“Legitimate Interest” in Without Prejudice Communications

Given the importance of without prejudice privilege in settlement communications, the recent Court of Appeal judgment in Crane World Asia Pte Ltd v Hontrade Engineering Ltd [2016] HKEC 1377 is worth noting.  The judgment confirms there is no legitimate interest in having a provision in a settlement offer that a witness not give evidence on behalf of another party, irrespective of the legitimacy of the other terms of the proposed settlement. Such a settlement proposal falls within the “unambiguous impropriety” exception to the privilege.

In so finding, the Court of Appeal allowed the plaintiff’s appeal and overturned the lower court’s judgment. In the lower court, the judge took a more pragmatic approach in deciding that the communication in respect of which the defendant asserted privilege was inadmissible because it formed part of an overall genuine attempt at settlement and should not be seen as an isolated attempt to induce a witness to refrain from giving evidence on behalf of the plaintiff.

The rationale for the Court of Appeal’s judgment appears to be rooted in principles that transcend the justification for without prejudice privilege; namely, the fundamental importance of the administration of justice and the convention that there is no property in a witness (for example, see Solicitors’ Guide to Professional Conduct, Principle 10.12). 

Therefore, any communication which contains a provision requiring a witness to refrain from giving evidence on behalf of another party should be added to the list of examples that come within the “unambiguous impropriety” exception.  The exception only applies in the clearest cases where the privilege is being abused.

According to the Court of Appeal its reasoning also applies when a court is considering whether to allow disclosure or evidence of a “mediation communication” pursuant to s. 10 (“Leave for disclosure or admission in evidence”) of the Mediation Ordinance (Cap. 620).

A takeaway point from all of this is that the protection of without prejudice privilege, while generally wide, is not absolute and parties to settlement negotiations should be careful to ensure that their communications are underpinned by a legitimate purpose.  There are a number of legitimate ways to seek to undermine another party’s evidence at trial but seeking to preclude a witness from giving evidence as part of settlement negotiations is not one of them.  

Finally, the case is an example of the potential worth of precedents from other common law jurisdictions.  The Court of Appeal’s judgment approves of (among other cases) Greenwood v Fitts (1961) 29 DLR (2d) 260; a decision of the British Columbia Court of Appeal not cited before the lower court but which appears to have been put to good use on appeal*.

* Indeed, this appears to be the first time that Greenwood v Fitts has been formally referred to in a reported judgment in Hong Kong. More generally, also note the recent appeal judgment in Ferster v Ferster [2016] EWCA Civ 717 (concerning improper threats in the context of the unambiguous impropriety exception).


Senior Consultant and Accredited Mediator, RPC

A commercial disputes lawyer with over 35 years' experience, David has extensive experience in handling the defence of professional indemnity, financial lines and other special risks claims as well as advising insurers in relation to such claims.

David has worked on the defence of claims in various jurisdictions including England, Hong Kong, Singapore, Malaysia, the PRC, Taiwan, Bermuda and the BVI.  He also has significant experience in handling regulatory and disciplinary matters.

He has considerable experience providing general risk management advice to professionals such as accountants, solicitors, insurance brokers, surveyors and stock-brokers. 

Most recently, he has been developing a practice as a commercial mediator. David is accredited as a mediator by both the Centre for Effective Dispute Resolution (CEDR) and the Hong Kong Mediation Accreditation Association Limited (HKMAAL).