Motorola stung for £838k after Chinese digital mobile radio biz Hytera wins appeal against UK asset-freezing order

Appeal judges say lower court stumbled with ruling over 'without prejudice' negotiations

Motorola must pay a Chinese mobile network radio maker more than £800,000 after losing a Court of Appeal case over claims its rival threatened to "retreat to China" and evade a previous judgment.

The complex case was summarised in a Court of Appeal ruling where senior judges reversed a High Court asset-freezing order against Hytera Communications Corporation Ltd, a digital mobile radio (DMR) biz.

Motorola previously sued Hytera in the US. Back in 2008, the Chinese company allegedly lured three of Motorola's engineers into its own ranks, taking "confidential documents and source code" with them. A US jury duly awarded Motorola $763m in compensatory and punitive damages in February 2020.

Worried that the Chinese company would evade the US verdict by moving its assets outside US jurisdiction, Motorola filed in London for a freezing injunction against Hytera and two of its UK subsidiaries, Project Shortway Ltd and Sepura Ltd in April last year.

"In summary," noted the Court of Appeal, Motorola's legal arguments were "that Hytera would take various steps to limit Motorola's ability to enforce a judgment in western jurisdictions such as the United States or the United Kingdom, by concentrating its assets in China and other jurisdictions where enforcement would be more difficult. This was said to have been described by Hytera as a 'retreat to China'."

During the High Court case, Motorola relied on that "retreat to China" statement to get Hytera's UK assets frozen, although it was made in so-called "without prejudice" negotiations between the two sides.

Statements and offers made under "without prejudice" cover are not admissible in court proceedings unless they contain an "unambiguous impropriety". An "unambiguous impropriety" is a statement by one side showing that it intends to break the law – in this case by fleeing the jurisdiction.

Judge Mr Justice Jacobs admitted the "retreat to China" statement and ruled that Hytera's assets should be frozen. Unfortunately for Motorola, the Court of Appeal ruled yesterday that the High Court judge had made a legal mistake in doing so.

Lord Justice Males sighed that it is "common for potential problems of enforcement to be a factor to which both parties will be alive in international litigation and it would be unfortunate if that was a subject which could not be discussed in settlement meetings for fear of being interpreted as a threat to move assets improperly."

Mr Justice Jacobs, said the Court of Appeal judge, had applied the wrong legal test. After the US jury verdict against Hytera, it and Motorola began negotiating about enforcement of the judgment. During those negotiations, Hytera's (now former) CFO Nuo Xu said Hytera would "retreat to China". Although Motorola took this as a threat to hide assets and evade the US judgment, the Court of Appeal took it rather differently, explaining that what the Chinese exec meant was "if there was enforcement of any judgment over Hytera's western assets, then the commercial reality would force Hytera to exit from the western markets".

Xu responded by claiming Hytera only had "about $40m in cash outside of China" as of 30 September 2019, telling Motorola its "more profitable markets were in China, Russia and Africa".

Describing both sides' evidence about the "retreat to China" as "equally plausible", Lord Justice Males ruled that the High Court had got the law on "unambiguous improprieties" wrong, wrongly admitted the "retreat to China" statement into evidence, and then made the wrong decision based upon that evidence.

The court therefore ordered Motorola to reimburse Hytera's legal and other costs from the High Court case, totalling £838,367.27.

Hytera was previously included on a US military "do not buy" list of vendors in 2018. ®