Nicola Sharp of Rahman Ravelli considers a case that emphasises that what is communicated in without prejudice privilege will remain protected unless it meets particular criteria
In Motorola Solutions, Inc. & Anor v Hytera Communications Corporation Ltd & Anor, Motorola has been told to pay Hytera’s legal fees of £838,367 ($1,142,059). The English Court of Appeal delivered its decision on January 11, 2021.
This latest development in a long-running trade secrets dispute is significant as it emphasises the test for admitting without prejudice privileged communications into evidence under the “unambiguous impropriety” exception.
The dispute between US telecommunications company Motorola and Chinese communications firm Hytera has a lengthy history that has crossed into many jurisdictions, including the US, Australia, and Germany.
In 2008, Hytera recruited three of Motorola’s senior engineers, who stole confidential documents and source code from Motorola to aid Hytera in copying and developing Motorola’s two-way digital mobile radio (DMR) technology. Following the successful development and distribution of Hytera’s DMR technology around the world, March 2017 saw Motorola bring a claim for theft of trade secrets in the US courts. In February 2020, a US court found in favour of Motorola and awarded it $345 million in compensatory damages and $418 million in punitive damages.
Following judgment, Hytera filed various motions in the US with the aim of slowing enforcement down. Concerned about its ability to extract the judgment sums from Hytera, Motorola applied for a freezing order for the sum of $345 million. Motorola sought not just to freeze Hytera’s assets, but also made an application to the English courts, requesting that it exercise its jurisdiction to impose a freezing order on two of Hytera’s UK-based subsidiaries in aid of the US proceedings.
It is in this context that the English courts considered the admissibility of without prejudice, privileged material.
Privileged Without Prejudice Communications and Unambiguous Impropriety
Motorola claimed that Hytera would seek to avoid paying the damages by moving its assets elsewhere and, due to this, asked the English High Court of Justice to freeze the assets of Hytera and the two UK subsidiaries.
Motorola sought to rely on the statement of Hytera’s (now former) chief financial officer Nuo Xu that Hytera would “retreat to China”. The statement was made in 2019 during ‘without prejudice’ discussions between the companies, meaning that it would not normally be permitted to be brought to the court’s attention. An exception to this rule is where such a statement amounts to “unambiguous impropriety”. Under English law threatening to deal with assets via improper means in order to frustrate a judgment can amount to unambiguous impropriety.
In April, the English High Court found that the statement constituted unambiguous impropriety and granted a freezing injunction in the sum of $345 million. Hytera appealed against the decision, arguing that the statement did not constitute unambiguous impropriety.
In its judgement, the Court of Appeal agreed that the “retreat to China” statement did not constitute unambiguous impropriety - and upheld Hytera’s appeal.
The statement does not necessarily amount to a threat to hide assets or evade the US judgment and could instead mean that enforcement against Hytera’s Western assets could force Hytera to “cease doing business in Western markets,” the court said.
The court determined that the statement was wrongly admitted into evidence and had been “taken out of the context of settlement meetings”. As it had been wrongly admitted into evidence, the decision based on this evidence was also wrong.
The Court of Appeal ordered Motorola to reimburse Hytera’s legal and associated costs
The judgment from the Court of Appeal reinforces the principle that what is communicated in without prejudice privilege will remain protected unless it falls within very specific, defined criteria.
The judgment acts as a helpful reminder of two practical points when considering the limits of without prejudice privilege:
- The threshold for adducing without prejudice is very high – and it should not be argued that there has been unambiguous impropriety unless there is sufficient evidence available to support the allegations.
- Remember that exceptions to privileged communications do exist and that communications made in settlement discussions should be frank and open but always measured.
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