Christian Church Community Trust v Bank of New Zealand
[2022] NZHC 3271
•7 December 2022
IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY
I TE KŌTI MATUA O AOTEAROA MĀWHERA ROHE
CIV-2022-418-16
[2022] NZHC 3271
UNDER the High Court Rules 2016 IN THE MATTER
of an interlocutory application for interim injunction
BETWEEN
THE CHRISTIAN CHURCH
COMMUNITY TRUST AND OTHERS
ApplicantsAND
BANK OF NEW ZEALAND
Respondent
Hearing: 29 November 2022 (By way of telephone conference) Appearances:
R W Raymond KC and A V Foote for Applicants W M Irving and L M Dick for Respondent
Judgment:
7 December 2022
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 7 December 2022 at 11 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
THE CHRISTIAN CHURCH COMMUNITY TRUST AND OTHERS v BANK OF NEW ZEALAND [2022] NZHC 3271 [7 December 2022]
Introduction
[1] The applicants are all companies, or other entities, which are associated with the Gloriavale Christian Community (Gloriavale). They include companies undertaking farming and other businesses along with unincorporated entities including the community itself, schools it operates, and trusts. They all operate bank accounts with the Bank of New Zealand (BNZ), having banked with BNZ for over 40 years. They seek, on an urgent basis, a without notice interim injunction restraining the bank from closing these accounts until a formal application for an interim injunction is filed on 2 December 2022.
[2] The decision to close the bank accounts stems from an Employment Court decision which issued on 10 May 2022.1 The decision found that three members of the Gloriavale community were employees from the age of six through to when they left Gloriavale, opening the way for them to proceed with a breach of duty claim against Labour Inspectors who concluded that those working within Gloriavale were not employees and so the Inspectorate had no jurisdiction to consider their claims relating to employment matters.2
[3] In June 2022, two women from the Gloriavale community asked BNZ to open some additional business accounts with the local branch in Greymouth. The local manager sent an email on 29 June 2022 declining the request and saying the relationship was being reviewed.
[4] A meeting was subsequently convened on 6 July 2022 between representatives of Gloriavale and the bank. The minutes of the meeting recorded that the bank was “aware of [Employment Court] decision and as BNZ follow strong human rights policy, have formed view concerning Human rights that show continuing to provide to entities banking facilities is inconsistent with BNZ policy”. BNZ attendees accordingly notified those present they were terminating the banking relationship with senior Gloriavale leaders and business entities. They advised that there would be a three month timeframe before closure to allow the affected entities and individuals to
1 Courage v Attorney-General and Ors [2022] NZEmpC 77, (2022) 18 NZELR 746.
2 At [16].
make alternative banking arrangements. Any offer by Gloriavale to remedy the concerns was rejected, with the minutes recording that: “The reality is the decision has been made.”
[5] A letter formally recording the decision was sent to Gloriavle on 8 July 2022. It attached a list of accounts to be closed. This included accounts for the charitable trust, the school, the pre-school, all businesses, the midwifery service, and accounts used for medical and laundry costs. Senior leaders in the community also received individual letters informing them that their accounts would be closed.
[6] The bank has closed the relevant accounts relying on cl 8.2 of the bank’s standard terms and conditions. That clause provides as follows:3
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;
3 As located on the BNZ’s website 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.
[7]In its letter terminating the relationship, BNZ said as follows:
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.
[8] Extensive communication occurred between the bank and Glorivale in the interim. By 7 October 2022, Gloriavale understood it was making progress with ASB and Kiwibank to find alternative banking arrangements but, given the scale of accounts required, the local branch at Greymouth was not able to deal with the size of the task at hand in the time available. BNZ extended the time before terminating to 30 November 2022.
[9] On 17 October 2022, Gloriavale advised BNZ that ASB was unable to facilitate the opening of the commercial entities’ bank accounts as requested. On 21 October 2022, Gloriavale, through its solicitors, advised that it was still working with Kiwibank to see if it would provide banking services and that position was repeated in a letter dated 4 November 2022.
