While the general rule is that solicitors have a duty to disclose all information material to the client's matter (as stated in option C), there are exceptions. According to the SRA Code of Conduct, specifically under rule 5.7, the duty to disclose does not apply if divulging the information could harm the physical or mental condition of the client. This means that Emma has the discretion to withhold the prognosis if she believes that revealing it could cause Mr. James significant harm. Other exceptions to the duty of disclosure include scenarios involving money laundering suspicions or when privileged documents have been mistakenly disclosed (option D). The instruction from Mr. James's next of kin (option E) does not impose a duty to withhold information but may influence Emma's decision under her discretion. 

Key Point: Solicitors must balance their duty of disclosure with the potential harm to the client’s physical or mental well-being. The SRA Code of Conduct allows solicitors discretion in withholding information if disclosing it could adversely affect the client’s condition.