The Supreme Court of New South Wales has enforced a contract of services between a television network and a celebrity talent judge to prevent the celebrity from working for a competing network during an exclusivity period agreed between the judge and the network.
Implications for employers
Prospective employers should note that valid contracts for services, along with any options for renewal that have been exercised, will be presumed to remain on foot in the absence of terminating conduct by the parties. This may be so even in the event of subsequent variation of the terms of the contract so substantial that it may appear to have been terminated. The enforcement of contracts may include restraints or exclusivity clauses which prevent the individual from providing services to a prospective employer.
This case concerned a contract for services under which a celebrity was to provide services exclusively to a television station. Under the agreement, the television station had an option to renew the contract for a year.
The plaintiff, Seven Network (Operations) Limited (Seven), entered into an agreement (Agreement) with the first defendant, entertainer Melanie Brown (Mel B), that she would appear on Seven's television shows X Factor and Dancing with the Stars. The Agreement also involved the second defendant Osiris, a production company owned by Mel B's husband, Stephen Belafonte.
The third defendant, Nine, is a television station and rival of Seven.
Seven claimed that it exercised its option under the Agreement with Mel B and Osiris in order to have Mel B appear as a judge on X Factor for a further year in 2013-2014. In its option exercise letter, Seven claimed that it varied the terms of the option so that Seven would pay an increased guarantee fee, and that Mel B would not be required to provide her services for Dancing with the Stars.
However, during the term of the exclusivity period covered by Seven's option, Mel B and Osiris entered into a written agreement with Nine, the terms of which specified that Mel B would appear as a judge on Nine's television show Australia's Got Talent.
Seven claimed that Mel B was prohibited by the Agreement from providing services to any of Seven's competitors in Australia. Mel B and Osiris claimed that Seven's exercise of its option was invalid, and that there was no longer a binding agreement between them and Seven.
Seven applied for an interim order restraining Mel B from appearing on Australian television under agreement with any person other than Seven before 31 January 2014. The Supreme Court granted this order, pending application for a final injunction.
At hearing, the Court found that Seven had validly exercised the option under its agreement with Mel B and Osiris, and that consequently Mel B should be restrained from providing services to Nine on Australia's Got Talent.
The Court determine the questions of whether Seven had exercised the option, and whether in doing so it had varied the terms of the option, by reference to objective indicators of the parties' intentions. The Court found that the behaviour and communications of Seven, Osiris and Mel B indicted that all three parties intended to contract on the terms set out in the option exercise letter. The original Agreement had not stipulated a method for exercising the option, and nor had it prohibited oral variation.
Interestingly, one of the factors relied on by the Court was that Stephen Belafonte had obtained a guarantee of indemnity from Nine for any potential legal claim Seven might make against Mel B. The Court reasoned that Stephen Belafonte's request was evidence that he believed a binding agreement with Seven still existed.
The Court concluded that there was "no reason" why Mel B should not be held to her promise to provide services in Australia exclusively to Seven and granted an injunction to restrain her from breaching her exclusivity commitment by working for Nine.
Seven Network (Operations) Limited v Melanie Brown  NSWSC 372