de Zylva v Hill

This case concerned an appeal from a judgment concerning breaches of a contract between Mr de Zylva and Mr Hill, who were partners in an accountancy business conducted through a company. Mr de Zylva had claimed breaches of contract and misrepresentation against Mr Hill, which were dismissed by the primary judge. Mr Hill, however, had a successful cross-claim for breaches of contract by Mr de Zylva, specifically failing to devote all his working time to the business and failing to endeavour in good faith to mediate disputes. The company was subsequently wound up on just and equitable grounds.

The central legal issue before the Court of Appeal was the appropriate measure of damages for Mr Hill's successful cross-claim. Specifically, the court had to determine whether the damages awarded by the primary judge, which extended to the loss of the value of Mr Hill's share in the company and the business, were recoverable under the principles established in *Hadley v Baxendale*. The court was required to consider whether such losses were a foreseeable consequence of Mr de Zylva's breaches of contract.

The Court of Appeal allowed the appeal, finding that the damages awarded to Mr Hill were not recoverable. The court reasoned that the loss of the value of Mr Hill's share in the company and the business was too remote a consequence of Mr de Zylva's breaches. The court applied the principles of remoteness of damages as articulated in *Hadley v Baxendale*, distinguishing between direct losses and consequential losses that must be within the reasonable contemplation of the parties at the time the contract was made. The court found that the loss of the business's value was not a loss that arose naturally from the breaches, nor was it a loss that Mr de Zylva could have reasonably foreseen as a probable result of his actions.

Consequently, the Court of Appeal set aside the primary judge's order on the cross-claim and substituted a judgment for Mr Hill against Mr de Zylva for $19,102.31, to take effect as at 3 April 2009. Mr Hill was ordered to pay Mr de Zylva’s costs of the appeal.