Share Sale Agreements – Calculating Deferred Payments via a Multi-Year Staged Process

Disclosure requirements – access to underlying information  –  construction approach where large amounts in issue – where earlier figures impact later calculations – effect of limited dispute windows – significance of terms of Independent Accountant  process – whether lack of precision fatal – commercial absurdity.

On 29 October 2025, I published a Keynote about the Court of Appeal of the Supreme Court of Victoria decision: Copper (Qld) Investments Pte Ltd (formerly EMR Capital Investment (NO. 6B) Pte Ltd) v Carl Hallion (as ‘agent’ of each ‘secured party’ under the Deed of Mortgage dated 17 September 2018) & Ors [2025] VSCA 805 (8 August 2025). It concerned the earnout provisions of a share sale agreement and provided some useful reminders regarding the rules of construction of commercial contracts where one interpretation is uncommercial.

The 6 November 2025 decision of Justice Waller also of the Victorian Supreme Court in Indi Pty Ltd (as trustee for the Hewitt Business Trust) v InComm TCN Holdings Pty Ltd [2025] VSC 687 illustrates some other principles of contract construction, again in a share sale, deferred payment context.

However, unlike EMR Capital, Indi concerns the extent of disclosure obligations to enable review of the purchaser’s calculations. The case did not directly concern the correctness of the calculations themselves nor whether ultimately the seller would be entitled to the deferred payment or Further Payment, as it was called in the share sale agreement (SSA).

The SSA concerned the sale of all the shares in TCN, The Card Network to InComm. The TCN business was the issue and sale of gift cards redeemable at nominated retailers throughout Australia. Richard Hewitt, the principal behind Indi, had been a co-founder of the business. The main source of revenue for the business arose from breakage which arises if gift cards expire before being spent.  Most gift cards sold had a 3 year validity period so when the shares were sold in October 2022, the level of breakage relating to pre-share sale sales, could only be calculated after the end of 2025.

Non-binding heads of agreement specified the total price for all the shares to be $105 million. However ultimately, it was agreed that the consideration for all the shares would be $75 million with a deferred Further Payment referrable to 2022 earnings and breakage.  Indi held 46.25% of the shares so would be entitled to that portion of the sale price.

The SSA established a complex multi stage process for calculating the Further Payment that was to operate over a period of years. At each stage, InComm had to provide Indi with the calculations required at that stage ‘together with supporting information, calculations and documentation’. A third party Card Complaint was also required to provide reports for use in the calculations.

At each stage, there were specified periods within which Indi could dispute the calculations and reports received pursuant to the process. There was also a stepped dispute process that included good faith negotiations and then finally, referral to an Independent Accountant, as defined, if the dispute remained unresolved.

In summary, InComm provided calculations at each stage together with reports and pdf-ed spreadsheets.  As they were ‘hardcoded’, the spreadsheets did not reveal underlying formulae or data from which the calculations were purported to have been made. Further, some of the reports were extensively redacted.

Indi sought further information and disputed calculations within each specified period. InComm did provide some additional information however the pattern continued with InComm providing reports and calculations and Indi disputing the figures and seeking additional underlying information.

In the course of reviewing the materials, Indi found some discrepancies in the Issue Amounts across different FP Notices (required as part of the process) which it alleged, InComm did not satisfactorily explain.

Indi issued proceedings before the final calculation was made and shortly after issue, on 28 February 2025, InComm advised Indi the actual breakage figure of cards sold during the 2022 calendar year and then assessed the Further Payment to be nil.

At a Glance!

Waller J found InComm to be in breach of the relevant provisions of the SSA.  The words ‘supporting information, calculations and documentation’ should be given a wide and broad meaning consistent with the purpose and context of the provisions and amount of money in issue. By reason of this finding, Waller J concluded that Indi was entitled to:

• source data;
• the unredacted reports, communications relating to the preparation of the reports including with Card Complaint, and documents relied on to prepare the reports;
• the general ledgers; and
• a reasonable sample of underlying invoices and transactional records respecting the December 2022 EBITDA calculation that was required as part of the process.

The judge also found that although the review periods for the calculations had passed, Indi’s rights to dispute figures had not expired because the review process had not concluded.  To find otherwise, would be commercial absurd as it would render the disputes procedure nugatory with Indi unable to participate fairly in the Independent Accountant process; and where earlier figures affected subsequent calculations, earlier figures could be disputed as part of the review process at a later stage.

Further a lack of specificity is not fatal where words of wide and broad import are used. One looks to what has been said, not whether it could have been more precise.

And for case nerds like me!

