THE CHRISTIAN CHURCH COMMUNITY TRUST AND OTHERS v BANK OF NEW ZEALAND [2022] NZHC 3271

THE CHRISTIAN CHURCH COMMUNITY TRUST AND OTHERS v BANK OF NEW ZEALAND[2022] NZHC 3271 [7 December 2022]IN THE HIGH COURT OF NEW ZEALANDGREYMOUTH REGISTRYI TE KŌTI MATUA O AOTEAROAMĀWHERA ROHECIV-2022-418-16[2022] NZHC 3271UNDER the High Court Rules 2016IN THE MATTER of an interlocutory application for interiminjunctionBETWEEN THE CHRISTIAN CHURCHCOMMUNITY TRUST AND OTHERSApplicantsAND BANK OF NEW ZEALANDRespondentHearing: 29 November 2022 (By way of telephone conference)Appearances: R W Raymond KC and A V Foote for ApplicantsW M Irving and L M Dick for RespondentJudgment: 7 December 2022JUDGMENT OF DUNNINGHAM JThis judgment was delivered by me on 7 December 2022 at 11 am, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Introduction[1] The applicants are all companies, or other entities, which are associated withthe Gloriavale Christian Community (Gloriavale). They include companiesundertaking farming and other businesses along with unincorporated entities includingthe community itself, schools it operates, and trusts. They all operate bank accountswith 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 bankfrom closing these accounts until a formal application for an interim injunction is filedon 2 December 2022.[2] The decision to close the bank accounts stems from an Employment Courtdecision which issued on 10 May 2022.1 The decision found that three members ofthe Gloriavale community were employees from the age of six through to when theyleft Gloriavale, opening the way for them to proceed with a breach of duty claimagainst Labour Inspectors who concluded that those working within Gloriavale werenot employees and so the Inspectorate had no jurisdiction to consider their claimsrelating to employment matters.2[3] In June 2022, two women from the Gloriavale community asked BNZ to opensome additional business accounts with the local branch in Greymouth. The localmanager sent an email on 29 June 2022 declining the request and saying therelationship was being reviewed.[4] A meeting was subsequently convened on 6 July 2022 between representativesof 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 rightspolicy, have formed view concerning Human rights that show continuing to provideto entities banking facilities is inconsistent with BNZ policy". BNZ attendeesaccordingly notified those present they were terminating the banking relationship withsenior Gloriavale leaders and business entities. They advised that there would be athree month timeframe before closure to allow the affected entities and individuals to1 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 theconcerns was rejected, with the minutes recording that: "The reality is the decisionhas 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 charitabletrust, the school, the pre-school, all businesses, the midwifery service, and accountsused for medical and laundry costs. Senior leaders in the community also receivedindividual 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'sstandard terms and conditions. That clause provides as follows:3When we can close or suspend your account or end or suspend any otherproduct or service: We can close your account or end any other product orservice, or immediately suspend or restrict the operation of your account orthe provision of any other product or service, for any reason. For example (butwithout 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 legalcapacity;(b) we learn that you, or your guarantor, have suffered a BankruptcyEvent or an Insolvency Event;(c) there are insufficient available funds (including funds available underany overdraft, or other loan facility on that account) to meet paymentinstructions or other obligations from that account (includingobligations that might arise later and our fees and charges);(d) we learn of a dispute over the ownership of funds or the operation ofyour account;(e) we learn that a party has reasonably claimed an interest in youraccount;(f) we reasonably believe that you or someone else has used or is usingyour account or has (or has attempted to use your account), illegallyor fraudulently, or behaving improperly (for example, in a threateningor aggressive manner to our staff);(g) for organisation accounts (including those of trusts, companies,incorporated societies and other businesses), while the authority of theperson representing the organisation is unclear;3 As located on the BNZ's website https://www.bnz.co.nz/assets/about-us/governance/pdfs/BNZ-Standard-Terms-and-Conditions.pdf.(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 otherauthority;(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 anextended period; or(l) you refuse to provide information that we ask for, or we learn thatinformation we have been provided in relation to you or in relation tothe operation of your account, is incorrect or misleading orincomplete.[7] In its letter terminating the relationship, BNZ said as follows:BNZ follows a strong human rights policy. Under this policy, BNZ must nottolerate, or be complicit in, any activities that contribute to adverse humanrights impacts. We believe that continuing to provide banking services to youwould be inconsistent with our human rights policy.[8] Extensive communication occurred between the bank and Glorivale in theinterim. By 7 October 2022, Gloriavale understood it was making progress with ASBand Kiwibank to find alternative banking arrangements but, given the scale ofaccounts required, the local branch at Greymouth was not able to deal with the size ofthe task at hand in the time available. BNZ extended the time before terminating to30 November 2022.