How should the Agreement be construed?
69 No clause in an agreement is to be considered in isolation. In order to arrive at its true meaning a clause must be considered in the context of the whole of the agreement: Lewison K, The Interpretation of Contracts (6th ed, Sweet & Maxwell, 2015) at [7.02].
70 Notwithstanding the position Ten took in its correspondence with Ms Webber, neither in its written submissions nor in oral argument did Ten disagree with the proposition advanced by Mr Hafertepen that the Agreement should be interpreted in accordance with the principles drawn from a succession of High Court cases, starting with Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at [11], summarised by Allsop P in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603. At [14] his Honour observed:
The construction and interpretation of written contracts is to be undertaken by an examination of the text of the document in the context of the surrounding circumstances known to the parties, including the purpose and object of the transaction and by assessing how a reasonable person would have understood the language in that context.
71 In Franklins v Metcash at [19] Allsop P also said that a contract should be read "fairly and broadly", not "pedantically or in a manner prone to defeat the evident commercial purpose".
72 In Maggbury at [11] Gleeson CJ, Gummow and Hayne JJ approved the statement of Lord Hoffman (with whom Lords Goff, Hope and Clyde agreed) in Investments Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912; [1998] 1 All ER 98 at 114 that interpreting a written contract involves "the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract".
73 The importance of context and purpose cannot be overstated. In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46] French CJ, Nettle and Gordon JJ observed that "[t]he rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose".
74 Further, as Mr Hafertepen submitted, an obligation is implied by law on the parties to a contract to do all things necessary to enable each other to secure the benefit of the contract, as well as a negative covenant not to hinder or prevent the fulfilment of the purpose of the express promises made in the contract: Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 at [36] (Gleeson CJ, Gummow, Kirby and Hayne JJ); Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 378 (Dixon J); Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201 at [117]-[118] (Whelan JA and Riordan AJA), [278] (McLeish JA). See also Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 at [61] (Kiefel J). As this principle is directly related to contractual performance, it is arguably a rule of construction: Barker at [37] (French CJ, Bell and Keane JJ). Of course, an implied obligation to cooperate cannot conflict with any express term of the contract: Adaz at [279] (McLeish JA). But there could be no such suggestion here, having regard to cl 10 of the Agreement, which expressly requires the parties to take all steps and do all things reasonably required to give effect to the Agreement.
75 Ten accepted that commercial contracts are ordinarily subject to an implied obligation of good faith, referring to the judgment of the NSW Court of Appeal in Burger King Corporation v Hungry Jack's Pty Ltd [2001] 69 NSWLR 558 and to the view expressed by Edelman J as a member of this Court in Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825; 329 ALR 1 at [1009] that in this context "the notion of 'good faith' is better understood as a norm underlying, and shaping, a particular duty or duties". The obligation is implied as a matter of law: Burger King at [164].
76 Allsop CJ, who has written extensively on the subject both in this Court and elsewhere, summarised the effect of the authorities in his judgment in Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 (FC). His Honour observed at [288] that the obligation of good faith usually involves "an obligation to act honestly and with a fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained". His Honour also at [289] made the following observations (without alteration):
As Posner J said in Market Street Associates Ltd Partnership v Frey 941 F (2d) 588 (1991) the contractual notion of good faith varies in what is required for its satisfaction by reference to the nature of the contract. But the notion is rooted in the bargain and requires behaviour to support it, not undermine it, and not to take advantage of oversight, slips and the like in it. To do so is akin to theft, and if permitted by the law led to over-elaborate contracts, and defensive and mistrustful attitudes among contracting parties.
77 His Honour explained at [290] that the good faith obligation will not call for the same acts from all contracting parties in all cases. Rather, "[t]he contractual and factual context (including the nature of the contract or contextual relationship) is vital to understand what, in any case, is required to be done or not done to satisfy the normative standard". His Honour remarked at [291] that the good faith obligation is consistent with the content given to the expression in influential jurisdictions in the United States, such as refraining from acting with subterfuge and evasion or refraining from opportunistic conduct, such as by taking advantage of a disadvantageous position of the other party who has performed first, or cooperating to achieve the contractual goals. The case references appear there and need not be reproduced here. At [292] his Honour noted that the good faith obligation is rooted in honest and reasonable fair dealing.
78 A party is not required to subordinate its own interests to that of another (Paciocco at [289]). But there are limits. As Barrett J pointed out in Overlook v Foxtel [2002] NSWSC 17; (2002) Aust Contract R ¶90-143 at [65], that only holds true "so long as pursuit of those interests does not entail unreasonable interference with the enjoyment of a benefit conferred by the express contractual terms so that the enjoyment becomes (or could become), in words used by McHugh and Gummow JJ in Byrne v Australian Airlines Ltd (1995) 185 CLR 410, 'nugatory, worthless or, perhaps, seriously undermined'". Later, at [67], his Honour put it this way:
[T]he implied obligation of good faith underwrites the spirit of the contract and supports the integrity of its character. A party is precluded from cynical resort to the black letter. But no party is fixed with the duty to subordinate self-interest entirely which is the lot of the fiduciary: Burger King at para 187. The duty is not a duty to prefer the interests of the other contracting party. It is, rather, a duty to recognise and to have due regard to the legitimate interests of both the parties in the enjoyment of the fruits of the contract as delineated by its terms.
