Flynn v PPK Mining Equipment Pty Ltd

The appeal in *Flynn v PPK Mining Equipment Pty Ltd* concerned the construction of a share purchase agreement. The appellants, the sellers of shares, alleged that the respondents, the purchasers, had breached the agreement by failing to satisfy certain performance conditions, which in turn affected the final purchase price. The dispute centred on the interpretation of "business revenue" as defined within the agreement for the purpose of assessing whether these conditions were met.

The primary legal issues before the Court of Appeal were: (1) how the share purchase agreement should be construed, particularly in light of its commercial purpose and object; and (2) the correct interpretation of "business revenue" for the purpose of determining whether the second performance conditions were satisfied, specifically whether revenue from internal supply should be included and how it should be calculated.

The Court of Appeal allowed the appeal, finding that the respondents had incorrectly calculated business revenue by excluding revenue derived from internal supply. The Court held that the agreement, when construed objectively and having regard to its commercial purpose, required the inclusion of revenue from internal supply. This internal supply was to be calculated based on the transfer price as agreed by the parties. The Court determined that the respondents had prepared their Net Profit After Tax (NPAT) statements on the basis of this incorrect contractual premise. Consequently, the Court set aside the Supreme Court's previous orders and remitted the issue of damages or other relief, and potentially costs at first instance, back to the primary judge for determination. The appellants were awarded their costs of the appeal, with a provision for further submissions if either party wished the Court of Appeal to determine the costs of the first instance hearing.