DARBY & GERWIG

The parties to this proceeding were Darby and Gerwig. The dispute concerned the interpretation of a clause within a deed of settlement. The matter came before Young J of the Supreme Court of New South Wales.

The central legal issue before the Court was whether a particular payment made by the defendant, Gerwig, constituted a "capital gain" for the purposes of a clause in the deed of settlement that stipulated a division of such gains between the parties.

Young J reasoned that the ordinary meaning of "capital gain" in a commercial context referred to an increase in the value of a capital asset. His Honour considered the nature of the payment in question and concluded that it did not represent an increase in the value of a capital asset but rather a recoupment of expenditure. Therefore, it did not fall within the definition of a capital gain as contemplated by the deed.

The Court ordered that the payment in question was not a capital gain and accordingly, the plaintiff, Darby, was not entitled to a share of it under the deed of settlement.