THE CHRISTIAN CHURCH COMMUNITY TRUST AND OTHERS v BANK OF NEW ZEALAND [2023] NZHC 2523

THE CHRISTIAN CHURCH COMMUNITY TRUST AND OTHERS v BANK OF NEW ZEALAND [2023]NZHC 2523 [8 September 2023]IN THE HIGH COURT OF NEW ZEALANDGREYMOUTH REGISTRYI TE KŌTI MATUA O AOTEAROAMĀWHERA ROHECIV-2022-418-16[2023] NZHC 2523UNDER The High Court Rules 2016IN THE MATTER OF An interlocutory application for interiminjunctionBETWEEN THE CHRISTIAN CHURCHCOMMUNITY TRUST AND OTHERSPlaintiffsAND BANK OF NEW ZEALANDDefendantHearing: 30 May 2023Appearances: R W Raymond KC, A V Foote and C M G Sykes for PlaintiffsW M Irving and L M Dick for RespondentJudgment: 8 September 2023JUDGMENT OF CULL J[1] In July 2022, the Bank of New Zealand (BNZ) gave notice of its intention toterminate its banking relationship with the companies and entities associated with theChristian Church Community Trust, more commonly known as the GloriavaleChristian community (Gloriavale).[2] Gloriavale has, almost exclusively, used BNZ as its bank of choice for the past40 years and seeks to continue to do so. It says that BNZ decided to terminate itsbanking relationship in reliance on internal reports that are factually inaccurate andwere never put to Gloriavale for comment. Gloriavale argues that BNZ was measuringthem against an internal "Group Human Rights Policy," which was not provided toGloriavale when requested. BNZ relied on an Employment Court decision, which wasretrospective, to terminate all its accounts.1[3] Despite making attempts to find alternative banking arrangements, Gloriavalereports that it has been turned away from every bank and seeks the Court's protectionto enable its businesses to continue to operate. Without the Court's protection,Gloriavale says that payment toward the community's most basic functions—including medical care, rates, food and clothing—may be jeopardised.[4] The relationship between BNZ and Gloriavale is governed by the StandardTerms and Conditions of BNZ (the contract). It is accepted by both parties that therehas been no breach of the contract terms by Gloriavale. The claim to be advanced byGloriavale at trial will be for breach of contract, breach of fiduciary duty and estoppelby convention.[5] A without-notice application for an interim injunction was granted byDunningham J after an urgent teleconference on 29 November 2022 restraining BNZfrom closing the relevant accounts.2 The matter was set down for this hearing todetermine whether the interim injunction order should continue, pending resolution ofthe claims at trial.Factual background[6] Gloriavale is comprised of 16 entities and has a total of 83 accounts across itsbusinesses and entities with BNZ. BNZ is the sole bank used not only by thebusinesses and entities within the Gloriavale community, but also with most individualmembers of Gloriavale. BNZ terminated this relationship on 6 July 2022, in relianceon cl 8.2 of the contract because of human rights breaches. BNZ gave Gloriavale threemonths to find alternative banking arrangements. A letter formally recording thedecision was sent to Gloriavale on 8 July 2022, attaching the list of all accounts to be1 Courage v Attorney-General and ors [2022] NZEmpC 77, (2022) 18 NZELR 746 [Courage].2 Christian Church Community Trust v Bank of New Zealand [2022] NZHC 3271 [Decision ofDunningham J].closed (which included accounts for the charitable trust, the school, the pre-school, allbusinesses, the midwifery service and accounts used for medical and laundry costs).3[7] Gloriavale attempted to engage with BNZ to seek to find a resolution, givingassurances that steps were being taken within the Community to remedy the practicesof concern to BNZ.4 Gloriavale asserts that BNZ did not raise its concerns with theCommunity until 6 July 2022.5[8] The parties' contractual relationship is governed by the contract terms, whichare imposed on Gloriavale and can be changed by BNZ at any time. BNZ relies oncl 8.2 of the terms, which states in broad terms that:We can close your account or end any other product or service, or immediatelysuspend or restrict the operation of your account or the provision of any otherproduct or service, for any reasonClause 8.2 then goes on to give examples of conduct that may give rise to a reason forBNZ to terminate an account, but the terms also state that these examples are given"without limiting the reasons why [BNZ] might close or suspend [an] account".[9] BNZ relied on the decision of the Employment Court in Courage v Attorney-General (Courage),6 which was released on 10 May 2022, to justify the invocation ofcl 8.2 and termination of its relationship with the Gloriavale entities on the basis ofBNZ's Group Human Rights Policy.[10] In Courage, the Employment Court considered the employment status ofmembers within the Gloriavale Community. The decision found that three membersof the Gloriavale community were employees from the age of six until they left,opening the way for those claimants to pursue a breach of duty claim against LabourInspectors, who said that those working within Gloriavale were not employees andtherefore not within their jurisdiction.3 At [5].4 A full account of the communications between Gloriavale and BNZ is summarised in the Decisionof Dunningham J, above n 2, at [3]-[14].5 It was accepted by Ms Rebekah Cain, BNZ's Chief Sustainability Officer, that internalconversations about the Community within BNZ occurred from time to time.6 Courage, above n 1.[11] Gloriavale challenges BNZ's reliance on this decision on the basis that it wasinterim, "naturally retrospective," and concerned only one of Gloriavale's entities. Itsays that BNZ's decision has caused immense pressure for the community and itsmembers, who are presently under unprecedented scrutiny from multiple sources.Gloriavale emphasises its "total reliance" on BNZ's services for its day-to-dayfunctioning of its entities for those living in the community.Interim injunction decision[12] The initial without-notice application came before Dunningham J in an urgentteleconference on a Pickwick basis. There were no draft pleadings but Gloriavalemade application on the basis of a breach of contract and breach of fiduciary duty.7[13] In her written reasons of 7 December 2022, Dunningham J accepted that it wasseriously arguable that there are constraints on the exercise of power to terminate acontract, particularly given the importance of banking facilities in today's society. TheJudge considered it was unclear from the Courage decision