Network Ten Pty Ltd v Seven Network (Operations) Ltd [2014] NSWSC 692
Tuesday 3 June 2014 @ 11.02 a.m. | Industrial Law
Last week, Stevenson J of the Supreme Court of NSW decided Network Ten Pty Ltd v Seven Network (Operations) Ltd [2014] NSWSC 692, a well-publicised case that illustrated the extremely high value televisions stations place in their programming executives.
The case stemmed from an attempt by Network Ten Pty Ltd (Channel Ten) to convince Mr John Stephens to defect to them from his employment at Seven Network (Operations) Ltd (Channel Seven). Mr Stephens initially accepted and signed a contract, but later purported not to accept the offer, saying among other things that he did not have the requisite capacity to accept the contract as he was under the influence of medication at the time. Mr Stephens instead accepted a different role at Channel Seven. Channel Ten refused to accept this, and went to the Supreme Court seeking an injunction that would restrain Mr Stephens from working at Channel Seven or its related bodies between 9 June 2014 and 8 June 2016, and a declaration that the employment contract was valid.
Facts
Mr John Stephens, a television programming executive with over 40 years’ experience, had been working for Seven since February 2013 as a Programming, Strategy and Acquisitions Consultant. His employment contract expired in 2015, but either party could terminate the agreement with three months’ notice. After an extensive email discussion about terms of the agreement including working hours and incentives, Mr Stephens signed a contract with Channel Ten on March 6. As he had raised the possibility that Channel Seven would require him to work out his full three month notice period, his employment was stated to commence on June 9 and to continue for a two year period. Clause 5b) and 5c)(iv) of the Contract read:
b) You agree that during the term of your employment, you will not solicit, encourage or accept any offers of employment from or offers to provide services to any other entity without TEN's prior written consent and if you receive such an offer, you will immediately communicate the existence of the offer and its terms to TEN….
c) You agree that, except with the written consent of the Chief Executive Officer during the term of your employment (including any leave of absence under clause 13c), you will not:
iv. become an employee, agent or contractor of another person;
When Mr Stephens notified Channel Seven of his decision to resign on the same day he signed with Channel 10, his resignation was not immediately accepted by the CEO, Tim Worner. Over the next few days, Mr Stephens had email conversations and meetings with representatives from both networks. On March 10, Mr Stephens wrote an email saying that he had decided not to join Channel Ten and would be remaining at Channel Seven. In particular, he wrote that he felt that he had been adversely affected by medication he had taken following surgery at the time he signed the contract.
Proper Construction of the Agreement
Channel Ten claimed that Mr Stephens acted in breach of clauses 5b) and 5c) of the agreement. Although the agreement stated it “commences on and is effective from the date of execution”, Stevenson J found that Mr Stephens’ obligations under Clause 5, which was titled “Employment Obligations”, did not arise prior to the date he was due to commence employment, 9 June [at 129]. He therefore concluded that there was no breach.
Stevenson J did note that Mr Stephens may have repudiated his obligations under the agreement with Channel Ten, and had Ten accepted this they could have looked to him for damages. However, Channel Ten did not accept the termination and attempted to hold Mr Stephens to the agreement.
Injunctive Relief
His Honour noted that equity does not normally enforce a contractual obligation to perform personal services [at 146], and noted it was clear that Mr Stephens would not go to work at Channel Ten. Channel Ten argued that Mr Stephens could work for “any entity in Australia or overseas other than Seven or the Nine Network” [at 153], but Stevenson J felt that this did not go far enough towards proving that “the grant of an injunction would not leave Mr Stephens idle” [at 156].
Additionally, Channel Ten made an offer on May 13 to Mr Stephens to pay his renumeration according to the original agreement if he was restrained from working for Channel Seven or Nine, regardless of whether he did any work for Ten itself. His Honour called this offer “extraordinary” and refused to take it into account in considering the injunction. He went on to say: “in effect, Ten is seeking to purchase an injunction” [at 160].
Intentional Interference by Seven
His Honour found that Seven did apply “pressure, procuration, and persuasion” to Mr Stephens that they knew would cause him to “walk away” from the contract [at 224]. Channel Seven created a new role for Mr Stephens with an “extraordinarily generous financial offer… they knew would more than match what Ten had offered”, as well as assisting him with preparing the draft email to Ten announcing his change of mind [at 226]. However, he found that this would still not have caused him to grant the injunction against Mr Stephens.
Declaratory Relief
His Honour was prepared to make a declaration that the agreement with Ten “remains on foot”, but left open the question of further enforceability.
Further Action?
It is not clear if Channel Ten intends to take any further action. Hamish McLennan, the chief executive of Ten, told The Guardian:
“The ruling that Mr Stephens’ contract with Ten remains on foot vindicates our position. The court has found that our contract is valid and binding… We stated from the outset that our aim was to get to the truth of what happened after Mr Stephens signed a contract with our company.”
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Sources:
Network Ten Pty Ltd v Seven Network (Operations) Ltd [2014] NSWSC 692