[9] On 17 October 2022, Gloriavale advised BNZ that ASB was unable to facilitatethe opening of the commercial entities' bank accounts as requested. On 21 October2022, Gloriavale, through its solicitors, advised that it was still working withKiwibank to see if it would provide banking services and that position was repeatedin 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 oneof Gloriavale's companies, Canaan Farming Dairy Ltd, but was still working throughthe decision on other accounts. The same position was recorded in a formal letter fromMr Jamieson to BNZ on 17 November 2022. In it, he advised that: "It is evident nowthat the transfer of banking services will not be complete by 30 November (the currentprovisional date of termination) and in respect to at least some entities, will not beachievable at all." He asked BNZ to confirm that "banking services will not bewithdrawn from the entities and individuals who have not been able to securealternative arrangements". He also said that the Gloriavale community "hasdemonstrated its willingness to address the issues it faces" and asked whether therewas any other "avenue that BNZ believes could be followed which has beenoverlooked" in order to maintain banking services.[11] On 23 November 2022, BNZ responded saying it would not agree to anyfurther extension of the closure date. It noted the possibility of injunctive relief beingsought by Gloriavale, but reiterated its view that it had the contractual right toterminate 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 thesteps that Gloriavale had been taken to ensure no one under 16 wasworking for any commercial entities and were in full time education ifthey were of school age;(b) said the notice period provided by BNZ was inadequate, and it hadproved impossible to transfer the accounts in the timeframe;(c) requested BNZ continue to provide services until an application forinterim relief had been determined, saying:(i) an application for interim relief would be filed by2 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 injunctiverelief without notice.[14] On 28 November, BNZ declined that request resulting in the application whichcame 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 ofthe application for an interim injunction. In it, he explained the history of Gloriavale'srelationship with the BNZ and the steps which had been taken since the bankcommunicated its decision to close the accounts on 8 July 2022.[16] In seeking the injunction, Mr Raymond traversed the conventional test forgranting 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 onboth breach of contract and breach of a fiduciary duty. While BNZ relies on thealleged ability, under cl 8.2, to close accounts for "any reason", Mr Raymond refers tothe list of examples contained in cl 8.2 as illustrating the kind of reasons which mightproperly 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 usualsense. While BNZ says it "understands" that "human rights abuses" are occurring (orhave occurred) in the community, that is strongly contested by Gloriavale.Furthermore, the BNZ says it relies on its human rights policy in making the decisionbut 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 isimplicitly limited and must relate to some conduct of the account holder. TheEmployment Court decision, even if justifying the decision, did not involve all the4 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (HC), and [1985] 2NZLR 140 (CA).entities which are affected by the bank's decision. The right to terminate the provisionof banking facilities cannot be unreasonably exercised, and Mr Raymond argues thatit is in this case. Mr Raymond also says there will be a claim for breach of fiduciaryduty 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 theapplicants. If the accounts operated by the applicants are closed with effect on30 November 2022, the applicants would be unable to make payments from theaccount which include payments for food, power, rates, and medical expenses.Around 570 people live at Gloriavale with over 350 children and a number of peoplewho are elderly, or who cannot work due to illness or disability. They are reliant onthe Gloriavale community entities for support. These include the schools and theentities which provide laundry, clothing and medical services, and the communalsharing account from which food expenses are paid. All require bank accounts tooperate.[20] Mr Raymond acknowledges the delay in applying to the Court, which BNZ iscritical of. However, he says this is a double-edged sword. The evidence shows thatGloriavale has been actively working to find an alternative bank, and it would havebeen premature to go to the Court while there were realistic possibilities of being ableto transfer the accounts to other banks. It was only when those options looked to beexhausted that it asked BNZ for a short further extension to allow time to seekinjunctive relief while it pursued it claims against the bank.[21] Mr Raymond acknowledged the bank's criticisms of the current applicationand, in particular, that it was not supported by the certification from counsel for theapplicants confirming that all reasonable enquiries and all reasonable steps had beenmade 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 anyfacts 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 whichthe application would be made, but could be supplied by Ms Foote, who prepared theapplication, as a condition of granting the interim injunction.[22] In terms of the failure to provide an undertaking as to damages, again this wascaused by the difficulty of obtaining signed documents from people who operate in asmall rural community on the West Coast, during the working week, but would besupplied as soon as possible and in any event, as part of the formal application for aninterim injunction to be filed on or before 2 December 2022.[23] Finally, in respect of whether the application had been filed in the properregistry of the Court, Mr Raymond relied on the unsworn affidavit of a communitymember, Serenity Valor, which set out the reasons for believing the cause of action inthe claim arose at Haupiri, closest to Greymouth, given the banking services areprovided via the bank's Greymouth branch and all communications relevant to thetermination of those services were received in Greymouth.BNZ submissions[24] The submissions for the BNZ focussed on jurisdictional issues and inparticular, 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 ortaken to ensure that the application contains all relevant informationincluding any opposition or defence that might be relied on by any otherparty 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 anundertaking as to damages. While the Court has a discretion to dispense with therequirement, it is only exercisable in narrow circumstances.6 Without the protectionof an undertaking as to damages, he submitted the bank should not be subject to an5 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 aformal application later this week.