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May 11 2018
Members of the Malaysian Bar complained that Inland Revenue Board officers had carried out raids on them in order to audit their clients' accounts and gain access to those records.
The Malaysian Bar then wrote to the director general of inland revenue (DGIR), stating that such audits breached the principle of solicitor-client privilege.
The DGIR replied, stating that Section 142(5) of the Income Tax Act 1967 overrode the provisions in Section 126 of the Evidence Act 1950 that conferred solicitor-client privilege.
The Malaysian Bar filed an action in the high court, seeking a declaration of the following:
The Malaysian Bar relied on Section 126 of the Evidence Act in support of its contention:
"No advocate shall at any time be permitted, unless with his client's express consent, to disclose any communication made to him in the course and for the purpose of his employment as such advocate by or on behalf of his client, or to state the contents or conditions of any document with which he has become acquainted in the course and for the purpose of his professional employment, or to disclose any advice given by him to his client in the course and for the purpose of such employment."
The DGIR argued that Section 12 of the Evidence Act, which is part of Chapter IX, Part III of the act, is subjected to and has been ousted by Section 142(5)(b) of the Income Tax Act.
According to Section 142(5)(a)(i), "Save as provided in paragraph (b) nothing in this Act shall (i) affect the operation of Chapter IX of Part III of the Evidence Act 1950".
Section 142(5)(b) provides as follows:
"Notwithstanding the provisions of any other written law, where any document, thing, matter, information, communication or advice consists wholly or partly of, or relates wholly or partly to, the receipts, payments, income, expenditure, or financial transactions or dealings of any person (whether an advocate and solicitor, his client, or any other person), it shall not be privileged from disclosure to a court, the Special Commissioners, the Director General or any authorized officer if it is contained in, or comprises the whole or part of, any book, account, statement, or other record prepared or kept by any practitioner or firm of practitioners in connection with any client or clients of the practitioner or firm of practitioners or any other person."
The Malaysian Bar argued that care must be exercised in construing the 'non obstante' nature of Section 142(5) of the Income Tax Act – that is, provisions that begin with the word 'notwithstanding' – to give effect to Parliament's intention and not go beyond the purpose and object for which Section 142(5) of the Income Tax Act was enacted.
The Malaysian Bar further argued that since Parliament had used different words – namely, 'practitioner' and 'advocate and solicitor' in the statute – they must refer to different persons.
In addition, the Malaysian Bar submitted that the words "notwithstanding the provisions of any other written law" in Section 142(5)(b) of the Income Tax Act did not exclude the operation of common law.
The Malaysian Bar further argued that the DGIR had misunderstood and misapplied the Latin maxim of 'generalia specialibus non derogant'. Specifically, the Malaysian Bar argued that since the Evidence Act is the specific statute governing matters pertaining to privilege, Section 126 of the Evidence Act – although enacted before Section 142(5) of the Income Tax Act – excludes the operation of the general provision of Section 142(5) of the Income Tax Act to the extent of any inconsistency.
In summary, the high court accepted the Malaysian Bar's arguments and held as follows:
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