[10] Gloriavale’s newly appointed Chief Executive Officer, Mr Phil Jamieson, emailed BNZ on 17 November 2022, advising that Kiwibank would not support one of Gloriavale’s companies, Canaan Farming Dairy Ltd, but was still working through the decision on other accounts. The same position was recorded in a formal letter from Mr Jamieson to BNZ on 17 November 2022. In it, he advised that: “It is evident now
that the transfer of banking services will not be complete by 30 November (the current provisional date of termination) and in respect to at least some entities, will not be achievable at all.” He asked BNZ to confirm that “banking services will not be withdrawn from the entities and individuals who have not been able to secure alternative arrangements”. He also said that the Gloriavale community “has demonstrated its willingness to address the issues it faces” and asked whether there was any other “avenue that BNZ believes could be followed which has been overlooked” in order to maintain banking services.
[11] On 23 November 2022, BNZ responded saying it would not agree to any further extension of the closure date. It noted the possibility of injunctive relief being sought by Gloriavale, but reiterated its view that it had the contractual right to terminate the provision of banking services.
[12]On 25 November 2022, Gloriavale’s lawyers:
(a)rejected the suggestion there were human rights abuses and set out the steps that Gloriavale had been taken to ensure no one under 16 was working for any commercial entities and were in full time education if they were of school age;
(b)said the notice period provided by BNZ was inadequate, and it had proved impossible to transfer the accounts in the timeframe;
(c)requested BNZ continue to provide services until an application for interim relief had been determined, saying:
(i)an application for interim relief would be filed by 2 December 2022; and
(ii)the application would be made ex parte, on a Pickwick basis.
[13] They asked for confirmation that BNZ would agree to that position by 4 pm, Monday 28 November 2022, failing which Gloriavale would seek urgent injunctive relief without notice.
[14] On 28 November, BNZ declined that request resulting in the application which came before me on 29 November 2022, by way of urgent teleconference.
Glorivale’s submissions
[15] Counsel for Gloriavale, Mr Raymond KC, filed a memorandum in support of the application for an interim injunction. In it, he explained the history of Gloriavale’s relationship with the BNZ and the steps which had been taken since the bank communicated its decision to close the accounts on 8 July 2022.
[16] In seeking the injunction, Mr Raymond traversed the conventional test for granting an interim injunction, being:4
(a)whether there is a serious question to be tried;
(b)where the balance of convenience lay; and
(c)consideration of the overall interests of justice.
[17] In arguing that there is a serious question to be tried, Mr Raymond relied on both breach of contract and breach of a fiduciary duty. While BNZ relies on the alleged ability, under cl 8.2, to close accounts for “any reason”, Mr Raymond refers to the list of examples contained in cl 8.2 as illustrating the kind of reasons which might properly prompt a decision to close the accounts. None of these examples are engaged, and there is no question of any breach of account terms and conditions in the usual sense. While BNZ says it “understands” that “human rights abuses” are occurring (or have occurred) in the community, that is strongly contested by Gloriavale. Furthermore, the BNZ says it relies on its human rights policy in making the decision but has declined to provide Gloriavale with a copy of that policy.
[18] Mr Raymond argues that the ability to terminate accounts under cl 8.2 is implicitly limited and must relate to some conduct of the account holder. The Employment Court decision, even if justifying the decision, did not involve all the
4 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (HC), and [1985] 2 NZLR 140 (CA).
entities which are affected by the bank’s decision. The right to terminate the provision of banking facilities cannot be unreasonably exercised, and Mr Raymond argues that it is in this case. Mr Raymond also says there will be a claim for breach of fiduciary duty stemming from the banking relationship that had developed over 40 years.
