Motorola Solutions, Inc & Anor v Hytera Communications Corporation Ltd & Anor (Rev 1)

The unambiguous impropriety exception to without prejudice privilege requires proof of impropriety which is genuinely unambiguous. A good arguable case or plausible evidential basis does not suffice, even on an interim application. The court must rigorously scrutinise the evidence and protect the public interest in candid settlement negotiations.

A credible dispute about what was said or meant at an unrecorded settlement meeting will often prevent satisfaction of this demanding test. A threat to move assets beyond enforcement may qualify, but its character depends on the circumstances. Legitimate changes in business arrangements do not necessarily constitute impropriety.

A freezing injunction requires solid evidence of a real risk of unjustified dissipation. Dishonesty alone is insufficient unless it points towards the concealment or disposal of assets to frustrate enforcement.

Motorola obtained a substantial jury verdict in United States trade-secret proceedings against Hytera. Before that judgment became enforceable, Motorola applied under section 25 of the Civil Jurisdiction and Judgments Act 1982 for domestic freezing injunctions against Hytera and its indirect subsidiary, Project Shortway Ltd.

Jacobs J granted injunctions against both companies in [2020] EWHC 980 (Comm). His conclusion that there was a real risk of dissipation depended on evidence of statements allegedly made by Hytera's former chief financial officer during without prejudice settlement meetings. He admitted that evidence because Motorola had a good arguable case that the statements amounted to unambiguous impropriety. The injunction against Shortway was granted under the Chabra jurisdiction.

The appeal concerned the evidential standard for the unambiguous impropriety exception, whether the alleged statements satisfied that standard, and whether the remaining evidence independently justified freezing relief.

1. Appeal allowed. The without prejudice evidence was inadmissible. The freezing injunctions against Hytera and Shortway were set aside.

2. The unambiguous impropriety exception protects against abuse of the privileged occasion, but it is deliberately demanding. It requires nothing less than established unambiguous impropriety. A good arguable case or plausible evidential basis is insufficient, including on an interim application. The public interest in candid settlement negotiations outweighs the risk that some impropriety which cannot be proved unambiguously will remain protected.

3. Evidence relied upon to disapply the privilege must be rigorously scrutinised. Where an unrecorded discussion is credibly disputed, the limitations of an interim hearing may prevent the court from finding unambiguous impropriety. The court should not take one party's disputed account at face value or direct satellite litigation to resolve what was said. The contrary approach in Dora v Simper was wrong in principle and should not be followed.

4. A threat to transfer assets outside the ordinary and proper course of business so as to defeat enforcement may amount to unambiguous impropriety, but it does not invariably do so. Context remains essential. Here the alleged proposals included reducing surplus subsidiary cash, changing future credit terms and concentrating business in other markets. Those measures were not inherently improper. Hytera's explanation was at least as plausible as Motorola's account, so the evidence did not establish unambiguous impropriety.

5. The remaining evidence did not independently justify a freezing order. Under the principles summarised in Lakatamia Shipping Co Ltd v Morimoto [2019] EWCA Civ 2203, the applicant needed solid evidence of a real, objectively assessed risk of unjustified dissipation. A good arguable case of dishonesty was insufficient unless the dishonesty pointed towards concealment or disposal of assets to frustrate enforcement. Jacobs J was entitled to find that threshold unmet.

6. Once the injunction against Hytera was set aside, the Chabra issue concerning Shortway did not arise. The court reserved its opinion on whether such relief would otherwise have been appropriate.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The freezing injunctions against Hytera and Project Shortway Ltd were set aside: [2021] EWCA Civ 11.
2. High Court, Commercial Court: Jacobs J granted a domestic freezing injunction against Hytera under section 25 of the Civil Jurisdiction and Judgments Act 1982 and a Chabra injunction against Shortway: [2020] EWHC 980 (Comm).