79 Mr Hafertepen pointed to the express obligation imposed on each party by cl 10 of the Agreement to take all steps and do all things reasonably required to give effect to the agreement. He submitted that there was arguably little substantive difference between a contractual obligation to act reasonably and an obligation to act in good faith. In Burger King at [169] Sheller, Beazley and Stein JJA noted that the Australian cases made "no distinction of substance between the implied term of reasonableness and that of good faith".
80 Ten did not argue that it was not required to act in good faith. Its position was that Mr Farley's evidence demonstrated that it did. I will come to Mr Farley's evidence in due course. First it is necessary to consider the context and purpose of the Agreement and decide how a reasonable person would have understood the language in cl 7.
81 Ten doggedly maintained that it had absolute discretion as to where on the 10play website to publish the Clarification because cl 7 was silent on the matter. On an objective reading of the Agreement, its position is untenable. Having regard to the context, and in view of the purpose of the Agreement, a reasonable person would not have understood it in this way.
82 The context is apparent from the terms of the recitals, which read as follows:
A. On 6 November 2018, Ten produced a story titled "Justice for Jack" (Content) and, through its subsidiaries and regional broadcasting affiliates throughout Australia, broadcast the Content as part of the television program known as The Project (Broadcast).
B. On or about 6 November 2018, the Content was uploaded by Ten to the 10play website (Internet Publication).
C. On or about 6 November 2018, the Content was promoted on The Project Twitter page (Internet Promotion).
D. The Content, Broadcast, Internet Publication and Internet Promotion contained references to Hafertepen.
E. On 25 October 2019, Hafertepen commenced defamation proceedings against Ten in the Federal Court of Australia.
F. The Parties have agreed to settle the Proceeding without any admission of liability on the terms set out in this Agreement.
83 The purpose of the Agreement was to settle the dispute over the alleged defamation in the broadcast and the various publications on the internet by restoring at least to a certain extent the damage to Mr Hafertepen's reputation potentially caused by the story. In consideration of his promise in cl 8 to release and discharge Ten from any claim connected with or arising out of the broadcast or the publication or promotion of the story on the internet, Mr Hafertepen received no monetary compensation. He argued that the Court could readily infer from the terms of the Agreement that the vindication derived from the publication of the Clarification, the letters to the media organisations, and the apology was the major component of the relief he agreed to accept in consideration for compromising his claim against Ten.
84 Ten quibbled with this characterisation. It contended that the statements made in the various publications were not intended as a complete vindication. It stressed that the Agreement was entered into "on a no-admissions basis" and the only concessions were made in respect of two out of seven imputations. It argued that there was a significant monetary component to the settlement, pointing to the agreement to pay the mediator's fees and Mr Hafertepen's reasonable costs. It also argued that there was little or no discretion in any of the clauses except for cl 7. Furthermore, it maintained that the fact that cl 7 was the last of the five substantive benefits listed in the Agreement, and much less detailed, demonstrates that it was of less importance than the others.
85 Neither the order in which the clause appears in the Agreement nor the amount of detail it contains defines its importance or assists in determining its purpose or the purpose of the Agreement as a whole.
86 Defamation is concerned with the protection of reputation. The purpose of a suit in defamation is to restore or repair the harm to the reputation of the applicant caused by the defamatory statement(s) or publication(s). That was certainly the objective purpose of the letters and the Clarification for which cll 5 and 7 provided. It was also the objective purpose of Ten's agreement to Mr Hafertepen showing the letter of apology to friends, family members and prospective employers.
87 The Clarification was in the nature of a retraction or public apology. The purpose of an apology is "to appease the injured feelings of the person defamed and to undo the harm done to his reputation in consequence of the publication": Gatley on Libel and Slander (12th ed, Sweet & Maxwell, 2013) at [29.2]. More than 150 years ago, in Lafone v Smith (1858) 3 H. & N. 735, in a passage cited in Gatley, Bramwell B said that:
Inserting an apology means effectually inserting it; not so that people would not be likely to see it, but in such a manner as to counteract as far as possible the mischief done by the libel.
88 More recently, in Wagner v Nine Network Australia Pty Ltd [2019] QSC 284 at [127] Applegarth J referred to the remarks of Bramwell B and observed that, for an apology to be effective "it should be published, so far as possible, to the readers or viewers of the indefensible defamation and to those to whom the defamation has spread on the grapevine". The same must also be said of a retraction, whatever name is given to it.
