Pact Property Pty Ltd v APF Commercial Pty Ltd

Pact Property Pty Ltd (Pact) and APF Commercial Pty Ltd (APF) were parties to a sale agreement concerning a business. The total purchase price was to be paid in two stages, with the sale conditional upon the novation of numerous client agreements. When this condition was not met, the parties varied the sale agreement, agreeing to a lesser amount for the first payment. The central dispute concerned how the second payment was to be calculated: as a percentage of the reduced first payment, or on the basis of the value of the novated agreements. The matter came before the New South Wales Court of Appeal.

The Court of Appeal was required to determine the proper construction of the varied sale agreement, specifically how the second instalment of the purchase price was to be calculated in light of the failure of the condition precedent and the subsequent variation. This involved interpreting the intention of the parties as expressed in the written agreement and its subsequent amendment, particularly in relation to the formula for the second payment.

The Court analysed the terms of the original agreement and the variation deed, applying principles of contractual construction. It considered whether the variation intended to substitute a new calculation method for the second payment or merely adjust the first payment while preserving the original basis for the second. The Court concluded that the parties' intention, as evidenced by the language of the variation deed, was to adjust the first payment and that the second payment was still to be calculated by reference to the value of the novated agreements, not as a percentage of the reduced first payment.

The Court answered the questions posed by the parties accordingly. Question 1(a) was answered "No", Question 1(b) was answered "Yes", and Question 1(c) was answered "No". Question 1(d) and all parts of Question 2 were deemed unnecessary to answer in light of these determinations.