High Court Determines Exceptions to ‘Without

Prejudice’ Privilege in Recent Disputes

By Latham & Watkins LLP on November 26, 2020

Posted in Commercial

Two cases illustrate the narrow scope of application for exceptions to the without prejudice rule of
legal privilege.

By Stuart Alford and Clare Nida

Background

In two recent judgments, the High Court found

exception to the ‘without prejudice’ rule of legal
privilege. The rule protects statements made by
parties to a dispute (whether written or oral
statements) in a genuine attempt to settle the dispute.
There are certain situations in which this public
policy justification will be outweighed by other
factors if the fairness of judicial proceedings is at
risk. Motorola Solutions, Inc. v Hytera
Communications Corporation Ltd[1] and Berkeley
Square Holdings v Lancer Property Asset Management
Limited[2] clarify the scope of certain aspects of these
exceptions, namely the “unambiguous impropriety”,
misrepresentation/fraud, and the “Muller”
exceptions.

Motorola Solutions, Inc. v Hytera Communications Corporation Ltd.

Facts

Motorola Solutions, Inc. and Motorola Solutions Malaysia (together, Motorola) made an application for a
freezing injunction against Hytera Communications Corporation Ltd and some of its subsidiaries (together,
Hytera) further to a judgment in the US that was pending enforcement. Motorola alleged that, during
settlement meetings, Hytera stated its intention to remove assets from jurisdictions that were likely to be
amenable to enforcement of a judgment in favour of Motorola, so as to frustrate the enforcement by
Motorola of any such judgment (the Hytera Statements). Hytera contended such evidence was inadmissible
as it was protected by without prejudice privilege.

Judgement
The Court held that the Hytera Statements were prima facie protected by without prejudice legal privilege,
in that the statements were made in the course of settlement meetings, and were, therefore, not ordinarily
admissible. However, the Court did acknowledge the existence of an exception to this rule in the form of th
“unambiguous impropriety” principle.

The Court held that this exception only applied if the privilege was “itself abused on the occasion of its
exercise,”[3] and would only apply in exceptional circumstances. The given example of such an exceptiona
circumstance was an instance in which an “improper threat”[4]— one that unambiguously exceeded what
was “permissible in settlement of hard fought commercial litigation”[5]— was made in the course of
settlement meetings.

Jacobs J was satisfied that the alleged statements would constitute “unambiguous impropriety”, and that th
Hytera Statements were capable of substantiating the existence of a real risk of dissipation. The Court also
noted that the fact that Hytera denied making the threat could only give rise to a factual question (i.e.
whether such denial is relevant to determining whether the Hytera Statement had actually been made or
not) that the court may need to resolve. The Court held that “plausible evidence” of the Hytera Statements’
existence had been submitted in the form of witness statements and documentary evidence.

Berkeley Square Holdings v Lancer Property Asset Management Limited

Facts

Berkeley Square Holdings and others (together, Berkeley) brought an application against the manager of
their London property portfolio and its directors and certain holding companies (together, Lancer), to strik
out parts of Lancer’s defence statement that referenced information included in previously exchanged
without prejudice mediation position statements. In the wider dispute, Berkeley claimed that Lancer was
“complicit in a substantial fraud” perpetrated on Berkeley, whereby Lancer’s management fees were
significantly increased through a “capital performance bonus”. Lancer’s defence claimed that Berkeley was
actually aware of these payments (and, in fact, affirmed them), given that details of the increased payments
were set out in the position statements exchanged during an earlier mediation.

Judgement

Roth J, although acknowledging that the position statements were subject to without prejudice privilege,
struck out Berkeley’s application and permitted Lancer to adduce the privileged statements to support its
defence. This finding was premised on Robert Walker LJ’s findings in Unilever Plc v Proctor & Gamble Co[6]
in which certain exceptions to the general rule regarding privilege of without prejudice statements were
discussed. Roth J held that of the exceptions described in Unilever, the misrepresentation/fraud and the
Muller exceptions applied to the facts of the present case.

Although the misrepresentation/fraud exception is generally applied if a party is seeking to use antecedent
without prejudice negotiations to prove fraud, misrepresentation, or undue influence (and thereby rescind
an agreement), Roth J held that it would be illogical to not also allow parties to rely on such negotiations to
disprove a misrepresentation and, thereby, uphold an agreement. This reasoning thus represents a minor,
albeit intuitive, extension of the misrepresentation/fraud exception to ‘without prejudice’ privilege.
Roth J applied the Muller exception as described in Muller v Linsley and Mortimer[7] and decided it would
not be “fairly justiciable” for Berkeley to allege that Lancer had acted dishonestly without disclosure of the
position statements into evidence. Given that the statements were so central to the consideration of
Berkeley’s claims of dishonesty against Lancer, Roth J held that there is a “serious risk that there will not be
a fair trial if that evidence is excluded.”

Conclusion

Both these cases highlight the fact that legal privilege afforded to without prejudice statements is not
absolute, however, such exceptions have a narrow application. In these cases, the Court only permitted an
exception if there was a real risk that the privilege was misused (in the case of the “unambiguous
impropriety” exception), or if there was a real risk that a fair trial would not take place unless the exception
was permitted (in the case of the misrepresentation/fraud exceptions and Muller exceptions).

This blog post was prepared with the assistance of Vikram Ajith in the London office of Latham & Watkins.

[1] Motorola Solutions Inc and others v Hytera Communications Corporation Ltd and others [2020] EWHC 98
(Comm)

[2] Berkeley Square Holdings v Lancer Property Asset Management Ltd [2020] EWHC 1015 (Ch).

[3] Savings & Investment Bank v Fincken [2003] EWCA Civ 1630

[4] Ferster v Ferster [2016] EWCA Civ 717

[5] Boreh v Republic of Djibouti [2015] EWHC 769 (Comm), [132]

[6] [2000] 1 WLR 2436

[7] [1996] PNLR 74

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