whether it was applicableto all the Gloriavale entities, with which BNZ has sought to terminate its bankingrelationship.8[14] The Judge was satisfied that the balance of convenience lay with Gloriavale,as the closure of accounts meant that the community could not make alternativearrangements. The Judge concluded it was "appropriate that those are sustained whilethe applicants' claim is determined"9 and granted an interim injunction, to prevent theclosure of the relevant accounts.10Legal principles of interim injunctions[15] Interim injunctions are protective orders that are ancillary to the final claim.An application for an interim injunction is made pursuant to r 7.53 of the High CourtRules 2016 (the Rules). An undertaking as to damages has been given by an entityrelated to Gloriavale (Alpine Health Manufacturing New Zealand Ltd), as required,7 Decision of Dunningham J, above n 2, at [28].8 At [28].9 At [29].10 At [33].and it is my understanding that a G32 Form has also been filed in accordance with theRules.[16] The threshold test for an interim injunction and the application of the principlesare well established in New Zealand. There are three questions that the Court mustconsider when evaluating an application for an interim injunction:11(a) whether there is a serious question to be tried;(b) where the balance of convenience lies (in granting versus not grantingthe order); and(c) the overall interests of justice.[17] At this stage of the proceeding, it is not the Court's function to attempt toresolve any conflicts of evidence on which the claims of the parties rely, nor is it forthe Court to determine any difficult questions of law which may require more detailedconsideration.12[18] Before addressing the three questions above, I address the issue of whether thisis a mandatory injunction.Mandatory injunction?[19] BNZ submit that this application is properly construed as one requiring BNZto provide banking services to Gloriavale, and so is an application for a mandatory (asopposed to a prohibitory) injunction. BNZ argue that mandatory injunctions aregranted rarely, and the applicant is required to establish a "powerfully arguable orstrong case to sustain a mandatory injunction".13 BNZ relies on Acernus Aero Ltd vVincent Aviation Ltd for the proposition that mandatory injunctions require a higher11 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (HC) at 133, (CA)at [142]; Intellihub Ltd v Genesis Energy Ltd [2020] NZCA 344 at [22]–[24]; and Mad ButcherHoldings Ltd v Standard 730 Ltd [2019] NZHC 589 at [14].12 Mad Butcher Holdings Ltd, above n 11, at [15] following American Cyanamid Co v Ethicon Ltd[1975] AC 396 (HL) at 407; Villa Maria Wines Ltd v Montana Wines Ltd [1984] NZLR 422 (CA)at 425; and Health Club Brands Ltd v Colven [2013] NZHC 428 at [9].13 Relying on Croser v Focus Genetics Ltd Partnership [2019] NZHC 627 and Acernus Aero Ltd vVincent Aviation Ltd [2012] NZHC 295.standard namely that they require the applicant to show a "powerfully arguable orstrong case."14[20] There are two reasons why I do not accept BNZ's submission. The first is thatin deciding whether to grant or withhold an injunction, the first principle is that theCourt should take whichever course seems likely to cause the least irremediableprejudice to one party or the other. That applies, whether the injunction is prohibitoryor mandatory.15 This principle was confirmed by the Court of Appeal in CommerceCommission v Viagogo AG where the Court observed that attempting to classifyinjunctions as either mandatory or prohibitory can be a "barren" exercise.16 Whatultimately matters is the practical implications of ordering the injunction sought.17[21] The second reason is that the interim injunction was ordered to prevent BNZterminating the Gloriavale accounts. Although BNZ submits that the injunctionrequires the bank to continue to do business with the customer against the bank's willas the Canadian authorities frame it,18 the current interim injunction prohibited BNZfrom terminating the Gloriavale accounts and to that extent, is a prohibitory injunction.[22] In any event, the orthodox test for an interim injunction should be applied tothe facts of this case and is appropriate here. I deal then with each of the thresholdsteps.Is there a serious question to be tried?[23] Gloriavale has filed its statement of claim pleading three causes of action,which are breach of contract, breach of fiduciary duty and estoppel by convention.[24] The principal focus of the hearing before me was on whether BNZ was inbreach of its contract by unilaterally terminating the Gloriavale accounts. The othertwo causes of action were also canvassed, and I deal with each below.14 Acernus Aero Ltd v Vincent Aviation Ltd [2012] NZHC 295 at [9] (footnotes omitted).15 National Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] UKPC 16, [2009] 1 WLR 1405.16 Commerce Commission v Viagogo AG [2019] NZCA 472; [2019] 3 NZLR 559 at [90] (footnotesomitted).17 At [90].18 RCG Forex Service Corp v HSBC Bank Canada [2011] BCSC 315 at [8].Has BNZ breached its contract with Gloriavale?[25] The contractual relationship between Gloriavale (including all of Gloriavale'sentities) and BNZ is governed by the contract, which applies to all BNZ transactionand savings accounts together with account related products and services.[26] The terms of the contract are imposed unilaterally by BNZ on its customersand cl 1.7 states clearly that BNZ "can change these Terms at any time" and cl 2.1provides that BNZ can decline an application to open an account or other product orservice and "we do not need to give you a reason for doing so".