[19] In terms of the balance of convenience, he says this clearly rests with the applicants. If the accounts operated by the applicants are closed with effect on 30 November 2022, the applicants would be unable to make payments from the account which include payments for food, power, rates, and medical expenses. Around 570 people live at Gloriavale with over 350 children and a number of people who are elderly, or who cannot work due to illness or disability. They are reliant on the Gloriavale community entities for support. These include the schools and the entities which provide laundry, clothing and medical services, and the communal sharing account from which food expenses are paid. All require bank accounts to operate.
[20] Mr Raymond acknowledges the delay in applying to the Court, which BNZ is critical of. However, he says this is a double-edged sword. The evidence shows that Gloriavale has been actively working to find an alternative bank, and it would have been premature to go to the Court while there were realistic possibilities of being able to transfer the accounts to other banks. It was only when those options looked to be exhausted that it asked BNZ for a short further extension to allow time to seek injunctive relief while it pursued it claims against the bank.
[21] Mr Raymond acknowledged the bank’s criticisms of the current application and, in particular, that it was not supported by the certification from counsel for the applicants confirming that all reasonable enquiries and all reasonable steps had been made or taken to ensure that the application contains all relevant information, including any opposition or defence that might be relied on by any other party or any facts that would support the position of the other party, as required by HCR 7.23(3). However, Mr Raymond said this had not been done because of the urgency with which the application would be made, but could be supplied by Ms Foote, who prepared the application, as a condition of granting the interim injunction.
[22] In terms of the failure to provide an undertaking as to damages, again this was caused by the difficulty of obtaining signed documents from people who operate in a small rural community on the West Coast, during the working week, but would be supplied as soon as possible and in any event, as part of the formal application for an interim injunction to be filed on or before 2 December 2022.
[23] Finally, in respect of whether the application had been filed in the proper registry of the Court, Mr Raymond relied on the unsworn affidavit of a community member, Serenity Valor, which set out the reasons for believing the cause of action in the claim arose at Haupiri, closest to Greymouth, given the banking services are provided via the bank’s Greymouth branch and all communications relevant to the termination of those services were received in Greymouth.
BNZ submissions
[24] The submissions for the BNZ focussed on jurisdictional issues and in particular, the failure to provide certification using Form G32 to confirm that:
(a)the grounds for a without notice application are made out; and
(b)all reasonable enquiries and all reasonable steps have been made or taken to ensure that the application contains all relevant information including any opposition or defence that might be relied on by any other party or any facts which would support the position of any party.
[25] Mr Irving, for the BNZ, noted that certification is not a “mere technicality”, but is a mandatory pre-condition to the granting of an order without notice.5
[26] He also took exception to the fact the applicants had not provided an undertaking as to damages. While the Court has a discretion to dispense with the requirement, it is only exercisable in narrow circumstances.6 Without the protection of an undertaking as to damages, he submitted the bank should not be subject to an
5 Craig v Craig [2019] NZHC 414, (2019) 5 NZTR 29-030 at [5].
6 Maniapoto v Maniapoto Māori Trust Board [2022] NZHC 455 at [54].
interim injunction requiring it to maintain the applicants’ accounts until the filing of a formal application later this week.
[27] Finally, the BNZ is critical of the applicants’ reliance on the claimed urgency of the application. Mr Irving pointed out that the applicants had been on notice since July that their accounts would be closed, and they have known for six weeks that they would be closed on 30 November, following an extension granted by the bank. They could have filed protective proceedings on any day since July. Instead, they have delayed until the very week in which the account closure is to occur before raising the matter with the Court. By seeking relief for the Court on such an urgent basis, the applicants appear to have deliberately denied the bank the usual protections afforded in such an application.
Discussion
[28] I do not have draft pleadings from the applicants which set out in full their claims of breach of contract and breach of fiduciary duty. It is difficult to assess the merits of the claims in those circumstances. That said, I accept that the assertion on behalf of the applicants that it is seriously arguable that there are constraints on the exercise of the power to terminate a contract, particularly given the importance of banking facilities to function in today’s society. In other words, there must be reasonable cause to terminate a banking relationship, and the examples set out in cl
8.2 are illustrative of what constitutes reasonable cause. Furthermore, it is unclear that the reason relied on by the bank is applicable to all entities it has sought to terminate a banking relationship with. For these reasons, at this very preliminary stage, I am satisfied there is a serious question to be tried.
