Hong Kong Court confirms without prejudice privilege applicable irrespective of whether litigation had begun

Without prejudice communications in a genuine attempt to settle a dispute are inadmissible as evidence in court. In Poon Loi Tak v Poon Loi Cheung Desmond [2019] HKCFI 3003, the Court considered the without prejudice privilege rule in the context of a family dispute. The defendant applied to exclude certain evidence on the ground that they were protected by without prejudice privilege. The court granted his application and provided a useful reminder of the legal principles on determining what constitutes without prejudice privileged negotiations.

Background

The plaintiff and the defendant were two of the six siblings. Their dispute concerned the proceeds of sale of a shop owned by their deceased father (the Sale Proceeds). The Sale Proceeds were in two bank accounts jointly held by the defendant and the father (prior to his death) amounting to HK$33 million.

The plaintiff, as the administrator of the father’s estate, asked the defendant to hand over the Sale Proceeds for distribution amongst the siblings. The defendant maintained that their father had gifted the Sale Proceeds to him.

With a view to resolving the dispute without resort to litigation, the defendant and his siblings had meetings and telephone conversations, and exchanged WhatsApp messages from September to December 2016, in which the defendant offered to share HK$18 million with his siblings. They subsequently discussed a draft settlement agreement, but ultimately did not sign it.

In December 2016, the plaintiff brought an action against the defendant, seeking to rely on the above discussions in support of his claims. The plaintiff also secretly recorded two meetings without the knowledge or consent of the defendant, and sought to rely on the recordings and transcripts of such meetings as his supporting evidence.

In response, the defendant applied to exclude certain paragraphs of the plaintiff’s witness statements and certain items on the list of documents for discovery, arguing that they were protected by without prejudice privilege and were therefore inadmissible.

Judgment

The court stated that the rationale of the without prejudice rule is to encourage parties to negotiate and settle their disputes out of court. It is immaterial that litigation had not begun when the relevant settlement discussions or meetings took place.

In particular, the court held that the correct approach was to consider (i) whether, objectively, the parties contemplated or might reasonably have contemplated that litigation would follow if they could not agree; and (ii) whether the communication evinced a genuine intention to negotiate a settlement of the actual or potential dispute.

Having viewed the facts objectively, the court found that the telephone conversations, the WhatsApp messages and the meetings were protected by without prejudice privilege and were thus inadmissible as evidence. The defendant’s offer was a concession, evidencing a bona fide attempt to promote negotiations to resolve the dispute concerning the Sale Proceeds. The fact that these communications were not expressly stated to be ‘without prejudice’ was immaterial.

Further, the paragraphs in the plaintiff’s witness statement relating to the subsequent draft settlement agreement were also held to be protected by without prejudice privilege, because these communications were a continuation of the siblings’ attempts to settle the dispute by negotiation.

In order for without prejudice privilege to be excluded, one would need to demonstrate that the conduct in question is an abuse of the privilege, for which the clearest of evidence is required. An example would be where a defendant told a plaintiff that he would give perjured evidence or bribe other witnesses to do the same unless the plaintiff withdrew his claims. The court in this case was of the view that the inconsistent positions taken by the defendant in the negotiations came nowhere close to showing that there was unambiguous impropriety sufficient to constitute an abuse of the privilege, let alone a clear case of such abuse.

Comment

When considering without prejudice privilege, the core question that the Hong Kong court will consider is whether a communication was made in a genuine or bona fide attempt to promote negotiations to settle actual or potential litigation. The court has confirmed that not having labelled a negotiation ‘without prejudice’ will not necessarily result in a loss of without prejudice protection if it is clear from the surrounding circumstances that the parties were genuinely seeking to settle the dispute when entering into the discussion or communication. Contemplation, and not actual commencement, of litigation, is the proper legal test.