From what I can tell, there are three possible interpretations of this ability:
(1) This goal of this ability was to let you deal your Curse damage with melee attacks! Which... you could already do, and the writer of this item simply didn't realize, and thus, the ability has no actual effect.
(2) When you hit your target with this weapon, you deal your Curse damage, entirely outside of the normal application of that damage. Which means you could deal double Curse damage if you choose to apply your normal Curse damage in addition to the Pact Hammer Curse damage that triggers when you hit. Given the complexity somewhat needed for this line of thought, along with how way too powerful it seems to be, I'm less inclined to go with this idea - but some think this is how it works.
(3) When you hit with the Pact Hammer, you can deal your Curse damage, even if you have already applied your Curse damage that round. This doesn't mean you can apply it twice over - it is simply opening up a restriction on the Curse damage usage, not providing an entirely seperate method of using it. Hypersmurf gives a good explanation of how this works.
I favor (3) as the interpretatio, since (1) is useless and (2) is way too powerful. Some feel that (3) might be useless as well, but I can see a variety of ways for it to trigger:
1) You blast an enemy with some power that makes them not want to attack you (Eyebite, Hellish Rebuke), or have a damaging aura around you (Armor of Agathys). After hitting the enemy on your turn (and dealing curse damage), they don't want to stay near you - and move away, provoking Opportunity Attacks on which you can apply your Curse damage.
2) On your turn, you blast the enemy, dealing Curse damage. On the Warlord's turn, he uses a power to let you take a free basic attack - on which you can apply your Curse damage when you swing with the Pact Hammer.
3) On your turn, you blast someone, dealing Curse damage. Then you Action Point, and walk up and hit them - dealing Curse damage due to the Pact Hammer.
4) You are using a power that lets you make attacks in later rounds by sustaining it with a minor action (Hunger of Hadar, Summons of Khirad, Tendrils of Thuban, etc.) At the start of your turn, you sustain the attack, and deal Curse damage when you hit. Then you walk up to the enemy and hit them with your Pact Hammer, thus dealing Curse damage again.
I mean, these aren't common situations, but they certainly exist. They are likely to come up occasionally on their own, and even more often if you actively work towards setting them up. That seems more than a reasonable ability for a weapon that is already pretty awesome to start with!