Appeal from High Court decision injuncting BNZ from terminating Gloriavale’s bank accounts pending trial – interpretation of standard terms in banking contract – implied term in law and fact? – breach of fiduciary duty? – is there a serious question to be tried on any of the pleaded causes of action? – overall interests of justice assessment
Bank of New Zealand v The Christian Church Community Trust [2024] NZCA 645
Gloriavale is a Christian community based on the South Island’s West Coast. The Christian Church Community Trust is responsible for the day-to-day functioning of the community.
The trust first opened a bank account with the BNZ in March 1999. Other Gloriavale entities (companies and trusts) then opened accounts with the BNZ (the only bank they use).
The terms of the contractual relationship between BNZ and the Gloriavale entities are the BNZ standard terms. The key term at issue is clause 8.2, which provides:
8.2 When we can close or suspend your account or end or suspend any other product or service: We can close your account or end any other product or service… for any reason. For example (but without limiting the reasons why we might close or suspend your account), we may close or suspend your account where: [list of specific reasons]
In July 2022, BNZ notified Gloriavale that it had made the decision to cease to provide banking services, explaining that it was aware of an Employment Court decision [Courage v Attorney-General [2022] NZEmpC 77.
This contained a number of adverse findings, including children being coerced to do dangerous physical work at Gloriavale] and the bank had serious concerns about the labour practices described in the decision. BNZ’s letter stated that continuing to provide banking services would be inconsistent with its human rights policy. BNZ provided a three-month notice period.
The Gloriavale entities attempted to engage with BNZ to find a resolution that would enable the banking relationship to continue. They advised the BNZ that the Employment Court findings did not apply to most of the Gloriavale entities and that significant measures had been implemented to address the concerns in the decision, including the appointment of independent external trustees and a new chief executive officer (who were not members of the Gloriavale community).
BNZ was not willing to engage or revisit its decision. It also declined a request to provide a copy of its human rights policy. It did however extend the notice period from 14 October 2022 to 30 November 2022.
The Gloriavale entities made a number of attempts to secure alternative banking arrangements, all of which were unsuccessful.
On 29 November 2022, the Gloriavale entities sought interim relief on a without-notice basis. The High Court granted an “interim interim” injunction to sustain the bank accounts.
The Gloriavale entities then filed proceedings (alleging breach of contract, breach of fiduciary duty and estoppel by convention) and applied on notice for an interim injunction pending trial.
The High Court granted the injunction, concluding that there was a serious question to be tried on the breach of contract cause of action, and the balance of convenience and overall justice favoured allowing an interim injunction to continue until determination of the substantive claims.
BNZ sought and was granted special leave to appeal to the Court of Appeal from the second interim injunction decision. BNZ argued that there was no serious question to be tried: as a matter of common law and under its contractual terms, it had an express unilateral right to terminate the provision of banking services to the Gloriavale entities.
Applicable principles: Proper meaning of clause 8.2? (“any reason” means what it says, as the language in a commercial contract usually will. It is not implicit that the reason be a good reason, or a valid or well-founded reason, or one relating to the customer’s account) – does BNZ have process obligations to engage with customer before exercising power to close account? (no, courts cannot invent obligations of this kind under the guise of interpretation if the parties have not agreed to assume them) – is there an implied term requiring BNZ to exercise its power to terminate for a proper purpose? (no, a ‘proper purpose’ implied term would add nothing, clause 8.2 is clear) – is there a seriously arguable issue for trial that BNZ breached an implied term to act honestly, in good faith and not arbitrarily or unreasonably? (no) – did BNZ owe fiduciary duties? (no, this argument is misconceived) – is there a serious question to be tried in relation to estoppel? (no)
Held: The appeal is allowed. There is no serious question to be tried in relation to any of the three causes of action pleaded. The injunction granted in the High Court is set aside with immediate effect. (The court did record BNZ’s assurance that it would continue to provide banking services for a period of three months from the date of the court’s decision).
Note: The court also observed that if it had considered there was a serious question to be tried in relation to the contractual cause of action, it would have nonetheless declined to grant an interim injunction, as it would not be in the overall interests of justice, noting that if no other bank is willing to accept the Gloriavale entities at customers, that reluctance cannot be laid at the door of BNZ.
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