A 7-member Federal Court bench held on 20 July 2022 that law firms’ clients’ account are protected by solicitor-client privilege under Section 126 of the Evidence Act 1950 (“EA”) and that Section 142(5) of the Income Tax Act 1967 (“ITA”) does not permit disclosure of the same. The Federal Court upheld the decision of the Court of Appeal and High Court (analysis of the Court of Appeal Judgment can be read here).
Without regurgitating my earlier blog post, the Director General of Inland Revenue (“DGIR”) requested for law firms to disclose details of their clients’ accounts circa 2016. The Malaysia Bar had protested, expressing its objections as they were protected by solicitor-client privilege. The DGIR’s reason for requiring disclosure of the clients’ accounts were to ensure tax compliance by law firms to determine quantum of taxes to be imposed on the respective law firms.
Chief Justice Tengku Maimun Tuan Mat held that “the content of the client’s accounts belongs to the clients of the solicitor and not the solicitor” and that Section 142(5) of the ITA does not oust Section 126 EA. The only person who can waive that privilege is the client.
This is a landmark ruling by the Federal Court on solicitor-client privilege in Malaysia. This decision entails that unlike New Zealand, there is no provision in the ITA or the EA which accords the tax authority to audit the clients account and such authority cannot be implied vide the rule of strict interpretation. The sanctity of client solicitor privilege can only be divulged through waiver by the client and no one else.