• The terms of a commercial contract are to be construed by reference to what a reasonable businessperson would have understood them to mean.
• The correct approach is to determine the parties’ rights and liabilities objectively by reference to text, context and purpose.
• In identifying purpose, that task may be assisted by an understanding of the genesis of the contract, background, context, the market in which the parties are operating and the agreed consideration.
• The phrase ‘supporting information, calculations and documentation’ is drafted in broad terms. Each individual word carried wide import, and the cumulative effect is to require provision of comprehensive material sufficient to enable meaningful review and verification [108].
• The phrase should also be considered within the purpose and context of the relevant clause as a whole. Clause 7 establishes a sophisticated mechanism for calculating the Further Payment, which may amount to many millions of dollars. The calculation depends on complex estimates of breakage (unspent amounts on gift cards) which in turn depend upon statistical analysis of historic spending patterns, treat met of different card types and sales channels, and judgments about future spending behaviour [109].
• The elaborate structure put in place would be undermined if the words were read narrowly. If Indi receives only summary figures or high-level explanations, it cannot conduct the meaningful review that clause 7 contemplates. The 20 business day review period in clause 7.6 would be illusory if Indi does not receive sufficient information to identify whether there are errors or grounds for dispute [111].
• Further at the Independent Accountant stage (the conclusion of the stepped dispute process), the parties may make submissions. The  Independent Accountant may review documents submitted by the parties and may request historic documents. If Indi doesn’t have access to the same underlying documents that InComm has, there will be information asymmetry here that would compromise the fairness of this process.
• Further where words or phrase appear in different parts of a contract, they should absent contextual indications to the contrary, be given the same meaning [114]. Here they appear in substantially identical form in different clauses so should be given the same meaning.
• The judge then looked at the different categories of disclosures required and the role of third parties. InComm argued that by including Card Complaint reports, the parties intended to rely upon its expertise without requiring detailed investigations of underlying data. The judge disagreed. Card Complaint’s final determination was still reviewable as Indi retained the ability to disagree with InComm’s calculations and again, the Independent Accountant process contemplated a substantive review of disputed matters so Indi must have the same data to prepare its submissions as InComm had.
• InComm also argued that had the parties intended that Indi have access to source data, they would have said so. The judge disagreed: By the same logic, if parties had intended ‘supporting information, calculations and documentation’ to exclude Source Data, they would have said so explicitly. The question is what the phrase means as a matter of construction, not whether it could have been drafted more precisely [133].
• The judge also gave Indi access to InComm’s communications with Card Complaint relating to the preparation of its reports. They are ‘supporting information’ or ’documentation’ in terms of the disclosure requirements.
• Turning to the ‘hard-coded’ spreadsheets, as they show only final results, not the calculation process or the data inputs [152], they do not permit meaningful verification. Therefore, given the Independent Accountant provisions, this information cannot be excluded. The discrepancies noted in the Issue Amounts show why this access is necessary.
• Next was information supporting the December 2022 EBITDA figure which was required as part of the process. InComm argued that the parties had agreed to apply this figure so no further information had to be provided. However, the figure was then carried forward into later calculations so any error would affect the ultimate Further Payment. An InComm representative conceded in cross examination that underlying legers and sample invoices would have to be considered to form a view about the correctness of the EBITDA figure and the judge concluded that Indi was entitled to this information.
• The judge then considered the argument that Indi’s entitlements had expired by reason of the timing provisions. The judge disagreed. Indi had consistently disputed the calculations so the process at the relevant stage had not concluded. The fact that the initial 20 business day review periods have expired does not mean the substantive review process is complete [190].
• Further, if InComm was right, once the 20 business day period had expired, Indi would never be able to seek the information necessary for the good faith negotiations required as part of the dispute process. Such a construction would be commercially absurd. The parties cannot have intended that Indi’s entitlement to access information would evaporate at precisely the tine the information is most needed [192].
• The judge also concluded that the commercial operation of the relevant clause supports an interpretation that permits ongoing access to information [197]. The structure of ‘flowing through’ figures from earlier stages to later stages means that information and calculations from earlier stages remain relevant throughout the entire process [199]. Therefore, Indi remained entitled to dispute calculations at a later stage even if the stage for disputing the earlier calculation had notionally passed [199].
• On the sample invoices, Waller J accepted that representative samples be provided across transaction types and channels sufficient to verify ledger entries accurately reflect business transactions, accounting policies had been consistently applied and unusual, material or non-standard transactions are properly documented [237]. If disputes arose respecting any of these items, the parties could apply to the Court for directions.