11 The defendants do not dispute that the consulting work they have undertaken for Mobilesoft has included work in the field of "video on demand services for content provision". In this context, "content" means entertainment such as movies, which can be provided through set-top-boxes or personal video recorders to subscribers. IceTV claims, but the defendants deny, that IceTV's business during the period of twelve months prior to 4 October 2006 included content provision.
12 The principles which I take to apply to construction of a restraint of trade were summarised in Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1179, as follows (at [67]-[68]):
67. A restraint is to be interpreted, for the purposes of ascertaining its real meaning, independently of the rules prescribing tests of reasonableness for the purpose of ascertaining its validity [ Butt v Long (1952) 88 CLR 476, 487; Geraghty v Minter , 180]. Nonetheless, where there is ambiguity, a covenant in restraint of trade in an employment contract will be construed in favour of the employee, so that a narrower construction of the scope of a restraint will be preferred to a broader construction, when both are reasonably available [ Mills v Dunham [1891] 1 Ch 576, 589-90; Vandervell Products Ltd v McLeod, 193 ; Littlewoods, 1486; Butt v Long, 487] - though this does not authorise a restrictive interpretation of general words simply to save a covenant from invalidity [ Butt v Long , 487; Galbally [108]]. In Australia, Butt v Long precludes the more liberal approach to construction of restraints adopted by Lord Denning MR in Littlewoods Organisation Ltd v Harris [1977] 1 WLR 14, 72, by which courts construe wide words narrowly so as to make the clause reasonable and therefore enforceable, interpreting them from the perspective that the parties' object is legality, and if the words of the restraint are so wide that on a strict construction they cover improbable and unlikely events, declining to enforce it in respect of them. However, Butt v Long is not inconsistent with the view that a covenant in restraint of trade should be construed, in the case of ambiguity, in favour of the employee; that is to say, in favour of giving it a narrower rather than a wider operation [ Butt v Long, 487].
68. Construction of a restraint is informed by the factual matrix, and in particular the nature of the employer's business, and the employee's role in it. An agreement in restraint of trade is construed with reference to its subject matter, and descriptive words may be restricted in their operation by reference to the circumstances in which the parties contract. Thus restraints which at first sight are general in form, in prohibiting a former employee from offering to perform services for or soliciting the custom of the former employer's clients, have often been construed as relating only to those services or products which the employer had offered, and covenants prohibiting a former employee from dealing or transacting business with customers of the former employer have been construed to mean business of the same or a similar kind to that which had been carried on by the former employer [ Lindner v Murdock's Garage, 635, 649; Mills v Dunham [1891] 1 Ch 576, 581, 586; Business Seating (Renovations) Ltd v Broad [1989] ICR 729, 735, (Millet J); G W Plowman & Sons Ltd v Ash [1964] 1 WLR 568, 572; [1964] 2 All ER 10; McLaughlin Consultants v Boswell [1989] 30 IR 417, 419 (Bryson J); cf I F Asia-Pacific Pty Ltd v Galbally (2003) 59 IPR 43; [2003] VSC 192, [118]-[127]].
13 What was, for the purposes of par (a) of the restraint, "the business of the company … carried on during the twelve months" period prior to October 2006, and what persons had, for the purposes of par (c) of the restraint, entered into discussions or negotiations with IceTV during the twelve months prior to the termination of the employment of Mr Ross and Mr Vogel, with a view to becoming a customer of IceTV, may be gleaned from a range of material.
14 In a ZapTV document dated 15 January 2005 - before the acquisition by IceTV - it was said, "Intelligent Content Engine (ICE) manages access to television content". The "vision statement" plainly contemplated the provision of "content" and the creation of "virtual channels", and envisaged, within three months of funding, offer of a "TiVo-like" service "using our proprietary seven-day EPG" to provide digital Personal Video Recorders for the free-to-air services that would soon replace the analogue service chosen by eighty percent of Australian households. Thus the business that IceTV acquired has had content provision, including a "TiVo-like" service, as an objective, although it was not yet doing so.
15 In early December 2005, Mr Vogel began to design new software functions for IceTV, intended to enable users to schedule TV recordings while away from home, using a website. This was called Personal Interactive Media Planner, or PIMP. It was envisaged that the PIMP website might later be adapted to include a library function, allowing downloading of other content, although this function had not been introduced, and no design or development work had been performed on that software, when Mr Vogel's employment was terminated.
16 Quickflix is an on-line home entertainment company, providing on-line DVD rental subscription services, offering customers a choice of over 16,000 movie and TV series titles to rent or purchase. On 25 January 2006, it announced that it had entered a "non-binding agreement" with IceTV to integrate its on-line consumer service offering with IceTV's interactive EPG, so that using the IceTV EPG and a personal video recorder or PC media centre, consumers would be able to manage what they watched across free-to-air TV and on-line services such as Quickflix, and that in the next twelve months, the partnership was expected to provide consumers with the ability to buy and rent movies at the touch of a button via their TV screen. The announcement included (emphasis added):
IceTV is Australia's only independent provider of interactive TV listings for free-to-air TV. The company's main product is the IceGuide, an EPG that shows subscribers what's on TV for the coming seven days for the digital free-to-view TV channels (7, 9, 10, ABC, SBS). In addition to the TV guide, IceTV is developing additional value added interactive content for the benefit of its subscribers . …
17 The announcement also attributed to Mr Ross the following (emphasis added):
IceTV CEO, Duncan Ross, said: "This exciting agreement with Quickflix means that IceTV subscribers will soon have the opportunity to buy or rent DVDs through their Electronic Program Guide. We are looking forward to working closely together to enable subscribers to download movies directly to their home entertainment centres in future ".
18 A memorandum of understanding between IceTV and Quickflix, to which Mr Ross as CEO of IceTV was one of the signatories, contained the following recitals (emphasis added):
A. IceTV is a provider of value added services to set-top-box Digital Video Recorders (DVRs) and PC based media centre products. Services include an interactive Electronic Program Guide (EPG) and content control features which provide users the ability to simply select television shows for recording, and to locate and download video content via the Internet.
B. Quickflix is a wholesaler and retailer of video movie "titles" which are sent to customers by mail, and in the future, sold over the Internet.
C. IceTV wishes to offer its customers the ability to purchase, rent and download the widest possible catalogue of movie titles .
D. Quickflix wishes to include sales of its titles by establishing a marketing partnership with IceTV.
E. IceTV and Quickflix have agreed in principle to work together to market Quickflix movies to IceTV customers under the project referred to as "IcePix" .
19 Mr Ross agrees that he executed this MOU with Quickflix in connection with the proposed provision of a movie download service, but says that no further action was taken following execution of the MOU, and that no infrastructure was ever designed or built or even demonstrated by Quickflix, and that Quickflix today still does not provide an electronic download content service.