorist Financing Act. According to
this Mediation Settlement, only paid
legal advice triggers that obligation.
What sparked the issue was an individual who contacted a law
firm to take advantage of a free consultation offer, and was told
that they would need to show identification during the
consultation. Not only did the individual not become a client of
the firm, they promptly complained to the BC Privacy Commissioner.
The matter was settled by way of mediation:
Potential client questions law firm demand for
An individual called a law firm to set up a meeting with a
lawyer to discuss a legal difficulty, with the expectation they
might hire the firm to handle their case, depending on the outcome
of the meeting. Like many law firms, this one offered free initial
consultations to enable the firm to decide if it wanted to take
someone on as a client.
During their initial phone call, the potential client was told
they would be required to show identification during their meeting
with the firm's lawyer. This requirement seemed unreasonable so
they decided not to become a client. Instead, they complained to us
that the law firm was demanding too much personal information.
Section 7 of the Personal Information Protection Act
says businesses cannot collect more information than they need to
provide their service or product. During mediation with our office,
the law firm told us the Law Society of British Columbia rules
required it to verify the identity of its clients to comply with
the federal Proceeds of Crime (Money Laundering) and Terrorist
Financing Act. However, it also acknowledged that the Law
Society did not require it to confirm the identity of a potential
client to whom it provided free advice. It agreed to review the
distinction with its staff to ensure potential clients would
receive accurate information regarding personal information
Identifying the client means obtaining certain basic information
about your client and any third party directing, instructing or who
has the authority to direct or instruct your client such as a name
and address. You must obtain this information whenever you are
retained to provide legal services to a client unless an exemption
consults a lawyer and on whose behalf
the lawyer renders or agrees to render legal services;
having consulted the lawyer,
reasonably concludes that the lawyer has agreed to render legal
services on their behalf.
The commentary to rule 1.1-1 provides that a "solicitor
and client relationship may be established without formality."
This means that no retainer agreement or monetary payment is
required to establish a solicitor-client relationship. This would
appear to be exactly the reverse of what the BC Mediation
However, the client versus potential client boundary is less of
a bright line boundary and more of a swampy "zone".
The law recognizes that clients and lawyers need to be able to
talk under the protection of solicitor-client privilege prior to a
relationship being established. The client needs to be able to
describe the problem/mandate and the lawyer needs to assess whether
to take on the work. As a result, solicitor-client privilege does
not depend on the existence of a retainer.
However, once advice is given, then the lawyer then owes duties
beyond confidentiality including competence, avoidance of
conflicts, etc. These duties don't turn on payment. A lawyer
can be sued for negligence having agreed to assist whether
pro-bono or paid.
Current business development practices mean many firms (like the
one that is the subject matter of the Mediation Settlement) offer
free advice before agreeing to act – even though there is
already a lawyer-client relationship. What is really being explored
is whether there should be an ongoing retainer.
Regardless, this distinction may have been lost in the Mediation
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