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.

For further information please contact:

Michael Byrnes, Partner
Phone: +61 2 9233 5544
Email: mjb@swaab.com.au

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.