[27] Finally, the BNZ is critical of the applicants' reliance on the claimed urgencyof the application. Mr Irving pointed out that the applicants had been on notice sinceJuly that their accounts would be closed, and they have known for six weeks that theywould be closed on 30 November, following an extension granted by the bank. Theycould have filed protective proceedings on any day since July. Instead, they havedelayed until the very week in which the account closure is to occur before raising thematter with the Court. By seeking relief for the Court on such an urgent basis, theapplicants appear to have deliberately denied the bank the usual protections affordedin such an application.Discussion[28] I do not have draft pleadings from the applicants which set out in full theirclaims of breach of contract and breach of fiduciary duty. It is difficult to assess themerits of the claims in those circumstances. That said, I accept that the assertion onbehalf of the applicants that it is seriously arguable that there are constraints on theexercise of the power to terminate a contract, particularly given the importance ofbanking facilities to function in today's society. In other words, there must bereasonable cause to terminate a banking relationship, and the examples set out in cl8.2 are illustrative of what constitutes reasonable cause. Furthermore, it is unclear thatthe reason relied on by the bank is applicable to all entities it has sought to terminatea banking relationship with. For these reasons, at this very preliminary stage, I amsatisfied there is a serious question to be tried.[29] In terms of the balance of convenience, I accept Mr Raymond's submissionthat this readily supports the applicants. The community, the services it provides, andthe businesses it operates would all be devastated by the closure of the bank accountsin circumstances where they have been unable to obtain alternatives. It is appropriatethat those are sustained while the applicants' claim is determined. There is no obviousdetriment to the bank in requiring it to continue to provide those services (as it hasdone over the last four and a half months), for a further three days to allow a formalapplication to be filed. It also follows that the overall interests of justice support theapplication being granted.[30] However, counsel for the bank have raised important questions regarding thejurisdiction to consider the without notice application. In terms of the undertaking asto damages, I have a discretion as to whether to dispense with that. I am satisfied itwas simply not practicable to provide those in the timeframes available. However,such undertakings will be provided with the formal application for an interiminjunction, and I consider, in the exercise of my discretion, that it is appropriate todispense with the need to provide such undertakings to cover the short period between30 November and 2 December 2022. Furthermore, there is nothing to suggest theapplicants 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 beaccompanied by certification in Form G32, and this was not provided. However, theapplication clearly provided the history of the bank's decision to terminate bankingfacilities 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 anyobvious omissions. Furthermore, Ms Foote, the instructing solicitor who prepared theapplication, was prepared to provide the certification promptly following thetelephone conference. In the circumstances, I have made provision of the certificationa condition of the grant of the interim injunction, pending the formal application whichwill proceed on notice.[32] Finally, in respect of BNZ's assertion that Greymouth is not the proper registryof the Court to commence the proceedings, I considered I had sufficient informationin the unsworn affidavit of Serenity Valor, supported by copies of the correspondencewhich had passed between the parties, to demonstrate there were at least grounds fortreating Greymouth as the proper registry in which to file the proceedings and that wasnot 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 theproper registry of the Court in which to commence the proceedings.[33] Accordingly, for the above reasons, I made the following orders at theconclusion of the telephone conference and issued them in writing on the same day:[2] an interim injunction order to prevent the closure of the accountswhich are at issue, and which were listed at Sch B2 of the memorandum ofcounsel for the plaintiff/applicants, until further order of the Court, and subjectto a full application for an injunction being filed by 2 December 2022.[3] The interim injunction granted is also subject to counsel providingbefore 5 pm today, a statement complying with the requirements of form G32of the High Court Rules in respect of the material filed to obtain this interiminjunction.[4] dispense with the requirement to provide an undertaking as todamages given the time constraints the applicants were operating under. Suchan undertaking is to be provided no later than Friday 2 December 2022, and Ican see no basis on which the short extension of time before closure of theaccounts was to have occurred and the formal filing of the application withthe associated undertaking as to damages, is likely to prejudice or harm therespondent.[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 hasbeen filed in the proper Registry. However, that indication is made withoutprejudice to BNZ's right to challenge whether the application is filed in theproper Registry of the Court.[6] In order to expedite the hearing of the formal application for aninterim injunction, I direct that a half day hearing is to be allocated, with thedate to be fixed by Registry staff in consultation with counsel.Solicitors:Duncan Cotterill, ChristchurchRussell McVeigh, AucklandCopy To:R Raymond KC, Barrister, Christchurch