Non-Dis­­­par­age­­ment Claus­es v Free Speech

The recent high-pro­file deci­sion of the Supreme Court of NSW in Net­work Ten Pty Lim­it­ed v van Onse­len [2023] NSWSC 829 pro­vides a rare insight into the scope and prac­ti­cal effect of non-dis­par­age­ment claus­es in deeds of release for employ­ment mat­ters. These claus­es are almost always includ­ed in such deeds, usu­al­ly in mutu­al form impos­ing non-dis­par­age­ment oblig­a­tions on both parties.

In this case, Dr Peter van Onse­len, an aca­d­e­m­ic, jour­nal­ist, author and com­men­ta­tor, entered into a deed of release (Deed) with his then employ­er, Net­work Ten Pty Lim­it­ed (Net­work Ten), which since 2017 has been part of the US based Para­mount Glob­al group. Among oth­er things, Dr van Onse­len co-host­ed the Net­work Ten pro­grams The Project and The Sun­day Project.

Jus­tice Ham­mer­schlag sum­marised the non-dis­par­age­ment clause in the Deed as fol­lows (at 5): 

“The Deed con­tained (in cl 7) what the par­ties have described as a non-dis­par­age­ment clause. Under it, both sides agreed not to dis­par­age the oth­er or make any state­ment or pub­li­ca­tion or autho­rise any oth­er per­son to dis­par­age or make any state­ment or pub­li­ca­tion which may, or which does in fact bring the oth­er into dis­re­pute or ridicule, or which may oth­er­wise adverse­ly affect their respec­tive reputations.”

The non-dis­par­age­ment clause in the Deed was in the fol­low­ing terms:

7. Non-Dis­par­age­ment

7.1. Sub­ject to clause 7.3, the Employ­ee agrees not to dis­par­age the Com­pa­ny or any of the Releasees or make any state­ment or pub­li­ca­tion, or autho­rize any oth­er per­son to dis­par­age or make any state­ment or pub­li­ca­tion, whether oral or in writ­ing, which may or which does, in fact, bring the Com­pa­ny or any Releasees into dis­re­pute or ridicule or which may oth­er­wise adverse­ly affect their respec­tive reputations.

7.2. Sub­ject to clause 7.3, the Com­pa­ny agrees not to dis­par­age the Employ­ee or make any state­ment or pub­li­ca­tion, or autho­rize any oth­er per­son (includ­ing the Releasees) to dis­par­age or make any state­ment or pub­li­ca­tion, whether oral or in writ­ing, which may or which does, in fact, bring the Employ­ee into dis­re­pute or ridicule or which may oth­er­wise adverse­ly affect the Employ­ee’s reputation.

7.3. For the avoid­ance of doubt, claus­es 7.1 and 7.2 do not lim­it or restrict the truth­ful state­ments made by each par­ty respec­tive­ly in rela­tion to the Proceedings.

Apart from clause 7.3, which deals with spe­cif­ic ongo­ing cir­cum­stances involv­ing Net­work Ten and Dr van Onse­len, the non-dis­par­age­ment clause in the Deed is in stan­dard terms. It would be an uncon­tro­ver­sial obser­va­tion to note that the major­i­ty of deeds relat­ing to employ­ment dis­putes or the ces­sa­tion of employ­ment con­tain claus­es to sim­i­lar effect. 

After ces­sa­tion of his employ­ment, Dr van Onse­len wrote an arti­cle pub­lished in the Busi­ness Review sec­tion of The Aus­tralian news­pa­per which Net­work Ten claimed dis­par­aged it, breach­ing the Deed. 

Net­work Ten sought a dec­la­ra­tion that Dr van Onse­len had breached the Deed and a per­ma­nent injunc­tion restrain­ing him from any fur­ther breach­es. Dr van Onse­len opposed the relief sought. 

The Approach to Inter­pret­ing the Deed

Jus­tice Ham­mer­schlag set out the prin­ci­ples to be applied to the inter­pre­ta­tion of the Deed at para­graph 69 (not­ing clause 7 is the non-dis­par­age­ment clause in issue):

“The Deed, includ­ing cl 7, is a com­mer­cial con­tract which is to be giv­en a busi­ness-like inter­pre­ta­tion. Inter­pret­ing it requires atten­tion to the lan­guage used by the par­ties, the com­mer­cial cir­cum­stances which it address­es, and the objects which it is intend­ed it secures. The mean­ing of the words cho­sen is deter­mined objec­tive­ly by ref­er­ence to its text, con­text, and pur­pose, the ques­tion being what a rea­son­able busi­nessper­son would have under­stood them to mean. Pref­er­ence is giv­en to a con­struc­tion sup­ply­ing a con­gru­ent oper­a­tion to the var­i­ous com­po­nents of the whole, so as to avoid com­mer­cial incon­ve­nience. Where lan­guage is open to more than one con­struc­tion, the Court will pre­fer a con­struc­tion which avoids con­se­quences which are capri­cious, unrea­son­able, incon­ve­nient or unjust.”

