In Cadbury Pty Ltd v Mercer Investment Nominees [2011] NSWSC 622, the court examined whether certain former employees of Cadbury Pty Ltd (Cadbury) were entitled to additional benefits from the superannuation scheme of which Cadbury was the trustee because they left employment within 12 months of a "change of control" of the employer. 

The agreement in question specified that if certain employees leave the service of the employer "following a change of control but not more than 12 months after the relevant date", they would be entitled to the additional benefits.

(a)    Does "change of control" include an internal restructure of the group of companies?

The plaintiff argued that the parties did not intend the "change of control" to mean an internal reconstruction in the Cadbury group which had no real effect on shareholders or operations.

The court noted that the definition in the agreement determined the meaning of "change of control".  Therefore, the relevant question was whether or not the result of applying the definition to an internal reconstruction is absurd, which would lead to the conclusion that this could not be what the parties intended.

In rejecting the plaintiff's argument, Windeyer AJ held that the term "change of control" was intended to include an internal restructure of the group of companies.  The mere fact that this was an "unexpected" result did not mean that it was an "absurd" result.

(b)     Does "following" mean "after" or "because of"?

The plaintiff argued that the word "following" meant "because of" (a causative meaning) not "after" (a temporal meaning).  Such construction may have allowed the plaintiff to question whether the former employees left the service as a result of the change of control (as it was clear that they had left after it).

Windeyer AJ held that, in the context, "following" meant "after", rather than "because of".  In particular, he noted the words "due to" were used in closely related provisions, which suggested "following" did not have a causative meaning.

When drafting a contract, companies should take care with "change of control" definitions and specify whether "change of control" is intended to include internal reconstructions or re-organisations, or solely external events.  Drafters should also use terminology which is unambiguous and use terms consistently to avoid confusion.

See case.