Bank of New Zealand v The Christian Church Community Trust

[2024] NZCA 246

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

 CA32/2024
 [2024] NZCA 246

BETWEEN	BANK OF NEW ZEALAND Applicant
AND	THE CHRISTIAN CHURCH COMMUNITY TRUST & ORS Respondents (See Schedule A for complete list of Respondents)

Court:	Mallon and Ellis JJ
Counsel:	A S Butler KC,  W M Irving and C F Butters for Applicant R W Raymond KC and A V Foote for Respondents
Judgment: (On the papers)	20 June 2024 at 11 am

JUDGMENT OF THE COURT

AThe application for leave to appeal is granted.

BCosts are reserved.

____________________________________________________________________

REASONS OF THE COURT

(Given by Mallon J)

Introduction

1. The applicant (BNZ) provides banking services to the respondents, who are persons and entities associated with the Gloriavale Christian Community (Gloriavale).  Pursuant to a termination clause in the contract governing the banking relationship, on 8 July 2022, BNZ gave notice that it was closing Gloriavale’s accounts in three months’ time.  At Gloriavale’s request, this notice period was extended to 30 November 2022.  When a further extension was declined, Gloriavale successfully applied to the High Court for an interim injunction.[1]  The High Court declined BNZ’s application for leave to appeal to this Court.[2]  BNZ now applies to this Court for leave to appeal.[3]

Background

[1]Interim orders were initially made on a Pickwick basis:  The Christian Church Community Trust v Bank of New Zealand [2022] NZHC 3271 [Pickwick interim injunction decision]. They were continued after a defended hearing on the application for interim relief: The Christian Church Community Trust v Bank of New Zealand [2023] NZHC 2523, [2023] 3 NZLR 190 [defended interim injunction decision].

[2]The Christian Church Community Trust v Bank of New Zealand [2023] NZHC 3464 [leave decision]. Leave had to first be sought from the High Court under s 56(3) of the Senior Courts Act 2016.

[3]Senior Courts Act, s 56(6).  BNZ seeks leave to appeal the defended interim injunction decision, above n 1.

1. Gloriavale has been a customer of BNZ for 40 years.[4]  It has 83 accounts with BNZ, none of which receive interest due to Gloriavale’s religious beliefs.  The contractual relationship between BNZ and Gloriavale is governed by BNZ’s standard terms and conditions.  BNZ gave notice of termination relying on cl 8.2 of those standard terms and conditions.  That clause provided as follows:

   [4]The facts are drawn from the decisions in the High Court.

   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, or immediately suspend or restrict the operation of your account or the provision of 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:

   (a)we learn of your, or your guarantor’s, death, or any other lack of legal capacity;

   (b)we learn that you, or your guarantor, have suffered a Bankruptcy Event or an Insolvency Event;

   (c)there are insufficient available funds (including funds available under any overdraft, or other loan facility on that account) to meet payment instructions or other obligations from that account (including obligations that might arise later and our fees and charges);

   (d)we learn of a dispute over the ownership of funds or the operation of your account;

   (e)we learn that a party has reasonably claimed an interest in your account;

   (f)we reasonably believe that you or someone else has used or is using your account or has (or has attempted to use your account), illegally or fraudulently, or behaving improperly (for example, in a threatening or aggressive manner to our staff);

   (g)for organisation accounts (including those of trusts, companies, incorporated societies and other businesses), while the authority of the person representing the organisation is unclear;

   (h)we reasonably believe that there is a legal requirement to do so, including to comply with Sanctions, or as required by a Court or other authority;

   (i)you have breached these Terms or any relevant Product Terms; or

   (j)we reasonably believe that you, or payments in or out of your account, are subject to Sanctions;

   (k)your account has never been used, or has not been used for an extended period; or

   (l)you refuse to provide information that we ask for, or we learn that information we have been provided in relation to you or in relation to the operation of your account, is incorrect or misleading or incomplete.

2. In its 8 July 2022 notice of termination, BNZ advised it was terminating the relationship because:

   BNZ follows a strong human rights policy.  Under this policy, BNZ must not tolerate, or be complicit in, any activities that contribute to adverse human rights impacts.  We believe that continuing to provide banking services to you would be inconsistent with our human rights policy.

3. This was against the background of the Employment Court’s decision in Courage v Attorney-General in May 2022.[5]  That decision concerned proceedings brought by three former members of Gloriavale who claimed they were required to work long hours, under harsh conditions, from the age of six until they left Gloriavale.  In finding these former members were employees, the Employment Court “broadly accept[ed]” evidence about the physical and psychological punishment, and the rigorous, and sometimes violent, supervision of their work, to which the children were sometimes subject.[6] 

   [5]Courage v Attorney-General [2022] NZEmpC 77, (2022) 18 NZELR 746.

   [6]See, for example: [34]–[35], [40]–[41] and [55]–[56]. An Employment Court decision of the same Judge making similar factual findings about the work conditions at Gloriavale is currently on appeal in this Court: see Temple v Pilgrim [2023] NZCA 631.

4. The notice period BNZ gave was intended to provide Gloriavale with the opportunity to find alternative banking arrangements.  Gloriavale was unsuccessful in this, which led it to apply for interim injunctive relief preventing BNZ from terminating Gloriavale’s accounts until determination of its substantive claim against BNZ for breach of contract, breach of a fiduciary duty and estoppel by convention.