His Hon­our treat­ed the Deed as a com­mer­cial con­tract, inform­ing his analy­sis. That approach is evi­dent in this obser­va­tion about the non-dis­par­age­ment clause (at para­graph 70):

“The non-dis­par­age­ment clause ulti­mate­ly agreed upon, on its plain word­ing, makes no excep­tion for dis­par­age­ment which may be fair com­ment or for the par­ty bound by it to say what­ev­er he or it want­ed, even if dis­parag­ing, pro­vid­ed it was with­in rea­son (what­ev­er that may be con­sid­ered to mean).”

Good Faith Commentary

In mak­ing this obser­va­tion, Jus­tice Ham­mer­schlag was giv­ing short shrift to an argu­ment on behalf of Dr van Onse­len that the clause was not intend­ed to cov­er state­ments made by him in good faith but only cap­tures state­ments in bad faith that go beyond fair com­ment. This argu­ment was part­ly pred­i­cat­ed upon Dr van Onse­len’s work as a jour­nal­ist and com­men­ta­tor which, by its very nature, involves pub­lic com­men­tary on events and mat­ters of interest. 

Apply­ing the gen­er­al approach to inter­pre­ta­tion set out above, his Hon­our stat­ed (at 72):

“Good faith and Dr van Onselen’s known occu­pa­tion do not intrude into the ques­tion of whether the Arti­cle meets the con­trac­tu­al descrip­tion of dis­parag­ing or bring­ing Ten or the Releasees (as defined in cl 5.1) into dis­re­pute or ridicule or adverse­ly or pos­si­bly adverse­ly affect­ing their reputation.”

His Hon­our ham­mered home the point that this was a case of con­trac­tu­al inter­pre­ta­tion; notions of free speech and fair com­ment had no role to play in the inter­pre­ta­tion of the Deed (at 73):

“This is not a defama­tion case. It is a claim for breach of con­tract. There is no defence of fair com­ment. This is a case about the right to free speech, but only to the extent that, by the Deed, Dr van Onse­len bar­gained that right away. The ques­tion is whether Dr van Onse­len breached the con­tract he made with Ten.”

His Hon­our found the arti­cle itself was dis­parag­ing with­in the mean­ing of clause 7.1 of the Deed, not­ing (at 88): 

“It con­veys analy­sis, com­ments, views, infer­ences and con­clu­sions, brought togeth­er in a pejo­ra­tive whole.”

Non-Dis­par­age­ment Clause as a Restraint of Trade?

A nov­el and intrigu­ing argu­ment raised on behalf of Dr van Onse­len was that the non-dis­par­age­ment clause was a restraint of trade with­in the mean­ing of s 2(2) of the Restraints of Trade Act 1976 (NSW) and invalid under s 4(1) of that Act because it is against pub­lic pol­i­cy. If suc­cess­ful, that argu­ment would mean that the clause itself would be invalid and unen­force­able (ren­der­ing moot the ques­tion of whether the arti­cle was disparaging). 

The nov­el­ty of the argu­ment was reflect­ed in the fol­low­ing obser­va­tion from his Hon­our (at para­graph 95):

“Nei­ther coun­sel referred me to any case in which a non-dis­par­age­ment pro­vi­sion has been con­sid­ered to be a restraint of trade. Ten sub­mit­ted that such claus­es are com­mon in redun­dan­cy deeds and in set­tle­ment agree­ments to ensure that dis­putes are not exposed to the risk of being reopened. It was put that any deter­mi­na­tion that a non-dis­par­age­ment clause may amount to a restraint of trade may run counter to the legit­i­mate expec­ta­tions of employ­ers and com­mer­cial par­ties generally.”

His Hon­our not­ed that (at 97): 

“There is no con­cep­tu­al rea­son why, depend­ing on its field of oper­a­tion, a non-dis­par­age­ment pro­vi­sion could not be in restraint of trade.”