[27] This proceeding concerns the termination clause, cl 8.2, governing BNZ'ssuspension or closure of accounts or services. Clause 8.2 provides that BNZ can closea customer's account or end any other product or service for any reason. It listsexamples of such reasons without limiting the reasons why the bank might close anaccount. Clause 8.2 provides:8.2 When we can close or suspend your account or end or suspend anyother product or service: We can close your account or end any otherproduct or service, or immediately suspend or restrict the operation ofyour account or the provision of any other product or service, for anyreason. For example (but without limiting the reasons why we mightclose or suspend your account), we may close or suspend your accountwhere:(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 availableunder any overdraft, or other loan facility on that account) to meetpayment instructions or other obligations from that account(including obligations that might arise later and our fees andcharges);(d) we learn of a dispute over the ownership of funds or the operationof your 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 athreatening or aggressive manner to our staff);(g) for organisation accounts (including those of trusts, companies,incorporated societies and other businesses), while the authority ofthe 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 orother authority;(i) you have breached these Terms or any relevant Product Terms;(j) we reasonably believe that you, or payments in or out of youraccount, are subject to Sanctions;(k) your account has never bene 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 relationto the operation of your account, is incorrect or misleading orincomplete.[28] Mr Raymond KC for Gloriavale submits that BNZ's exercise of power undercl 8.2 is an exercise of contractual discretion, and that "absolute" contractualdiscretions cannot be exercised in a way that is "arbitrary, capricious, or unreasonable,having regard to the provisions of the contract",19 as Doogue J found in CanaanFarming Dairy Ltd v Westland Dairy Company Ltd, a comparable case involving acontract termination with Gloriavale.[29] Gloriavale contends that it has complied with the bank's terms and relies onBNZ to provide continuity of services.[30] Gloriavale notes that access to banking facilities is an actively protected rightin a number of jurisdictions,20 but accepts that in the absence of an express contraryagreement, a bank may terminate a relationship with its customer on reasonable notice.However, Mr Raymond says that this common law principle does not assist BNZbecause cl 8.2 provides an express, contractual requirement that BNZ must have aqualifying reason for closing the affected accounts.19 Canaan Farming Dairy Ltd v Westland Dairy Company Ltd [2022] NZHC 2524 at [115]–[122].20 The World Bank "Financial Inclusion" (29 March 2022) <Financial Inclusion Overview(worldbank.org)>; The World Bank "UFA2020 Overview: Universal Financial Access by 2020"(1 October 2018) <UFA2020 Overview: Universal Financial Access by 2020 (worldbank.org)>.[31] In opposition, BNZ argue that cl 8.2 expressly provides that the identifiedexamples do not limit the reasons as to why BNZ may close a customer's account.BNZ refers to cl 2.1 of the contract, which provides that BNZ has the sole discretionas to whether to open an account for a prospective customer, and cl 8.1, which providesthat a customer can unilaterally close their account at any time. BNZ says that cl 8.2should be read consistently with these other terms.[32] BNZ submits that cl 8.2 sets out in clear terms an absolute termination right asdistinct from a contractual discretion. It rejects any suggestion that there is an impliedterm of reasonableness, saying that it would contradict the Bank's unfettered right toterminate. BNZ drew the Court's attention to the recent case of Targa Capital Ltd vWestpac New Zealand Ltd, 21 where the applicant was unsuccessful in obtaining aninjunction requiring Westpac to continue operating its accounts, even where Westpac'stermination clause contemplated 'reasonable grounds' to terminate. Mr Irving forBNZ says that even where the customer's contractual position was stronger in Targa,the injunction was not granted, and a similar result should follow here.[33] The question then is whether BNZ can unilaterally terminate a customer'saccount for any reason as it claims, or are there constraints on that power as theapplicants contend? If BNZ's submission is correct, it submits there is no seriousquestion to be tried and the injunction should be set aside.Is it seriously arguable that there are constraints on the contractual terminationpower?[34] Each of the parties rely on common law rules and principles.[35] The principal submission of BNZ is that the common law position on thebank's ability to terminate bank accounts is well settled. In Targa this Court upheldthe common law principle that banks may terminate a customer's account onreasonable notice. The only requirement, therefore, is that banks must give a customera reasonable notice of time before the accounts are terminated. Relying on Targa andthe authorities cited in it, 22 BNZ relied on its ability to close accounts for "any reason",21 Targa Capital Ltd v Westpac New Zealand Ltd [2023] NZHC 230 [Targa].22 At [35] and [42].by pleading that there is no restriction on the nature or quality of the reason for whichit may close a customer's bank accounts.[36] Mr Raymond relied on the common law principles applying to an exercise ofan absolute contractual discretion, which requires that it may not be exercised in a waythat is arbitrary, capricious or unreasonable having regard to the provisions of thecontract.23[37] The latter principle is called the default rule. Since the hearing before me, theCourt of Appeal has recently considered this issue in Woolley v Fonterra Co-operativeGroup Ltd (Woolley).24 The Court of Appeal reviewed what approach should beapplied to the exercise of a contractual discretion and any implied term to act"reasonably". The Woolley judgment raises the very question in these proceedings asto whether there is an absolute contractual right without constriction or whether thereare constraints on contractual discretions.The default rule[38] The common law has developed a default rule controlling the exercise ofunilateral contractual powers or discretion. The rule is that a party, on whom a contractconfers a discretionary power, must not exercise the discretion arbitrarily, capriciouslyor in bad faith, or unreasonably in the sense that no reasonable contracting party couldhave so acted.