Leave application

1. In the High Court the Judge found there was a serious question to be tried and the balance of convenience and overall justice favoured the granting of interim injunctive relief.[7]  The application for leave is focussed on whether there was a serious question to be tried that BNZ had breached its contract with Gloriavale by closing the accounts pursuant to its right to cancel them for any reason under cl 8.2.

   [7]Defended interim injunction decision, above n 1, at [84]–[85], [89] and [92].

2. In finding there was a serious question to be tried the Judge said:

   [84]     I conclude that it is seriously arguable that BNZ does not have an express unilateral power of termination and that either the default rule (or the Braganza extension) applies or there is an implied term in the contract to act reasonably. …

3. The “default rule (or the Braganza extension)” refers to a series of cases where the courts have, in some contexts, interpreted a discretionary power conferred under a contract on one of the parties as being subject to some implied restrictions, for example requiring that it be exercised for a proper purpose or rationally in a Wednesbury sense.[8]  There has been limited consideration of these cases in this jurisdiction.[9]  In the banking context, the Judge’s decision in this case contrasts with the High Court decision in Targa Capital Ltd v Westpac New Zealand Ltd.[10]

   [8]See, for example: Abu Dhabi National Tanker Co v Product Star Shipping Ltd (No 2) [1993] 1 Lloyd’s Rep 397 (CA) at 404; Paragon Finance plc v Nash [2001] EWCA Civ 1466, [2002] 1 WLR 685; and Socimer International Bank Ltd (in liq) v Standard Bank LondonLtd [2008] EWCA Civ 116, [2008] 1 Lloyd’s Rep 558 at [66]. The “Braganza extension” refers to the approach taken by the United Kingdom Supreme Court in Braganza v BP Shipping Ltd [2015] UKSC 17, [2015] 1 WLR 1661. These authorities were recently surveyed by this Court in Woolley v Fonterra Co-Operative Group Ltd [2023] NZCA 266, [2023] 3 NZLR 405 at [86]–[102].

   [9]Compare the detailed discussion of this topic in H G Beale (ed) Chitty on Contracts (35th ed, Sweet & Maxwell, London, 2023) at [2.076]–[2.095] with the absence of any discussion of these authorities in Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022).  See also Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [279] per Glazebrook, O’Regan and Williams JJ; Woolley v Fonterra Co-Operative Group Ltd, above n 8, at [86]–[102]; C & S Kelly Properties Ltd v Earthquake Commission [2015] NZHC 1690 at [73]; and Stephen Kós “Constraints on the Exercise of Contractual Powers” (2011) 42 VUWLR 17 at 22–21.

   [10]Targa Capital Ltd v Westpac New Zealand Ltd [2023] NZHC 230, [2023] NZCCLR 21.

4. There is a high threshold for leave to appeal an interlocutory order for a variety of reasons.  Leave to appeal should only be granted where the significance or implications of an arguable error of fact or law, for the particular case or the applicant or as a matter of precedent, warrant the further delay which the appeal would involve.  The overarching test is the interests of justice.[11]

   [11]See, for example, Greendrake v District Court of New Zealand [2020] NZCA 122 at [6]–[7].

5. We acknowledge that an applicant for an interim injunction need only establish a serious question to be tried.  However, on occasion it is possible to express a concluded view on the question and, depending on that view, it may lead to a conclusion that there is no tenable cause of action.[12]  We accept that, if BNZ were able to meet that threshold on an appeal (about which we are not to be taken as expressing any view), it may be effectively dispositive of the substantive proceeding and have important precedential value, including for future injunctive relief applications in the banking context.  We acknowledge that Gloriavale pleaded two other causes of action but it appears from the High Court judgment that the contract cause of action was the primary one.  We conclude it is in the interests of justice to grant leave to appeal even though it may involve delay in the progress of any substantive proceeding if the appeal is unsuccessful.

   [12]See, for example, National Commercial Bank Jamaica Ltd v Olint Corpn Ltd [2009] UKPC 16, [2009] 1 WLR 1405 at [21]. The grant of an interim injunction involves a discretion but the issue of whether there is a serious question to be tried — the primary challenge here — calls for judicial evaluation rather than the exercise of a discretion: see NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90 at [13].

6. There is no reason to depart from the usual rule that costs are reserved pending the outcome of the appeal.[13]  We reserve costs accordingly.

Result

[13]Court of Appeal (Civil) Rules 2005, r 53G(3).

1. The application for leave to appeal is granted. 

2. Costs are reserved.

Solicitors:
Russell McVeagh, Auckland for Applicant
Duncan Cotterill, Christchurch for Respondents

SCHEDULE A – complete list of Respondents

BRUNNER STATION LIMITED
CANAAN FARMING ENGINEERING LIMITED
CANAAN FARMING DEER LIMITED
CANAAN FARMING DAIRY LIMITED
HAUPIRI NET LIMITED
VALUE PROTEINS LIMITED
CHRISTIAN PARTNERS
CARING MIDWIVES LIMITED
FOREST GOLD HONEY LIMITED
PURE VITALITY LIMITED
ALPINE HEALTH MANUFACTURING NEW ZEALAND LIMITED
VALUE ENERGY LIMITED
CHRISTIAN PARTNERS ASSETS LIMITED
CHRISTIAN PARTNERS HOLDINGS LIMITED
THE CHRISTIAN CHURCH COMMUNITY TRUST
BRUNNER CHRISTIAN RESIDENTIAL TRUST