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EVIDENCE
Privilege – Professional communication – Defendant conducted audit of law firms' client's account and insisted on having sight of relevant accounting books and records –
Whether audits breached principle of solicitor-client privilege –
Whether section 142(5) of the Income Tax Act 1967 prevails over section 126 of the Evidence Act 1950


Bar Malaysia v Ketua Pengarah Hasil Dalam Negeri
[2018] 3 AMR 439, High Court 

Facts The plaintiff, the Malaysian Bar (“Bar”), is a body corporate established under the Legal Profession Act 1976 (“LPA”) to regulate the legal profession. Members of the Bar (“Bar members”) had complained that officers of the defendant, the Director General of Inland Revenue (“DGIR”), had been carrying out raids on the Bar members’ law firms to conduct audit of their clients’ accounts (“Clients’ Accounts”) and demanded access to the relevant accounting books and records (“Audit”). Following those complaints, the Bar wrote to the DGIR to inform the DGIR that the Bar had taken a stance that such Audit breaches the principle of solicitor-client privilege (“Privilege”) and that section 142(5) of the Income Tax Act 1967
[1] (“ITA”) should not and does not prevail over the Privilege. DGIR replied to the Bar and, amongst others, took the stance that section 142(5) of the ITA overrides the provisions of Chapter IX of Part III of the Evidence Act 1950[2] (“EA”) thereby allowing the DGIR to conduct such Audit. Dissatisfied, the Bar filed an Originating Summons in the High Court stating that section 142(5) of the ITA does not entitle or empower the defendant to disregard the Privilege conferred under section 126 of the EA[3].

Issue The main issue is whether section 142(5) of the ITA prevailed over section 126 of the EA.

Held The High Court held in favour of the Bar upholding that section 126 of the EA prevails over section 142(5) of the ITA as the privilege is absolute unless it is waived by the Privilege holder or falls within the proviso to section 126 of the EA. Furthermore, section 126 of the EA is the specific provision on Privilege whilst section 142(5) of the ITA is merely a general provision hence, the DGIR cannot be allowed to use the ITA as an instrument of fraud to fish for information in the possession of law firms or clients of the law firms.


 
 
[1] Evidential provisions
[2] Witnesses
[3] Professional communications

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