[39] This rule was defined by Leggatt LJ in Abu Dhabi National Tanker Co vProduct Star Shipping Co Ltd (No.2), where the assessment of reasonableness of acontractual exercise of discretion was compared with judicial review.25 The rule wasarticulated as follows:For purposes of judicial review the Court is concerned to judge whether adecision-making body has exceeded its powers, and in this context whether aparticular decision is so perverse that no reasonable body, properly directingitself to the applicable law, could have reached such a decision. But theexercise of judicial control of administrative action is an analogy which must23 Canaan Farming Dairy Ltd v Westland Dairy Ltd, above n 19, at [115]–[122].24 Woolley v Fonterra Co-operative Group Ltd [2023] NZCA 266.25 Abu Dhabi National Tanker Co v Product Star Shipping Co Ltd (No.2) [1993] 1 Lloyd's Rep 397(CA) at 404.be applied with caution to the assessment of whether a contractual discretionhas been properly exercised. The essential question always is whether therelevant power has been abused. Where A and B contract with one another toconfer a discretion on A, that does not render B subject to A's uninhibitedwhim. In my judgment, the authorities show that not only must the discretionbe exercised honestly and in good faith, but, having regard to the provisionsof the contract by which must be conferred, it must not be exercised arbitrarily,capriciously, or unreasonably. That entails a proper consideration of thematter after making any necessary inquiries. To these principles, little is addedby the concept of fairness: it does no more than describe the result achievedby their application.[40] The Court of Appeal, in traversing the authorities in other jurisdictions,observed that little had been published in New Zealand on the default rule, apart fromone article by Stephen Kós,26 but was referred to in a number of High Court decisions.In C & S Kelly Properties Ltd v Earthquake Commission, Mander J observed:27[73] To summarise, Commonwealth Courts are willing to intervene in theexercise of a prima facie unfettered discretion. Such intervention willordinarily be premised on an implied term to constrain the exercise of thediscretion so as to give effect to the reasonable expectations of the parties.The exercise of contractual discretion will be open to challenge where it canbe established that it was not exercised honestly in good faith; or not exercisedfor the purpose(s) for which it was conferred; or when exercised in acapricious or arbitrary manner; or otherwise falls into the category of whatwould be considered Wednesbury unreasonableness.[41] The Court also described the expanded default rule, as a result of the decisionin Braganza v BP Shipping Ltd in which Lady Hale observed the "obvious parallelbetween cases where a contract assigns a decision-making function to one of theparties and cases where a statute assigns a decision-making function to a publicauthority."28[42] The Court of Appeal in Woolley assumed that the default rule applies in NewZealand (without expressly deciding the point) and did not view the case as anappropriate vehicle for either general endorsement or rejection of the Braganzaapproach.29 The Court dismissed Mr Woolley's application for leave to appeal, findingthat although it was common ground in exercising a discretionary power to suspend26 Stephen Kós "Constraints on the Exercise of Contractual Powers" (2011) 42 VUWLR 17 at 22-21.27 C & S Kelly Properties Ltd v Earthquake Commission [2015] NZHC 1690 at [73].28 Braganza v BP Shipping Ltd and another [2015] UKSC 17, [2015] 1 WLR 1661 at [19]29 Woolley v Fonterra Co-operative Group Ltd, above n 24, at [103] and [112]–115].milk collection under its contract, Fonterra was obliged to comply with the defaultrule.30 Fonterra's decision did not offend against the default rule because it wasreasonable for Fonterra to manage its risk of being in breach of an Environment Courtorder.The banking authorities[43] In contrast to the above authorities, Mr Irving draws a distinction between theexercise of an absolute termination right and the exercise of a contractual discretionwith an implied term of reasonableness in the provisions of the contract. He submitsthe exercise of an absolute termination right does not attract the courts' intervention inthe same manner.31 BNZ maintains there is no authority in New Zealand or elsewhereto the effect that banks require a reasonable justification to terminate customeraccounts.[44] Citing the Supreme Court of British Columbia, Mr Irving submits that if banksrequired a reasonable justification to terminate customer accounts it:32would require the court to impose a hopelessly vague and uncertain termupon the parties. A judicial determination will be required in practically allcases. The court would effectively become the supervisor of the bankingrelationship.[45] With the international imposition of anti-money laundering legislation, thebanks have become more vigilant about their exposure to reputational risk, reflectedin bank policies implemented as a result of legislation in order to mitigate the risks ofmoney laundering.[46] There are a number of authorities, where courts in other jurisdictions have heldthat banks were entitled to close a customer's bank accounts and terminate itsrelationship with the customer provided adequate notice was given, where the bankwas exposed to a commercial and reputational risk. 3330 At [92].31 Cathay Pacific Airways Ltd v Lufthansa Technik Ag [2020] EWHC 1789 (Ch) at [163]–[179].32 RCG Forex Service Corp v HSBC Bank Canada, above n 18 at [33].33 Hlongwane and Others v Absa Bank Ltd and Another (75782/13) [2016] ZAGPPHC 938 (10November 2016). The High Court of South Africa held that Absa Bank was under no obligationto retain the customer or to expend time on monitoring the customer's activities for moneylaundering. The customers were perceived by the bank as high profile and high-risk clients and it[47] The same considerations were taken into account in Targa, where the Courtupheld Westpac's assessment of the three risks it identified in continuing its bankingrelationship with Targa.34 This included the regulatory risk of breaching UnitedKingdom or Australian sanction regimes, the contract risk of Westpac's ability toaccess offshore capital markets because of perceived breaches of sanction regimes bythird parties, and ultimately the capital markets risk, where third parties may declineto deal with Westpac. Campbell J held that these three risks were of a type thatprovided a reasonable basis for Westpac deciding to terminate its banking relationshipwith Targa.[48] Similarly, in RCG Forex Service Corp v HSBC Bank Canada, HSBC Bankmaintained that as part of its ongoing risk assessment, it considered RCG was a highmoney laundering risk and the bank was subject to the Proceeds of Crime (MoneyLaundering) and Terrorist Financing Act SC 2000, which set out the bank's duties withrespect to prevention and detection of money laundering and terrorist financing.35[49] The same applies to the United Kingdom Privy Council decision of NationalCommercial Bank of Jamaica Ltd v Olint Corp Ltd where the Court upheld thecommon law principle that in the absence of express contrary agreement or statutoryimpediment, a contract by a bank to provide banking services to a customer isterminable upon reasonable notice.36 In refusing to grant an injunction, the Courtnoted that the bank was concerned about the customer's money laundering andterrorist financing risk and had asked for their audited accounts, which were refused.