89 Ten denied that its apology was insincere. That much must be accepted. It follows, as Mr Hafertepen's counsel put it in submissions, that the Clarification was not merely platitudinous. Rather, it served to correct an impression some viewers may have formed that Mr Hafertepen was in some way associated with his partner's death. Correcting the record about such a serious matter was an important part of the Agreement.
90 Since the Clarification related to a story aired on The Project, and was intended to go at least some way towards restoring or repairing any damage to Mr Hafertepen's reputation the story may have caused, a reasonable person would have understood the reference in cl 7 to the 10play website to be a reference to a place on the website where the Clarification was likely, if not most likely, to come to the attention of anyone who had watched the program. Yet, by posting the Clarification on the Terms of Use page, Ten put it in a place where it was highly unlikely to come to anyone's attention. As Ms Webber put it in correspondence with Ten before the filing of the interlocutory application:
The purpose of the Clarification is to provide information to users of the 10play website who may have watched the story titled "Justice for Jack" (Content), broadcast as part of the television program known as The Project, and uploaded by Ten to the 10play website on or about 6 November 2018. Users of the 10play website since November 2018 would have no reason in May 2020 to read or access the website Terms of Use, and in particular to scroll to the bottom of those Terms.
91 In what can only be described as an understatement, Mr Hafertepen submitted that "the 'Terms of Use' page is not an immediately apparent feature when one accesses the Website". To find it, one has to scroll to the bottom of the homepage where, in small white letters on a black bar the following text appears:
Advertise with Us - Terms of Use - Privacy Policy - FAQs - Careers - Corporate - Contact Us / © 2020 Network Ten Pty Limited.
92 If one clicks on the words "Terms of Use", one is taken to the "Terms of Use" page.
93 The "Terms of Use" page is that page of the website which records the terms and conditions pursuant to which anyone accessing or using the website agrees to do so. The Clarification was published after the Terms of Use where, bizarrely, it was followed by the word "Advertisement". When printed out, the Terms of Use run to 15 A4 pages.
94 To say the least, this was an obscure location. It is notorious that most people do not read terms of use even when prompted to do so before obtaining access to digital services. Ms Webber was unable to find the Clarification even though she was looking for it. In the circumstances it is difficult not to believe that the Clarification was published there in order that it would not be seen.
95 The decision to upload the Clarification to this part of the website was made by Mr Farley in consultation with "key members of the Network Ten digital team" and Ms Smithies who was his supervisor. The evidence indicates that the idea to put it on the Terms of Use page, however, was his.
96 No evidence was adduced from Ms Smithies or any member of Ten's digital team. Some of the consultation took place by email but much of it was oral and not disclosed. In the absence of any explanation for the absence of evidence from these potential witnesses, it is reasonable to infer that nothing they could say would assist Ten's case.
97 Mr Farley deposed that, before the Clarification was published, he was told by (unnamed) members of the digital team and believed and continued to believe that:
(a) Because Network Ten is a television broadcaster, the homepage of the 10play website is designed specifically to host video content and does not allow a large amount of text to be published on it;
(b) The 10play website has been specifically designed so it easily carries across to the 10play mobile phone and smart television applications in a similar layout;
(c) If a large amount of text were to be published on the 10play homepage, this would require a significant amount of re-design to the website or the underlying code to ensure that the homepage would continue to carry across to the 10play mobile phone and smart television applications in a similar layout; and
(d) It was not realistically feasible to place the Clarification on the 10play homepage.
98 Mr Farley did not indicate what he meant by "a large amount of text". I struggle to understand why it was not feasible to publish the Clarification on the 10play homepage, since on the face of things it does not consist of "a large amount of text". Be that as it may, Mr Hafertepen does not suggest it should have been published there. The case Ten came to meet was that it should have been published on a page of the website relating to The Project. Mr Farley deposed that this was an option the digital team discussed with him and that "the most logical" part of that page was the "Articles" tab, which he described as "a location commonly reserved for statements or responses to requests for comment". But he said that, given the discretion he considered Ten had in determining where on the website to place the Clarification, he directed the digital team to put it on the Terms of Use page in the same size and font that usually appears on that page.
99 In his first affidavit Mr Farley deposed that this was "the most logical location". In his second affidavit he described it as "the most appropriate". This evidence strains credibility and I cannot accept it. Indeed I consider it to be disingenuous. In cross-examination Mr Farley accepted that it was not commonplace for a person to click on the Terms of Use page to find out information about a particular program. He revealed that, before he selected the Terms of Use page as "the most logical" and "most appropriate" location to publish the Clarification, no-one had ever told him they had read the Terms of Use page. When asked how a clarification to a person who had sued Ten was a term of use, he struggled to answer, replying:
I don't - you mean a term of - no, that's - it wasn't part of the terms of use, it was underneath them.