While this opens up the the­o­ret­i­cal pos­si­bil­i­ty of such an argu­ment being suc­cess­ful in future cas­es, in this instance Jus­tice Ham­mer­schlag held the non-dis­par­age­ment clause was not a restraint of trade. 

In this regard, his Hon­our held (at 99):

“Clause 7.1 lim­its Dr van Onse­len only to mak­ing state­ments which are dis­parag­ing of his for­mer employ­er and its relat­ed cor­po­ra­tions, offi­cers and employ­ees. Leav­ing aside the fact that it does not muz­zle him entire­ly, in the uni­verse of dis­course in which Dr van Onse­len is or may be involved, real­is­ti­cal­ly viewed, it does not restrain him in his trade or call­ing in any, or any mean­ing­ful, way. It impos­es no bar­ri­er to him exer­cis­ing his pro­fes­sion or call­ing and, if it does, the bar­ri­er is de min­imis. The con­nec­tion between that restraint and any sup­posed eco­nom­ic prej­u­dice is too remote to result in it being fair­ly viewed as in restraint of trade”

For good mea­sure, his Hon­our added that even if the clause was a restraint of trade it would not be against pub­lic pol­i­cy as it “…goes no fur­ther than is nec­es­sary to pro­tect Ten’s legit­i­mate inter­ests in pro­tect­ing its good­will against dis­par­age­ment from a for­mer senior and high-pro­file employ­ee” (at 100).

Deci­sion

Jus­tice Ham­mer­schlag made a dec­la­ra­tion that Dr van Onse­len breached clause 7.1 of the Deed by the pub­li­ca­tion of the arti­cle. His Hon­our, how­ev­er, declined to issue an injunc­tion on the basis that he con­sid­ered the risk of any repeat con­duct by Dr van Onse­len to be low. 

Some Lessons from the Case

The case is an inter­est­ing one, not only for the media cov­er­age it gar­nered but the legal argu­ments raised and considered. 

There are some inter­est­ing lessons from the case:

1. A deed of release (in agree­ment form) entered into by employ­er and employ­ee to resolve employ­ment issues is, in effect, a com­mer­cial con­tract and will be inter­pret­ed in accor­dance with the prin­ci­ples apply­ing to such contracts.
2. Con­sis­tent with this, even though the case involved a jour­nal­ist and com­men­ta­tor, whose pro­fes­sion nec­es­sar­i­ly involves pub­lic report­ing and com­men­tary, con­cepts such as free speech and fair com­ment, that some might regard as sacro­sanct prin­ci­ples that should be inca­pable of being trad­ed away, ulti­mate­ly had no role to play in the out­come. Pri­ma­cy was giv­en to the mean­ing of the words in the non-dis­par­age­ment clause.
3. If either par­ty is con­cerned about a par­tic­u­lar sit­u­a­tion aris­ing which might lead to a breach of a clause of the deed (includ­ing non-dis­par­age­ment claus­es), it might be prefer­able to seek a spe­cif­ic carve-out to the oper­a­tion of the rel­e­vant clause rather than rely upon what one par­ty might regard as com­mon sense or good­will in the way in which the clause should oper­ate in practice.
4. For­mer employ­ees sub­ject to a non-dis­par­age­ment clause in a deed of release need to care­ful­ly con­sid­er what they say about their for­mer employ­er. While very few have the oppor­tu­ni­ty to write an arti­cle pub­lished in a major nation­al news­pa­per about a for­mer employ­er, social media is avail­able to almost every­one and can serve as a temp­ta­tion to write and pub­lish pejo­ra­tive com­ments or posts. Less obvi­ous­ly, if some­one inter­est­ed in work­ing for an employ­er asks a for­mer employ­ee sub­ject to a non-dis­par­age­ment clause what it was like to work for that organ­i­sa­tion, the answer may need to be cir­cum­spect, care­ful­ly craft­ed to avoid breach­ing the non-dis­par­age­ment oblig­a­tion. Argu­ments such as a need to be can­did or to give a warn­ing to pos­si­bly avoid a bad expe­ri­ence are high­ly unlike­ly to suc­ceed in the event a breach is assert­ed by the for­mer employ­er. Of course, this exam­ple illus­trates a point about non-dis­par­age­ment claus­es: in real­i­ty, they are fre­quent­ly breached but rarely enforced, either because the breach is not detect­ed or the employ­er choos­es not to take action. A for­mer employ­ee sub­ject to such a clause, how­ev­er, is assum­ing a risk in tak­ing com­fort from this and ignor­ing any ongo­ing non-dis­par­age­ment obligation.