[50] Although it is not as express as "the belief on reasonable grounds" term in theWestpac contract in Targa, I cannot overlook that cl 8.2, by giving the examples ofreasons for BNZ to terminate a customer's account, appears to imply either that therewould be need to be a valid reason for termination, or that BNZ would act reasonably.As its alternative argument, BNZ says it had a reason to terminate if one was required,believed its duty to comply with the Financial Intelligence Centre Act 38 of 2001 would beonerous. Bredenkamp v Standard Bank (599/09) ZASCA 75; 2010 (4) SA468 (SCA); 2010 (9)BCLR 892 (SCA); [2010] 4 All SA 113 (SCA) (27 May 2010).34 Targa, above n 21, at [52]–[53].35 RCG Forex Service Corp v HSBC Bank Canada, above n 18, at [20].36 National Commercial Bank of Jamaica Ltd v Olint Corp Ltd, above n 15.and that was its reliance on the Courage decision to believe Gloriavale was in breachof its human rights policy. I deal with this alternative argument below.[51] In light of the wording of cl 8.2, the Court of Appeal's decision in Woolley(which was decided after the hearing before me), and the relevant principles that applyto an exercise of an absolute contractual discretion canvassed in the authorities, I amunable to accept BNZ's position that BNZ had an absolute termination right and theinjunction can be set aside on that basis.[52] I consider it is reasonably arguable that the default rule or the Braganzaapproach may be applicable to the banking relationship, and to the exercise of BNZ'sdiscretion to terminate under cl 8.2.[53] In the event that either the default rule applies or that there is an implied termto act reasonably, there is still the question whether BNZ acted reasonably in relianceon cl 8.2 to terminate Gloriavale's accounts.Is it seriously arguable that BNZ's exercise of its discretion was unreasonable?[54] The question remains, as framed in Targa, whether it is seriously arguable thatBNZ had exercised its discretion unreasonably.37 There are two aspects to consider.The first is whether in reaching its decision BNZ was procedurally fair and reasonable.The second is one of substance, namely, whether its decision was substantivelyreasonable.Was BNZ's process procedurally fair and reasonable?[55] Counsel for Gloriavale have raised three factors in relation to the process orprocedure BNZ adopted to terminate its accounts and whether BNZ followed a fairprocess in giving Gloriavale an opportunity to respond to BNZ's proposed action.[56] The first, is that Mr Raymond contests BNZ's reliance on other 'credibleaccounts' of conduct at Gloriavale, such as unverified Wikipedia pages and New37 Targa, above n 21, at [45] and [48].Zealand Herald Articles, submitting that they are unreliable and wrong, yet BNZ tookno steps to check their veracity.[57] BNZ responds to the allegation of a lack of engagement with Gloriavale bysaying that an exemption to the Group Human Rights Policy is only granted in certainsituations, and BNZ did not consider that the applicants would be in a position to meetthe criteria for exemption.[58] Secondly, BNZ did not engage with the Gloriavale leaders, before BNZreached its decision and it never disclosed to Gloriavale the Group's Human RightsPolicy, despite being asked, until the Court proceedings. The meeting by BNZ withthe Gloriavale community leaders on 6 July, following BNZ's termination decision,was convened to inform them of BNZ's decision. The reasonableness of the procedureBNZ adopted in reaching its decision to terminate, and whether enquiries were madeof the Gloriavale representatives as to what steps they were taking following theEmployment Court's decision, or how widespread the use of child labour was withinthe Gloriavale entities as a whole, are matters for determination at a further hearing.[59] The third factor is whether BNZ should have considered the asymmetry ofpower and the length of the banker/customer relationship in exercising its decision toterminate. Gloriavale points to its 40 year banking relationship with BNZ. Thisinvolved all entities of Gloriavale as well as the accounts held by the individualmembers of the community. As a result of their Christian beliefs, Gloriavale did notreceive any interest on any of its investment or other accounts over those years. Thisgave a significant financial benefit to BNZ. Gloriavale submits that despite themutually beneficial and significant relationship, BNZ gave no consideration toGloriavale's loyalty or its position.[60] Gloriavale has no ability to reinstate its accounts with BNZ or any otherbanking facility in NZ to maintain its livelihood and continue its business and trading.Whether the length of the banking/customer relationship, the power imbalancebetween a Bank and a customer, and the lack of consideration to Glorivale's solidbanking history are arguably relevant to the exercise of BNZ's discretion to terminate,in addition to the substantive inquiry of reasonableness.Was BNZ's exercise of discretion substantively reasonable?[61] This inquiry addresses the issue of whether the BNZ decision wassubstantively reasonable, either by the application of the default rule or by an impliedcontractual term. If, at the substantive hearing, the Court considers that the defaultrule or its extension applies to a bank, the two-stage test articulated by Lady Hale inBraganza v BP Shipping Ltd may well be relevant to the Court's consideration.38[62] The Court of Appeal in Woolley addressed Lady Hale's judgment in Braganza,in which she referred to the Wednesbury test of reasonableness of an administrativedecision,39 by describing it thus:40Lady Hale DP referred to the test of reasonableness of an administrativedecision adopted by Lord Greene MR in Wednesbury Corporation, drawingattention to its two limbs: the first limb focuses on the decision-makingprocess — whether the right matters have been taken into account inreaching the decision; the second focuses upon its outcome — whether, eventhough the right things have been taken into account, the result is sooutrageous that no reasonable decision-maker could have reached it. Shepointed out that the latter is often used as a shorthand for the Wednesburyprinciple, but without necessarily excluding the former.Noting dicta to the effect that contractual discretions should not be exercisedwith reference to considerations wholly extraneous to the subject matter ofthe decision, Lady Hale DP reasoned that, if it is part of a rational decision-making process to exclude extraneous considerations, it is also part of arational decision-making process to take into account those considerationswhich are obviously relevant to the decision in question. She stated that itis of the essence of "Wednesbury reasonableness" (or "GCHQ rationality")review to consider the rationality of the decision-making process rather thanto concentrate on the outcome, pointing out that concentrating on theoutcome runs the risk that the court will substitute its own decision for thatof the primary decision-maker.