Routhan v PGG Wrightson

The Routhans sought to buy a farm on the West Coast of the South Island. Prior to purchase, PGG Wrightson (PGG) (through its agent) confirmed the details of historical milk production averages for a farm as being 103,000 kg ms (milk solids) (kgMS) over the past three years. Actual milk production for that period was significantly lower than represented at 98,729 kgMS.

The Routhans bought the farm in 2010, although they did not identify the misrepresentation until 2014. It was accepted that they would not have purchased the farm but for PGG’s misrepresentation. The High Court found that their due diligence was adequate and reflected common practice at the time.³The Routhans were unable to produce anywhere near 103,000 kgMS at any stage of their ownership. This was apparent to them almost immediately on taking possession. They took appropriate professional advice and implemented various post-purchase measures to try and increase production, which were not successful. In 2017, their financier forced the sale of the farm and the Routhans’ run-off property.

The Routhans claimed from PGG not only losses associated with the loss in value of the property, but also consequential losses arising from that purchase.

In the High Court, the Routhans largely succeeded in their claim, being awarded $1,697,000 in damages. The recoverable losses included not only the difference in value paid for the farm, but the loss of value on the forced sale of their neighbouring run-off farm, and loss of investment for capital improvements.

In the Court of Appeal, PGG succeeded in reducing the liability to $300,000. The Court held PGG had not assumed responsibility to advise the Routhans on what course of action to adopt. Its duty was confined to supplying specific information which the Routhans wanted to help them decide whether to proceed. In an information case, the SAAMCO cap limits the recoverable damages to the consequences of the information being wrong rather than all losses arising from entry into the transaction.

Applying SAAMCO and subsequent English cases, the Court held that the scope of PGG’s duty was confined to the consequences of the production information being wrong. Applying the SAAMCO cap, the Court limited the “normal” measure of damages to the difference between the price paid for the farm against the true market value at the time, had the correct information been provided. None of the other consequential losses were recoverable.

In the Supreme Court, liability was not in dispute. The issues for determination were whether and how the New Zealand courts should apply the SAAMCO principles, and accordingly the proper measure of damages.

Prior to Routhan, the New Zealand courts had applied the principles in SAAMCO. However, there had been no clear statement from New Zealand’s highest court about whether the SAAMCO principles were part of New Zealand’s law of negligence.

In a split decision, the Supreme Court confirmed by a 4:1 majority that the scope of duty principle discussed in SAAMCO does form part of our law of negligence. They held the Court of Appeal erred by using the “SAAMCO cap” as the “normal” measure of damages. While differing on approach, the Supreme Court effectively agreed that the SAAMCO cap applies as a useful cross check in respect of any damages awarded, to identify whether loss caused by a defendant’s breach falls within the scope of their duty of care. Key to the analysis of the scope of duty is the extent to which the defendant has assumed responsibility for the risks of harm to the plaintiff.

A majority (3:2) determined that the Routhans were entitled to compensation for not only the difference in value between the actual sale price and the price had the farm been correctly represented, but some limited losses relating to the trading of the farm. Further heads of loss including other capital expenditure, increased trading costs, and loss on sale of the farm and the run-off were determined to be too remote, or lacking in evidential foundation, to justify a recovery. While the minority largely agreed with the applicable legal analysis regarding the scope of duty, they ultimately disagreed as to its application on the facts of the case. The net result was an award of $780,500, plus interest and costs.

The Supreme Court also made a number of important findings generally in respect of the law of negligence and the way in which judges should assess the scope of duty as part of that legal analysis.⁴

Routhan confirms our Courts will award losses over and above the SAAMCO cap, provided there is a close connection between the scope of the duty the adviser owed and the loss.

Had the Supreme Court determined that the SAAMCO cap applied as a hard stop on liability, then in an “information” case, that cap would limit the extent of liability to the loss that would have been suffered had the information been correct

While there are areas of difference in the three judgments issued, the Supreme Court unanimously endorsed a key maxim of damages; that is “the ultimate question as to compensatory damages is whether the particular damage claimed is sufficiently linked to the breach of a particular duty to merit recovery in all the circumstances”.⁵ If in doubt, this maxim is the lodestar to guide the assessment of the recoverability of any particular loss claimed.

For insurers and professionals, Routhan clarifies the applicability of SAAMCO principles in New Zealand. The scope of duty principle is the guiding light. Routhan is helpful in that it confirms that in most cases, a negligent professional will not be responsible for all the financial consequences of the plaintiff’s decision to enter the transaction. That must be right when the professional is only providing one ingredient. A key consideration will be whether the professional adviser is considering and advising on all matters relevant to a transaction or only providing a limited part of the information on which the plaintiff will rely when assessing the wisdom of transaction. If the professional is guiding and advising on the entire transaction, the scope for recoverable loss will be much greater.

By way of example, a professional valuer who provides a negligent valuation will be liable for the difference between the represented value and the true value. However, whether they are liable for further losses suffered will be a matter of fact and degree in any given case. Similarly, negligent conveyancing lawyers who only provide advice on a limited part of their client’s purchase such as a report on title are unlikely to have liability for all downstream losses of the transaction. At the other end of the spectrum, an investment adviser who recommends a particular investment is likely to be liable for all foreseeable consequences of entering the transaction, as they are likely to be held to be responsible for the overall risks of that investment.

As is usually the case, any analysis of loss flowing from established breach will be an intensely factual one. For a claimant to be successful, they will need to ensure that the scope of duty encapsulates the head of loss allegedly suffered.

In every case, a prudent professional must take care to agree with their clients the scope of their retainer and record this, including any limitations, in writing at the outset of the engagement. Any changes in the retainer after the initial engagement should similarly be recorded.

1. Routhan v PGG Wrightson [2025] NZSC 68 (“Routhan”)
2. South Australia Asset Management Corp v York Montague Ltd [1997] AC 191 (“SAAMCO”)
3. This was despite the fact that they did not ask for the farm’s actual production season by season or request details of the farming practices the vendor used. They also did not obtain a valuation or other independent advice about the quality of the farm.
4. In particular, at paragraphs [147] – [170]
5. McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 664 (CA) at 41

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