[29] In terms of the balance of convenience, I accept Mr Raymond’s submission that this readily supports the applicants. The community, the services it provides, and the businesses it operates would all be devastated by the closure of the bank accounts in circumstances where they have been unable to obtain alternatives. It is appropriate that those are sustained while the applicants’ claim is determined. There is no obvious detriment to the bank in requiring it to continue to provide those services (as it has done over the last four and a half months), for a further three days to allow a formal
application to be filed. It also follows that the overall interests of justice support the application being granted.
[30] However, counsel for the bank have raised important questions regarding the jurisdiction to consider the without notice application. In terms of the undertaking as to damages, I have a discretion as to whether to dispense with that. I am satisfied it was simply not practicable to provide those in the timeframes available. However, such undertakings will be provided with the formal application for an interim injunction, and I consider, in the exercise of my discretion, that it is appropriate to dispense with the need to provide such undertakings to cover the short period between 30 November and 2 December 2022. Furthermore, there is nothing to suggest the applicants are impecunious.
[31] I accept that without notice applications (which this technically is, notwithstanding that it was served on the respondent on a Pickwick basis) should be accompanied by certification in Form G32, and this was not provided. However, the application clearly provided the history of the bank’s decision to terminate banking facilities for the applicants and provided the grounds on which that decision was based. Indeed, counsel for the bank did not suggest the material before the Court had any obvious omissions. Furthermore, Ms Foote, the instructing solicitor who prepared the application, was prepared to provide the certification promptly following the telephone conference. In the circumstances, I have made provision of the certification a condition of the grant of the interim injunction, pending the formal application which will proceed on notice.
[32] Finally, in respect of BNZ’s assertion that Greymouth is not the proper registry of the Court to commence the proceedings, I considered I had sufficient information in the unsworn affidavit of Serenity Valor, supported by copies of the correspondence which had passed between the parties, to demonstrate there were at least grounds for treating Greymouth as the proper registry in which to file the proceedings and that was not an impediment to granting the relief sought in the application. It is, of course, without prejudice to the bank’s right to contest the issue of whether Greymouth is the proper registry of the Court in which to commence the proceedings.
[33] Accordingly, for the above reasons, I made the following orders at the conclusion of the telephone conference and issued them in writing on the same day:
[2] … an interim injunction order to prevent the closure of the accounts which are at issue, and which were listed at Sch B2 of the memorandum of counsel for the plaintiff/applicants, until further order of the Court, and subject to a full application for an injunction being filed by 2 December 2022.
[3] The interim injunction granted is also subject to counsel providing before 5 pm today, a statement complying with the requirements of form G32 of the High Court Rules in respect of the material filed to obtain this interim injunction.
[4] … dispense with the requirement to provide an undertaking as to damages given the time constraints the applicants were operating under. Such an undertaking is to be provided no later than Friday 2 December 2022, and I can see no basis on which the short extension of time before closure of the accounts was to have occurred and the formal filing of the application with the associated undertaking as to damages, is likely to prejudice or harm the respondent.
[5] I also note that the place where the cause of action arose is contested. Sufficient information has been filed before this Court to suggest that it has been filed in the proper Registry. However, that indication is made without prejudice to BNZ’s right to challenge whether the application is filed in the proper Registry of the Court.
[6] In order to expedite the hearing of the formal application for an interim injunction, I direct that a half day hearing is to be allocated, with the date to be fixed by Registry staff in consultation with counsel.
Solicitors:
Duncan Cotterill, Christchurch Russell McVeigh, Auckland
Copy To:
R Raymond KC, Barrister, Christchurch
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