When (lack of) silence is golden –
the true impact of non-disparagement clauses
A recent decision of the Supreme Court of NSW has squarely put into focus the issue of non-disparagement clauses in deeds of settlement.
This decision is important as non-disparagement clauses are becoming quite commonplace – while they have long been a feature of employment settlement deeds, they are finding their way into employment contracts, agency and licensing agreements, sponsorship agreements and even commercial settlement deeds. Some clients view these clauses as a form of window dressing – a ‘nice-to-have’ with some uncertainty as to their actual effect on the parties' legal positions. This decision should turn that attitude on its head and puts parties on notice that a breach of such clauses risks further claims even when they believe comments that they have made to be “fair".
The Supreme Court proceedings arose when Channel 10 claimed that an article written by Dr Peter van Onselen about the “financial decline” of Channel 10 and published in the Australian Business Review section of ‘The Australian’ newspaper (ABR Article) breached a deed of settlement previously signed by Dr van Onselen and Channel 10 (Deed). Channel 10 had employed Dr van Onselen from around 2010 to early 2023.
Dr van Onselen’s exit from Channel 10 was negotiated mainly between his solicitor and the Vice President of Human Resources of Channel 10, Mr McDonald. The negotiations resulted in the parties signing a deed of settlement on 3 March 2023 (Deed) which featured a payment to Dr van Onselen by Channel 10 and the following mutual non-disparagement clause:
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.
The reference to “Proceedings” in clause 7.3 was a reference to a claim brought by another former employee of Channel 10 in the Fair Work Division of the Federal Court concerning several complaints, some of which were directed at alleged conduct by Dr van Onselen.
Before the execution of the Deed, Dr van Onselen and Mr McDonald spoke about the non-disparagement clause. Both Dr van Onselen and Mr McDonald gave competing evidence about this conversation and the matters discussed. Importantly, Dr van Onselen’s version of this conversation indicates that he believed the non-disparagement clause in the Deed didn’t prevent him from providing fair comment about Channel 10, given his career as a journalist and commentator. It goes without saying that Mr McDonald’s version of the conversation substantially differed from that of Dr van Onselen.
Channel 10 asserted that the ABR Article was disparaging of Channel 10’s financial position and, as such, breached clause 7.1 of the Deed. Dr van Onselen made several arguments against Channel 10 in the proceedings:
- Clause 7.1 was not intended to capture statements made by Dr van Onselen in good faith that discredited or lowered the estimation of Channel 10, but rather, captured comments made in bad faith that went beyond fair comment.
- The article did not disparage Channel 10 in a way that breached clause 7.1 for several reasons, including that Dr van Onselen believed that the true purpose of the Deed was to prevent him from making negative commentary specifically about his employment, Channel 10 as an employer or the circumstances in which his employment ended. Dr van Onselen believed the clause did not apply to his comments that he considered “fair comment”. However, the Court found that this was not the case and that all that was required was for the comment (or the publication in this case) to be disparaging. The Deed did not extend to genuine reporting by Dr van Onselen or the mere reproduction by him of otherwise publicly available without analysis, comment or conclusions.
- Clause 7.1 was an unreasonable restraint of trade and was therefore invalid.
- Channel 10 came to Court with unclean hands such that clause 7 was unenforceable. This argument was based on the disputed conversation between Dr van Onselen and Mr McDonald before the Deed was executed.
The Court had to determine whether the ABR article constituted a breach of the Deed.
Ultimately, the Court found that the Deed was a commercial contract that should be given ‘a business-like interpretation’. In that regard, Clause 7.1 plainly made no exception for disparagement of Channel 10 by Dr van Onselen that might otherwise be defensible as ‘fair comment’. Further, it was evident from the words of clause 7.1 that it covered any of Dr van Onselen’s statements (no matter the context) as long as those statements were disparaging. The Court rejected Dr van Onselen’s evidence about the alleged conversation between Dr van Onselen and Mr McDonald as to “fair comment” being an exception to the non-disparagement clause, preferring Mr McDonald’s evidence on that issue. It also was not prepared to find that it amounted to an unreasonable restraint.
Given that it was clear that the article published by Dr van Onselen disparaged Channel 10, the Court found that Dr van Onselen had breached the Deed. The Court was not prepared to excuse them on the basis that he was merely repeating something that had been said earlier by other parties. In any event, the Court accepted that the impact of a high-profile person (such Dr van Onselen) repeating a disparaging statement could be amplified. Dr van Onselen was also subsequently ordered to pay Channel 10’s legal costs.
What does this mean for your business?
This recent decision of the Supreme Court of NSW is significant as it shows that non-disparagement clauses contained in deeds of settlement will be construed and enforced by the Courts in favour of the party who has been disparaged. This decision is a timely reminder to parties subject to these types of obligations to avoid making any statements that could be taken to disparage the other. Even if the comment is regarded by the maker of it as “fair comment”, if the non-disparagement clause doesn’t exclude such comments from its reach, then it will be problematic for the maker – potentially exposing them to Court orders, costs and possibly even damages.
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