Don’t badmouth your boss: the scope of non-disparagement clauses
Settlement agreements can sometimes include provisions preventing one person from making disparaging comments against another. These will more typically arise following a dispute where there has been a close working relationship such as under a partnership, joint venture or employment.
But are these clauses enforceable? Can a contractual provision stop someone from voicing their honestly held beliefs?
These issues were considered in the recent high-profile case of Network Ten Pty Limited v van Onselen.
Network Ten Pty Limited v van Onselen [2023] NSWSC 829
The facts
This case concerned whether or not Dr van Onselen, a high-profile journalist and former employee of Network Ten, had breached a non-disparagement clause in a deed that they had signed following the termination of Dr van Onselen’s employment.
After entering into the deed, van Onselen wrote an article which painted Network Ten in a negative light. The article was published in the Australian Business Review.
The arguments
Network Ten argued that the article was disparaging because it conveyed that Network Ten was commercially unviable and had poor management. Network Ten sought a declaration that van Onselen had breached the non-disparagement clause, and an injunction to prevent any further breaches of the clause.
Van Onselen defended the claim on the basis that:
- the scope of the clause was limited to comments made in bad faith that go beyond fair comment; and the information in the article was already publicly available; and
- the non-disparagement clause operated as a restraint of trade and was against the public interest; and
- Network Ten had made representations to van Onselen about the operation of the clause that led him to believe the article would not breach the clause.
The Court’s decision
The Court found in favour of Network Ten, making a declaration that the article was a breach of the non-disparagement clause. However, the Court did not grant an injunction to prevent further breaches as it was persuaded that the breach was a “one-off mistake”.
What is the scope of non-disparagement clause?
Consistently with other cases, the Court determined that the non-disparagement clause should be interpreted like any other contractual clause which meant that in a commercial agreement it will be given a “business-like” interpretation that reflects what a “reasonable businessperson” would have understood the clause to mean. This requires consideration of the language used, the commercial circumstances and the purpose that the clause is intended to serve.
Van Onselen’s defence that he was allowed to make comments which did not go beyond fair comment failed, because the non-disparagement clause was found not to limit its scope in that way. The clause had not been edited to include such a limit.
The clause was also not limited by notions of “freedom of speech”, as the Court found a person’s agreement not to make non-disparaging comments was enforceable.
The article was not merely a repetition of publicly available information as it included analysis, comments, views, inferences and conclusions about that information. In any event, the repetition of publicly available information by a high-profile ex-employee could be disparaging in its own right.
Did the non-disparagement clause operate as a restraint of trade?
The Court held that a non-disparagement clause may in certain circumstances operate as a restraint of trade. However, in this case the clause did not restrict van Onselen’s ability to work and earn income as a political commentator and academic (or if it did, then any restraint was insignificant and went no further than was necessary to protect Network Ten’s legitimate interests in protecting its goodwill).
What about the alleged representations made by Network Ten?
The Court preferred the evidence of Network Ten’s representative to the evidence of van Onselen and held that no representations were made by Network Ten to van Onselen regarding the scope of the clause.
It was relevant to the Court’s assessment of the evidence that the deed included a clause expressly acknowledging that van Onselen was not relying on any promises or inducements other than those set out in the deed, as well as a clause confirming that the deed represented the entire agreement between the parties.
It was also important that neither van Onselen nor his lawyers had sought to change the wording of the deed to reflect what he said had been his understanding of its limitations.
Key takeaways
The key takeaways from this case are:
- The express language used in a non-disparagement agreement is critically important. If exceptions are required or the clause is ambiguous as to its scope, then the clause should be modified;
- Depending on the scope and context of the clause, a non-disparagement clause can amount to a restraint of trade and would also need to comply with rules relating to restraint of trade provisions (such as not offending public policy);
- It is important to seek legal advice before entering into an agreement that includes a non-disparagement clause to ensure that the clause accurately reflects the intention of the parties. Where express carve-outs are discussed, the clause should be amended to include these carve-outs.