[63] Although the Braganza decision involved an employment contract, thequestion remains whether the discretion exercised by BNZ has exercised reasonably.In Targa, the Court accepted that Westpac was entitled to have regard to its ownlegitimate commercial interests and in that case, Westpac's interest in managing its38 Braganza v BP Shipping Ltd, above n 28.39 At [24], [28]–[29]; Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948]1 KB 223 (CA).40 Woolley v Fonterra Co-operative Group Ltd, above n 24, at [99]–[100] (footnotes omitted).economic trade sanctions risk was expressly recognised in the anti-money launderingand sanctions clause.[64] On an assessment of BNZ's substantive decision-making in this case, Iconsider there are at least three factors which are relevant to the question of whetherBNZ's discretion has been exercised reasonably.[65] The first is whether BNZ was managing a real risk to its banking operationwhen it made its decision. BNZ submits that it was entitled to take into account itsreputational, environmental, social and governance risks by reference to the widerNational Australian Bank's (NAB) Group Human Rights Policy. The risks identifiedin the NAB statement appear to raise concerns about financial crime management,referring to "human impact crimes human trafficking and modern slavery practicessuch as servitude, forced labour, forced or servile marriage, debt bondage and theexploitation of children."[66] The Gloriavale community's use of child labour, while condemned by theEmployment Court, does not involve criminal behaviour such as trafficking, for whichsubstantial penalties are imposed. The circumstances here are distinguishable fromthose in Targa where the Court accepted that Westpac was entitled to manage its riskand its own commercial interests, by taking steps to avoid anti-money launderingsanction or likely economic trade sanctions,41 or avoid breaching a Court order as inWoolley.42[67] Was BNZ having to manage its actual risk and commercial interests incontinuing the Gloriavale accounts or did BNZ simply no longer want to deal withGloriavale and wished to distance itself from that community? There was nosuggestion that NAB had raised any issue with BNZ over a continued relationship withGloriavale. The connection, as in a likely sanction for any criminal activity as inTarga, between Gloriavale and any risk to BNZ was not apparent on the evidencebefore me.41 Targa, above n 21, at [50] and [51].42 Woolley v Fonterra Co-operative Group Ltd, above n 24.[68] In BNZ's decision, which is undated, but appears to have been reached in lateMay to June 2022, BNZ placed reliance on the Courage decision in the EmploymentCourt which found there were child labour practices in Gloriavale and that "memberswere not to report concerns to external agencies".43 The decision then lists a historyof human rights violations in Gloriavale. This included a conviction in 1995 of acommunity member for sexual abuse charges and an investigation into sexual abusein July 2020, together with reference to other inquiries and investigations intoallegations of physical and sexual abuse from February 2021 to August 2021. BNZbelieved that Gloriavale was breaching "our Group Human Rights Policy due to anumber of Human Rights violations including the right not to be subject to torture ordegrading treatment or punishment, slavery, rights of protection for the child and rightsto enjoy just and favourable conditions of work." BNZ's decision notes that WorksafeNew Zealand is sending inspectors to investigate, that Charities Services hascommenced an investigation into Gloriavale's trusts over allegations of unpaid childlabour and noted that other companies in the Gloriavale enterprises' value chain werediscontinuing their relationships with the company, including Westland Dairy, whichwas the subject of the Canaan Farming Dairy Ltd decision.44[69] Although BNZ does not accept that it has to provide a reason for terminatingthe accounts, it places reliance on the Group Human Rights Policy and in particularthe Group's intolerance for slavery, human trafficking, forced labour or childexploitation (including the worst forms of child labour) at cl 3.6.2. The policyprovides however that the Group will engage with relevant customers, supplies andother stakeholders to encourage best practice in respecting other human rights ofrelevant local communities at cl 3.6.4. Clause 3.6.5 sets out actions to be taken wherethe Group discovers that actions of third parties or customers are associated withhuman rights violations. Those actions include notification to law enforcementagencies or regulators, engaging with the relevant parties to promote good practiceand/or avoiding or exiting the business relationship.[70] Mr Raymond submits that it is relevant that Worksafe has not prosecuted anyof the applicants, that BNZ continued its relationship with the community despite the43 Courage, above n 1, at [102].44 Canaan Farming Dairy Ltd v Westland Dairy Company Ltd, above n 19.conviction of the Gloriavale leader on sexual abuse charges in 1995, and that theCharities Services reviewed the Gloriavale trust in 2017 but decided not to conductany further investigation since 2020. The Canaan Farming Ltd contract terminationwas resolved between the parties with Westland Dairy resuming milk collection, andMr Raymond notes, a number of the matters listed by the Employment Court relate tohistoric matters.