Ontario's top court has ordered the National Post to hand over documents in the "Shawinigate" allegations involving former prime minister Jean Chrétien, saying the need to enforce the law should outweigh the need to protect anonymous sources.

In a decision released Friday, the Court of Appeal overturned an earlier ruling that quashed an RCMP search warrant issued against the newspaper and reporter Andrew McIntosh.

"We do not diminish the press's important role in uncovering and reporting an alleged wrongdoing," the three-judge panel wrote. "But in our society, it is the police who are charged with the crucial role of investigating and prosecuting crime."

Douglas Kelly, the editor-in-chief of the National Post, said the paper is disappointed by the decision and is considering whether to appeal to the Supreme Court of Canada.

"It is important to point out that [the decision] does uphold some basic journalistic principles, including the importance of being able to protect the confidentiality of sources when pursuing important stories that are in the public interest," Kelly was quoted as saying on the National Post website on Friday.

"Having said that, the decision does raise serious questions about the competing interests of protecting free expression without impeding the work of law enforcement agencies."

John Norris, a lawyer for McIntosh and the newspaper, said the decision is concerning for McIntosh and other journalists.

"Now his professional obligations to his source have been swept aside in the interests of law enforcement," Norris said. "It will very much send a chill to journalists in their dealings with their sources."

Brown envelope sent to reporter

In 2001, a source sent McIntosh a brown envelope containing a copy of what appeared to be a Business Development Bank of Canada loan authorization for a hotel in then prime minister Jean Chrétien's home riding, suggesting Chrétien could be in a possible conflict of interest.

The document indicated the Grand-Mère Inn owed Chrétien's family company $23,040 in 1997, the same year he was lobbying the president of the bank to grant the loan.

BDBC officials went to the police claiming the document was a fake. The police later obtained a search warrant and assistance order for the document and the envelope to determine who sent them.

But in 2004, a court quashed the warrant and the order, citing journalist-source confidentiality as one of the reasons.

In its decision, the Appeal Court said that ruling was "unreasonable" and did not adequately consider the "overwhelming" interest of the police.

Investigators need the documents for forensic testing, the panel of judges said, and obtaining them is the only way to uncover the truth.

Post might be shielding wrongdoer

If the document was forged, it would be "an especially grave and heinous crime," they wrote, because it would seem the person behind it aimed to "create controversy and undermine the authority" of a prime minister.

By not handing over the documents, the Post was shielding a potential wrongdoer from prosecution for a serious crime, the court concluded.

As such, the Appeal Court restored the issuing judge's order for the National Post to hand over the envelope and document to the Crown.

The CBC and the Globe and Mail were among the interveners in the case, arguing that handing over the documents would harm the media's ability to do their job.

The Canadian Association of Journalists testified and submitted information on the newspaper's behalf.

"Today's decision is a major setback for press freedom and the public's right to know," CAJ president Mary Agnes Welch said Friday in a news release.

"It would effectively require journalists to become agents of the state, which will put a chill on whistleblowers and other people of conscience who would bring matters of profound public importance to light.

"The legal standard in Canada should allow any journalist to protect the identity of their confidential sources, period. This is woefully absent from our laws and jurisprudence, which is what can lead to rulings like this one."

With files from the Canadian Press