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2021 MarsdenLR 2052
COURT OF APPEAL PUTRAJAYA
KETUA PENGARAH HASIL DALAM NEGERI – Appellant
Versus
BAR MALAYSIA – Respondent
[Civil Appeal No: W-01(A)-304-05-2018]
The court affirmed that statutory provisions do not eliminate solicitor-client privilege without explicit legislative intent, emphasizing the principle of 'once privileged, always privileged.'
Headnote:(A) Income Tax Act 1967 – Section 142(5) – Evidence Act 1950 – Section 126 – Legal Profession Act 1976 – Section 80 – Solicitor-client privilege claimed by the respondent against the appellant's demands for document disclosure – High Court ruling that s 142(5) of the ITA does not override s 126 of the EA, affirming the continued protection of solicitor-client privilege under Malaysian law. (Paras 5, 12, 68)
(B) Legal principles regarding statutory interpretation – Privilege exists unless explicitly waived by the client – The principle of 'once privileged, always privileged' applies unless a statute states otherwise. (Paras 50, 70)
Facts of the case: Dispute arose from the appellant's audit demands directed at law firms regarding their client accounts, which the respondent contested as infringement of privilege. (Paras 1, 4)
Findings of Court: The Court affirmed the High Court's decision that the appellant could not access documents protected under client privilege as asserted by the respondent. (Paras 5, 80)
Issues: The core questions addressed the interpretation of whether provisions of the ITA permitted access to privileged legal communications, particularly in the context of auditor's powers. (Paras 12, 68)
Ratio Decidendi: The court concluded that the absence of explicit legislative intent to override established legal privilege necessitated protection for client communications from the auditor's disclosures. (Paras 68, 72)
Result: Appeal dismissed with no order as to costs.
JUDGMENT
[1] On 3 November 2016, the respondent, the Malaysian Bar, wrote to the appellant, the Ketua Pengarah Hasil Dalam Negeri. By this letter, the appellant was informed that the respondent had received complaints from its members. The complaints were that the appellant had been carrying out raids on law firms to conduct audits on their clients' accounts and insisting on having sight of accounting books and records pertaining to these accounts.
[2] In its letter, the respondent expressed its objections and its view that the documents and information sought by the appellant were protected by solicitor-client privilege and may not be made available to the appellant.
[3] On 7 December 2016, the appellant replied. The appellant maintained that the audits complained of were necessary to ensure "tax compliance" by taxpayers. The Appellant maintained that the audits were not in breach of any solicitor-client privilege by reason of s 142(5) of the Income Tax Act 1967 (" ITA ") which overrides the provisions of Chapter IX of Part III of the Evidence Act 1950 (" EA ") and the Legal Profession Act 1976 (" LPA "). Accordingly, it was maintained that the actions of the appellant complained of were not in breach of any solicitor-client privilege.
[4] In light of the divergent views of the parties and their disagreement as to whether the law relating to solicitor-client privilege was being ignored and under threat by the appellant's actions complained of, the respondent brought the matter to Court seeking several declarations on the issue.
[5] On 2 April 2018, the High Court ruled in favour of the respondent and made the declarations sought. In essence the learned High Court Judge (as His Lordship then was) held that s 142(5) of the ITA did not override s 126 of the EA . Thus, the privilege provided under s 126 of the precluded the appellant from insisting on documents or information in respect of or relating to the clients' accounts of advocates and solicitors. The appellant appealed.
[6] This is the decision of the Court in respect of the appellant's appeal.
The Declarations Sought By The Respondent
[7] The declarations sought by the respondent were set out in the judgment of the High Court and they are reproduced below:
"(i) a Declaration that s 142(5) of the ITA does not entitle or empower the Defendant to disregard the privilege under Malaysian Law that protects all communications, books, objects, articles, materials, documents, things, matters or information passing between an Advocate and Solicitor and his/her client or advice given by an Advocate and Solicitor to his / her client, whether contained in any book, statement, account or other records of any description whatsoever (hereinafter collectively referred to as "Client Communications"), and which privilege is referred to variously under Malaysian law as "legal privilege" (hereinafter referred to as "Privilege") by requesting or demanding access to, or disclosure of, such Client Communications from any Advocate and Solicitor, unless Privilege is waived by the client;
(ii) a Declaration that Part V. of the ITA generally, and s 80 of the in particular, do not entitle or empower the Defendant to disregard the Privilege that protects all Client Communications by requesting or demanding access to, or disclosure of, any such Client Communications from any Advocate and Solicitor, unless Privilege is waived by the client;
(iii) a Declaration that Privilege under Malaysian law generally, and as referred to in ss 126, 127, 128 and 129 of the Evidence Act 1950 in particular, require an Advocate and Solicitor to reject any request or demand of the Defendant for access to, or disclosure of, any, Client Communications, unless Privilege is waived by the Client."
[8] The key legislative provisions are reproduced hereunder for ease of reference.
[9] Section 80 of the ITA states as follows:
"Power of access to buildings and documents, etc.
80. (1) For the purposes of this Act the Di