[71] These matters give rise to the question as to whether there was a reasonablebasis for BNZ to decide to terminate all 83 of Gloriavale's accounts given that theleaders of Gloriavale say they gave assurances to BNZ that they were addressing theconcerns arising from the Courage decision. It is uncertain whether every Gloriavaleentity with which BNZ seeks to terminate its relationship, has breached its GroupHuman Rights Policy in such a manner that may invoke the application of cl 8.2.There needs to be an assessment, on all the evidence, as to whether it was reasonablefor BNZ to have terminated its banking relationship with all of Gloriavale's entities.[72] Second, is unilateral termination of a banking contract and customerrelationship reasonable when there are no other banking services available toGloriavale? Although given three months' notice to find alternative banking services,Gloriavale has no other banking options, having been turned down by the other banksapproached. The result is that Gloriavale will effectively be unable to operate theirbusinesses, their importing and exporting businesses, together with their midwiferyand other related activities, and unable to pay staff or suppliers or wages to communitymembers. It was accepted by all parties including BNZ that without access to bankingservices, businesses, apart from a very small operation, cannot operate in the market.In the current market, receipts of benefits, online payments and other such communityaccepted services require bank accounts.[73] If termination can occur for any reason, this case demonstrates that it places acommercial body in a powerful position to determine whether a customer is acceptableto the bank or not. On the other hand, like Westpac in Targa, BNZ may be able toshow that it was an appropriate and reasonable management of its Group HumanRights policy risks. That however will depend on a careful examination of the policyand the NAB policy and whether it was reasonable for BNZ to apply those policies tothe facts at issue here and across all of Gloriavale's entities.[74] Although BNZ pointed to the further inquiries taking place, the referral to theSolicitor-General, to which the Chief Employment Court Judge refers at theconclusion of the Courage decision, for a review of all of Gloriavale's activities andcompanies in relation to child labour, has not occurred.45 Is it reasonable, therefore,for BNZ, in terminating its contract, to rely on a Court's finding unrelated to the bank'sservices, to effectively impose a sanction on a customer like Gloriavale, leaving itwithout an ability to access banking services?[75] The third factor is whether a banking service is an essential service, importingpublic interest obligations on BNZ arising from its contractual relationships. MrRaymond submits that access to banking facilities is a right that is actively protectedin a number of jurisdictions. He produced a number of documents which record theWorld Bank Group's initiative to "ensuring that people worldwide can have access toa transaction account."46[76] The Australian Banking Association has also recently made a commitment toensuring accessibility to banking services. Of relevance, the introductory comment toa 2019 report on the Australian Banking Association's commitment states:"accessibility to banking services is a fundamental right."47 As Mr Raymond submits,that report acknowledges the importance of banking as an essential part of modernlife.48[77] The European Commission has made a similar observation. In 2011, with theuse of cash rapidly decreasing, "access to a bank account has become a pre-conditionfor participating fully in the economic and social life of a modern society."49 In45 Courage, above n 1, at [205].46 The World Bank "Financial Inclusion" (29 March 2022) <Financial InclusionOverview(worldbank.org)>; and The World Bank "UFA2020 Overview: Universal FinancialAccess by 2020" (1 October 2018) <UFA2020 Overview: Universal Financial Access by 2020(worldbank.org)>.47 Australian Banking Association Every Customer Counts: Accessibility Principle for BankingServices (November 2018).48 At [1.1].49 European Commission Commission Recommendation of 18 July 2011 on Access to a BasicPayment Account 2011/442/EU, OJ L 190, 21 July 2011.Canada and the UK, banks must open an account for eligible persons such as atransactional account, unless there are qualifying statutory grounds for refusal and awritten statement confirming the bank's decision is mandatory.50 Mr Raymondsubmits that New Zealand is heading in the same direction, with the importance ofaccess to banking services being acknowledged in s 44 of the Human Rights Act 1993.[78] Because of the potentially detrimental effect of unilateral termination, thequestion arises as to whether banking services be viewed as an essential service.Should something akin to the doctrine of prime necessities apply? As the authoritiesnote,51 the doctrine of prime necessities remains part of the law of New Zealandrequiring that the monopoly suppliers of essential services "must charge no more thana reasonable price", which is relevant to the supplier/customer contractual relationshipof domestic services.52[79] The doctrine provided for a form of price regulation applicable to essentialservices such as the supply of water, electricity, removal of sewage and wharf services.Although the Court of Appeal in Vector Ltd (formerly Mercury Energy Ltd) vTranspower New Zealand Ltd held there was no room for the operation of the doctrinein relation to the transmission of bulk electricity by Transpower to Vector as the resultof the Commerce Act 1986, regulatory protection has since developed, includingmeasures to stop the unilateral termination of essential services to those receivingpower for example, who are medically dependent on power.53[80] Lord Woolf, speaking extra-judicially in 1986, posed a question about theimpact on the public interest, where decisions made by powerful bodies are not subjectto challenge. He said:5450 See Bank Act SC 1991, c 46, s 627.17–627.19 and Payment Accounts Regulations 2015 (UK) reg22, 23 and 26.51 Chris Noonan Competition Law in New Zealand (Thomson Reuters, New Zealand, 2017) at[4.2.2].52 Vector Ltd (formerly Mercury Energy Ltd) v Transpower New Zealand Ltd [1999] 3 NZLR 646(CA) at [51]; Michael Taggart "Public Utilities and Public Law" in Philip A Joseph (ed) Essayson the Constitution (Brookers, Wellington, 1995) 214; Lyn Stevens "The Goals of the CommerceAct" in Mark Berry and Lewis Evans (eds) Competition Law at the Turn of the Century: A NewZealand Perspective (Victoria University Press, Wellington, 2000) 84.53 The