100 He later conceded that it would be a misdescription to call the Clarification a term of use. He sought to justify his position in this way. He understood that terms of use are legal notices for the website and the Clarification was a legal notice, although he had never previously been involved in putting anything else in that position since he had worked for Ten and was unaware of any other legal notice appearing on the Terms of Use page.
101 Even if there were some logic to Mr Farley's thinking, the Terms of Use page was by no means the most logical or most appropriate location. If anything, it was one of the least logical and least appropriate. In effect, if not by design, publishing the Clarification in this part of the website undermined its purpose. The logical location was the place where it was most likely to be seen by people who had seen the story, for they were the people whose opinion of Mr Hafertepen might have been lowered by the relevant imputations and whose misconceptions were in need of correction. If that was not the homepage or the Clarification could not be accommodated on the homepage, then it was a page relating to The Project, being the place on the website to which the story had been uploaded and where it had been made available for streaming.
102 In cross-examination Mr Farley denied making the decision to put the Clarification on the Terms of Use page in the belief that "next to nobody" would see it. But when asked whether he thought people read the terms of use of the website, he said he did not know. When pressed, he replied:
Look, I don't think that - I don't think people go there, but - I - I don't know. I honestly don't know.
103 If he did not think people go to the Terms of Use page (or know whether they do), then the Terms of Use page was scarcely the most logical or appropriate location for the Clarification. The most rational explanation for his choice of location was that he thought it was in Ten's best interests to bury it where it was unlikely to be found. It is true that later in cross-examination, when asked whether he was seriously telling the Court that he was satisfied that the Clarification was in a place where people could find it, he replied that it was. In the light of his earlier evidence, however, his answer was not credible.
104 In his second affidavit Mr Farley addressed the requests made by Ms Webber to republish the Clarification where it could be seen and to send her copies of the letters to the media organisation. He dealt with this matter by reference to the "reputational cost" of the Agreement, stating:
[31] As a national broadcaster and large media organisation, the Respondent's public standing carries considerable value. In my experience, it is not a small matter for an organisation such as the Respondent to make any form of public correction, clarification or apology. This is especially the case, as in this matter, where the Respondent settled the proceeding with no admission of liability, pursuant to clause 14 of the Settlement Agreement.
[32] I considered that the Settlement Agreement was an all-inclusive package deal the Applicant was prepared to accept and the Respondent was prepared to pay, which had a considerable reputational and monetary cost for the Respondent.
[33] I considered that the requests by the Applicant for the repositioning of the Clarification and copies of the Letters to Media Organisation had the potential to undermine the integrity of the Settlement Agreement as a package deal, which finely balanced the reputational cost the Respondent was prepared to accept in return for the cost effective resolution of the dispute.
105 In cross-examination, however, he rejected the proposition that his decision that the Clarification should be published on the Terms of Use page in the first place was primarily actuated by his concern with the reputational harm he felt would be occasioned to Ten because it had agreed to publish a clarification. On the other hand, he conceded that the purpose of the Clarification was to vindicate Mr Hafertepen's reputation to the extent that it may have been damaged by The Project's story. He also conceded that in order to achieve that purpose it was necessary for people to see the Clarification and that it was therefore necessary for it to be published in a position where it could be seen. Yet, the effect of Mr Farley's evidence is that it never entered his head when considering the various options that the Clarification should be published in a position where it could be seen. Rather, it was a matter of complete indifference to him. As long as it was published that was enough. This evidence is also implausible. I accept the submission made on Mr Hafertepen's behalf that more likely than not Mr Farley chose the place of publication in order to avoid or minimise the so-called reputational cost of making a public apology.
106 Mr Farley was an unsatisfactory witness. He was often evasive and had to be pressed to answer the questions he was asked. In cross-examination he was unable to provide an intelligible explanation for sending Ms Webber a photograph to prove the letters had been sent when the subject-matter of the photograph was unable to be discerned. As indicated above, on critical issues his evidence was not credible.
107 I find that, by publishing the Clarification at the bottom of the Terms of Use page of the 10play website Ten's conduct failed to discharge its obligation under cl 7. Rather, it published the Clarification in a manner that was calculated to frustrate or undermine its purpose and which deprived Mr Hafertepen of an essential benefit of the contract he had bargained for. In acting in this way, Ten breached the Agreement.
108 By insisting that it was adhering to the terms of the Agreement, Ten's conduct involved what Barrett J referred to in Overlook as "cynical resort to the black letter". Publishing the Clarification in a place where it was unlikely to be seen by anyone, let alone by anyone who had seen or heard the publication the subject of the suit being compromised by the Agreement, was an act of bad faith. It was also inconsistent with Ten's obligation to do all things reasonably required to give effect to the Agreement.