Overview
On 26 June 2025, the Supreme Court issued its judgment on the case Routhan and Anor as Trustees of the Kaniere Family Trust v PGG Wrightson Real Estate Limited [2025] NZSC 68. This case clarifies the proper measure of damages for negligent misrepresentation and considers whether the New Zealand Courts should apply the approach taken by the House of Lords in South Australia Asset Management Corp v York Montague Ltd (SAAMCO) including the "scope of duty" principle; and the SAAMCO "cap" on liability.
On the key issue of a defendant's liability, the Supreme Court was divided. The majority held that a defendant's liability will be limited to the foreseeable consequences of the information provided by the defendant being wrong.
Background to the Routhans' case
The Routhans brought a claim in the High Court against a PGG Wrightson Real Estate Ltd (PGG) real estate agent who they said negligently misrepresented the productivity of a dairy farm to them prior to purchase in 2010. PGG was found to have misrepresented the farm’s recent average milk solids production to the Routhans as steady, and generating 103,000 kg of milk solids per season. In reality, production was significantly lower and in decline. Ultimately, the farm underperformed, and the Routhans' bank forced a sale in 2020. The Routhans successfully argued in the lower Courts that they would not have purchased the farm had they known its true productivity levels and PGG was found liable for damages in negligent misstatement and under the Fair Trading Act 1986.
Issues for the Supreme Court to consider
The key issue for the Supreme Court to decide was not PGG’s liability (which had been established by the lower Courts), but the correct measure and quantum of damages, including whether the SAAMCO approach should be applied.
For the past two decades, SAAMCO has laid down the definitive test in the United Kingdom for the determination of liability for negligent valuations. While it has been cited in several New Zealand decisions, it has not yet been adopted as authority on liability for negligent misstatements (such as in the Routhans' case).
SAAMCO – scope of duty principle and liability cap
The scope of duty principle arising in SAAMCO limits liability in negligence to the types of loss or harm that fall within the risks the defendant was responsible for guarding against at the time the duty of care was assumed. As Lord Hoffman in SAAMCO articulated:1
If the duty is to advise whether or not a course of action should be taken, the adviser must take reasonable care to consider all the potential consequences of that course of action. If he is negligent, he will therefore be responsible for all the foreseeable loss which is a consequence of that course of action having been taken. If his duty is only to supply information, he must take reasonable care to ensure that the information is correct and, if he is negligent, will be responsible for all the foreseeable consequences of the information being wrong.
In addition to the scope of duty principle, the SAAMCO decision also caps liability, by requiring a Court to assess whether the claimed losses would still have been suffered had the information been correct.2 This has been referred to (but not previously adopted) in New Zealand, unlike the scope of duty principle.
Supreme Court decision
In a majority decision, the Supreme Court held that the scope of duty principle set out in SAAMCO forms part of New Zealand's law of negligence.
While Kos J did not consider the principle should be adopted in New Zealand, the majority of the Supreme Court recognised its application, with Miller and Glazebrook JJ confirming that the principle requires a forward-looking enquiry and that:
…liability in negligence ought generally to be confined to harm that resulted from the risks that made the defendant’s conduct negligent in the first place. It is necessary to consider the position at the time the duty arose or was assumed and inquire for what kinds of risk was the defendant taking responsibility and whether the allocation of risk was a fair one in the circumstances.Winkelmann CJ and Ellen France J agreed, adding that the scope of the duty is orthodox in New Zealand and an inevitable part of the inquiry for the court.4 They also confirmed that a rigid distinction between 'information' and 'advice' does not form part of New Zealand law, preferring the concept of a "spectrum" between the passing on of information and the provision of advice.5
The SAAMCO cap on liability
The majority of the Supreme Court found that the Court of Appeal erred in using the SAAMCO cap (ie would the claimed losses have been suffered had the information been correct) as the “normal” measure of damages. Applying the SAAMCO cap results in the loss inquiry extending too far and requires highly debatable arguments and counterfactual reasoning to show that, had the advice been correct, the plaintiff still would have suffered the same loss.6
In dissent, Winkelmann CJ and Ellen France J noted that the cap was a useful tool to distinguish loss which is attributable to the fact that as a result of the defendant's negligence the information was wrong (within the scope of the duty) and loss flowing from the decision to enter into a transaction at all (a “but-for” measure).
Key takeaways
The Supreme Court has recognised that the scope of duty principle set out in SAAMCO forms part of New Zealand's law on negligent misstatement. This principle requires a court to engage in an analysis of the scope and type of risks a defendant was responsible for at the time a duty of care arose, and whether the allocation of risk was fair in the circumstances. In addition, the majority rejected the SAAMCO cap on liability as being the normal measure of damages, but a strong minority dissent considered it is a useful analytical tool when measuring loss.
Professionals who provide information or advice should be conscious of understanding the purpose for which the advice or information they provide is obtained, and continue to be mindful of the potential risks that could arise if that information or advice is not correct or accurate.
While this judgment provides clarity concerning the law of negligent misstatement, the various dissenting judgments are indicative of underlying debate and disagreement, and suggest that this Supreme Court decision may not be the final word on this issue.
Co-authored by Beth Fitchett (solicitor).
1SAAMCO at [214].
2Routhan at [113].
3Routhan at [150]
4Routhan at [328].
5Routhan at [329].
6Routhan at [169].
