Nestle Australia Ltd v McDougall

Nestlé Australia Ltd appealed to the New South Wales Court of Appeal against a decision of the Supreme Court of New South Wales, which had found in favour of the respondent, McDougall. The dispute concerned the interpretation of a clause within a deed of settlement, which McDougall argued entitled him to a share of certain profits derived from the sale of a business. Nestlé contended that the clause did not confer such a right.

The primary legal issue before the Court of Appeal was the proper construction of clause 4(b) of the deed of settlement. This clause stipulated that McDougall was to receive a proportion of "net profits" arising from the sale of the business, but the parties disagreed on what constituted "net profits" and whether certain costs incurred by Nestlé should be deducted in calculating this figure. The court was required to determine the intention of the parties as expressed in the deed, considering the ordinary meaning of the words used and the context of the agreement.

The Court of Appeal held that the interpretation of the deed should be based on the plain and ordinary meaning of its language. It found that the term "net profits" was not defined in a way that would permit the deduction of the specific costs Nestlé sought to claim. The court applied the principle that where a contract is clear and unambiguous, its terms will be given their literal meaning, and extrinsic evidence cannot be used to contradict or vary the written agreement. Consequently, the court found in favour of McDougall, upholding the Supreme Court's decision.