Protecting the without prejudice rule
In its decision of January 11, 2021, the English Court of Appeal set aside a freezing injunction imposed by the High Court in the context of an ongoing trade secrets dispute in the US. Key to its ruling was an analysis of the “unambiguous impropriety” exception to without prejudice (WP) privilege.
Emphasising the limited scope of that exception, this judgment preserves the privilege in WP communications, emphasising the strong public interest in facilitating open and frank settlement discussions between litigants, with an aim to resolving disputes.
Background
In April 2020, American consumer electronics and telecommunications company Motorola obtained a freezing injunction in the UK against Hytera, a Chinese manufacturer of radio systems. In support of its interim application, Motorola relied on statements made by Hytera during WP settlement discussions.
Motorola argued that comments made by Hytera about a “retreat to China” during those discussions amounted to a threat to dissipate assets from western jurisdictions to jurisdictions in China, Russia and Africa. Motorola contended that the purpose of this restructure would be to frustrate the enforcement of an adverse judgment in the US trade secret litigation. Key to the admissibility of such evidence was whether Hytera’s statement was sufficiently “unambiguously improper” to lift the cloak of WP privilege.
In support of its position at first instance, Motorola had relied upon the case of Dora v Simper (1999) in the UK. Motorola argued that, to determine whether comments made during WP discussions might be admitted, the court must ask whether the disputed statement, if indeed accurate, demonstrated an “unambiguous impropriety”.
“Dora should not have been regarded as a binding authority that it is sufficient to take a party’s evidence at face value.”
Hytera’s position was that the reference “retreat to China” had been misconstrued and should not fall within the scope of the exception (the comment being underpinned by legitimate commercial considerations).
In his decision, the High Court judge opined that the test for admissibility of WP evidence was whether there was a “good arguable case” that there had been “unambiguous impropriety”. Further, he considered that he was bound by the approach taken in Dora that a threat to transfer assets with the aim of frustrating a judgment (if proven) constituted such impropriety.
In light of this, the judge ruled that the statements made fell within the exception, were thus admissible, and granted the injunction.
The appeal
Hytera, in appealing the High Court decision, argued that the judge had erred in the following respects:
