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In a significant judgment with implications for professionals who provide advice or information, the Supreme Court of New Zealand in Routhan v PGG Wrightson Real Estate Ltd [2025] NZSC 68 has clarified how damages are assessed for negligent misstatements, especially where those misstatements induce a transaction. Importantly, the Court examined the extent to which the UK case of South Australia Asset Management Corp v York Montague Ltd (SAAMCO) forms part of New Zealand law in determining whether a particular loss falls within the scope of the defendant’s duty of care.
Background
In 2010, the Routhans, acting as trustees of the Kaniere Family Trust, purchased a dairy farm near Hokitika marketed by PGG Wrightson Real Estate Ltd (PGG). PGG’s agent negligently advised that the farm’s recent average milk production was 103,000 kgMS annually, when in fact the true average was significantly lower and declining.
Relying on the misstated information, the Routhans proceeded with the $2.8 million purchase. In the years that followed, they were unable to achieve the represented production levels and incurred substantial costs trying to improve the farm’s performance and were ultimately forced to sell the farm under financial pressure in 2020.
Central Issue
Both the High Court and Court of Appeal agreed that the Routhans would not have purchased the farm had they known the true production figures. PGG was held liable for negligent misstatement and for misleading conduct under the Fair Trading Act 1986. However, the Courts diverged on the assessment of damages:
- The High Court awarded $1.7 million in damages, comprising the overpayment on the purchase price as well as compensation for loss of equity and capital expenditure incurred in attempting to improve farm productivity.
- The Court of Appeal reduced the damages to $300,000, applying SAAMCO It held that PGG’s duty of care did not extend to the wider risks associated with post purchase farm operations, and limited liability strictly to the overpayment attributable to the misstatement.
The Supreme Court granted leave to appeal on the measure and quantum of damages, specifically whether the Court of Appeal was correct to reduce the damages awarded by the High Court. Central to the dispute was the whether the “scope of duty” principle from SAAMCO forms part of New Zealand law, and whether the SAAMCO cap on recoverable damages applies.
Supreme Court
A majority of the Court confirmed that New Zealand law incorporates the SAAMCO scope of duty principle. Under this principle, professionals are liable only for harm that falls within the scope of the risks they assumed responsibility for when giving advice or information. This requires the Court to assess using a forward-looking inquiry, asking at the time the duty arose, what kinds of risks the defendant accepted and whether that allocation of risk was fair in the circumstances. Further, the Court rejected a rigid information vs advice distinction, instead treating them as points along a spectrum.
Separate from the scope of duty principle, SAAMCO in the UK has also been understood as establishing a cap on liability, limiting it to the foreseeable consequences of the information being wrong or to the extent of overvaluation where the defendant merely provided information to inform the plaintiff’s decision making.
The Supreme Court rejected a strict application of the SAAMCO cap. A majority of the Court held that the Court of Appeal erred in treating the cap as the normal measure of damages, however recognised its purpose as a tool in cross checking liability.
Damages Award
The Court awarded $780,500 in damages, broken down as:
- $480,500 for overpayment due to misrepresented value.
- $150,000 for fertiliser costs in pursuit of unattainable production levels.
- $150,000 for re-pasturing expenses undertaken in reliance on false productivity figures.
Claims for lost revenue, additional supplementary feed, debt servicing, and long-term capital investment were rejected as too remote or not clearly linked to PGG’s breach. In dissent Winkelmann CJ and Ellen France J considered none of the post-purchase losses were properly attributable to PGG’s breach and they would have limited damages to the overpayment of the farm alone.
Key Takeaways
This decision marks an important clarification in New Zealand tort law. The Supreme Court confirming that professionals are liable for losses, beyond just overpayment that fall within the scope of the risks for which they assumed responsibility. While the SAAMCO principle is part of New Zealand law, the Court rejected using the SAAMCO cap as a default limit on liability.
Key takeaways for professional service providers include:
- The scope of assumed duty is central to liability.
- The SAAMCO cap does not place an automatic limit on liability in New Zealand.
- Professionals should clearly define the extent of their responsibilities and be aware of potential risks associated with providing incorrect advice.
- Courts will consider actual reliance and the foreseeability of losses when determining the extent of damages.
If you have any questions, please get in touch with our Disputes Team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
