Damages awarded against previous executive employees for breach
of non-solicitation clause
Mr Ross and Mr Vogel were, respectively, the Chief Executive
Officer ("CEO") and Chief Technical Officer
("CTO") of IceTV from February 2005. They left their
employment on 4 October 2006, having served out a period of three
months notice. Their contracts of employment included:
non-competition clause; non-solicitation clause and confidentiality
IceTV distributed an electronic program guide for television
known as the Ice Guide. The Ice Guide could be downloaded onto
personal video recorders, set-top boxes and similar equipment.
A public float of IceTV was set in train in April 2006 with the
objective of raising $3 million in capital. However, before the
float could make substantial progress, Nine Network Australia Pty
Limited commenced proceedings against IceTV claiming that IceTV had
infringed its intellectual property. Although IceTV ultimately
succeeded in the High Court (IceTV Pty Limited v Nine Network
Australia Pty Limited  HCA 14, 239 CLR 458), the
institution of the legal proceedings brought about the demise of
the float and left IceTV in a parlous financial position in
On 4 July 2006, Mr Ross and Mr Vogel were each given three
months notice by IceTV terminating their contracts of employment.
However, they were asked to continue working until the last day of
the notice period and they did so.
IceTV claimed that after their employment was terminated, Mr
Ross and Mr Vogel, through a corporate entity, Vogel Ross Pty
Limited ("Vogel Ross"), breached their contracts
of employment including by undertaking consulting work on behalf of
Mobilesoft Pty Limited ("Mobilesoft"), a
software engineering company which was a customer or potential
customer of IceTV.
IceTV also alleged that Vogel Ross had intentionally induced and
procured the breaches.
At first instance, Rein J found that the defendants had breached
their contracts, and awarded damages in the sum of $43,488.19. The
self-represented defendants appealed to the NSW Court of
The first issue was as to whether leave was required to appeal,
in the context that the award at first instance was less than
$100,000. The defendants alleged leave was not required as their
cross-claim was in excess of that amount. The cross-claim related
to damages arising from an injunction IceTV obtained, preventing
them from completing certain work until the matter was heard. The
Court of Appeal agreed that given there was a prospect of an award
exceeding $100,000 if the appeal and the cross-claim were
successful, leave to appeal was not required.
The primary judge found that the defendants were not reliable
witnesses. On appeal, the defendants made submissions attacking the
findings adverse to their credit. The Court of Appeal did not see
reason to review those findings, as a decision could be made in the
absence of that issue. However, it was noted that there was a
strong argument that the primary Judge's credit-based findings
were flawed, at least insofar as they involved findings that the
defendants set out to betray IceTV's interests.
In deciding the case, it was noted by the Court of Appeal that a
restraint of trade is contrary to public policy and void unless it
can be justified by the special circumstances of the particular
case. Two conditions must be satisfied if the restraint is to be
held valid. The restraint must be reasonable in the interests of
the contracting parties and reasonable in reference to the
interests of the public.
The interests protected by the nonsolicitation clause in issue
were IceTV's goodwill and confidential information.
The restraint was imposed on each of the defendants for a period
of 12 months. They were prevented from:
Being competitive with the business of IceTV
Canvassing or soliciting the custom of any person who has
entered into discussions or negotiations with IceTV during the
twelve months prior to termination of their employment.
The restraint and its period of 12 months were considered
reasonable, in the context that the defendants were high level
executives in a relatively small operation with involvement in
negotiations and access to all confidential information. The
restraint was not too broad to be valid, being confined to
involvement by the defendants in a business competitive with that
The defendants had submitted that the primary Judge erred in
awarding damages for breach of the non-solicitation clause because
IceTV had not shown that it would have been engaged to perform the
work. This proposition was rejected. The Court of Appeal stated
that this finding was consistent with the evidence, and the award
The appeal was dismissed with costs.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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