Electricity Authority Consumer Care Guidelines (July 2021).54 Lord Woolf "Public Law – Private Law: why the Divide? A personal view" (1986) Public L 220at 224–225.The interests of the public are as capable of being adversely affected by thedecisions of large corporations and large associations, be they of employers oremployees, and should they not be subject to challenge on Wednesburygrounds if their decision relates to activities which can damage the publicinterest? ... Should it not be possible for the court to intervene if the decisionhas been reached without a relevant consideration being taken into account orif the decision has been taken on the basis of some irrelevant consideration inthe same way as it does in the case of a public body? Powerful bodies, whetherthey are public bodies or not, because of their economic muscle may be in aposition to take decisions which at the present time are not subject to scrutinyand which could be unfair or adversely affect the public interest[81] In a prescient dissertation on the application of administrative law principlesin private law, one academic writer asked whether there is a need for the Goliathsexercising public functions to be reviewable by the courts to protect individualsagainst those entities wielding a "giant strength."55[82] Mr Irving reminded the Court that there is no legislation in New Zealandrequiring the banks to provide transactional services to customers and in the absenceof such regulatory obligation, BNZ is entitled to manage its risks as it sees fit. Thereis no obligation for a bank to continue with customers it no longer wishes to deal withand that, he says, permits BNZ to rely on the common law principle of expresstermination on reasonable notice.[83] These submissions raise the question as to whether there should be protectionsfor consumers of banking services by way of an analogous form of the doctrine or arequirement on the banks to provide transactional services as a minimum.Conclusion[84] I conclude that it is seriously arguable that BNZ does not have an expressunilateral power of termination and that either the default rule (or the Braganzaextension) applies or there is an implied term in the contract to act reasonably. Iconsider there is a serious question to be tried under the breach of contract claim, andthat the following sub-issues arise:55 Calvin Liang "The Application of Administrative Law Principles in Private Law: the case forconvergence" (2020) SJLS 427 at 427.(a) Does BNZ have an express right to terminate the banking relationshipfor any reason or is it required to act reasonably?(b) If BNZ is required to act reasonably, was its termination decisionreasonable, procedurally and/or substantively?(c) Is there a public interest obligation on BNZ as an essential service toprovide a minimal or transactional banking facility to customerswithout alternative banking options?[85] Having found that the threshold has been met and there is a serious question tobe tried on the first cause of action, I do not need to address the arguments relating tothe other causes of action. I now consider the second and third threshold questions.56Balance of convenience and overall interests of justice[86] In the next stage of the inquiry, the Court must consider where the balance ofconvenience lies in granting (or not granting) the interim injunction, and what isrequired by the overall interests of justice. Although, strictly speaking, these are twoseparate questions, the reasoning of the two are similar in these circumstances and socan be dealt with together.[87] Mr Raymond submits that there is no real issue with determining the balanceof convenience and overall interests of justice, which both clearly lie in the favour ofGloriavale. He says that nothing has changed since the first hearing of this matter andthe decision of Dunningham J granting the interim injunction. Gloriavale argues thatBNZ's decision to terminate comes at a time where Gloriavale is making significantchanges in their practice, addressing the very issues that BNZ say they have concernsabout.56 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd, above n 11, at [142];[88] In relation to these questions, BNZ submits that:(a) It is not in the overall interests of justice for BNZ to continue to providebanking services for a community that has coerced school aged childrento work for them.(b) Individuals within Gloriavale continue to have access to bankingservices.(c) BNZ's closure of the accounts does not result in the applicant's fundsbeing forfeited or frozen. Individuals retain access to bank accountsand closure does not prevent the systematic transfer of income.(d) The Court should not grant an injunction 'purely to delay theinevitable'.[89] I accept the submission of Gloriavale that the balance of convenience andoverall interests of justice lie in its favour here.[90] When considering the balance of convenience, the Court must pay particularattention to the question of whether damages would be an adequate remedy for theplaintiff. If it is likely that they would be, it generally follows that the balance ofconvenience does not require any interim intervention of the Court.57 I am satisfiedthat damages is not an appropriate remedy here. Gloriavale risks losing the provisionof a banking service in New Zealand, which is vital to its day to day functioning andoperation.[91] More importantly, declining to continue the interim injunction in this case willhave the effect of determining the final proceeding. The closing down of Gloriavale'soperational and commercial accounts will detrimentally affect Gloriavale's position.57 Cabco Group Ltd v Bartlett (2009) 6 NZELR 500 (HC) at [30].[92] There is a serious question to be tried on at least the breach of contract causeof action and it is appropriate that the Gloriavale accounts remain functional pendingfinal resolution of the claim. I endorse Dunningham J's observation, that there is noobvious detriment to BNZ continuing to provide these services,58 and I consider theoverall interests of justice require that the interim injunction continues.Result[93] There is a serious question to be tried. The balance of convenience and overalljustice favours allowing an interim injunction to continue until determination of thesubstantive claims.[94] I therefore grant an order continuing the interim injunction to prevent therespondent from terminating the applicants accounts, as listed in Sch B of theapplicant's statement of claim dated 2 December 2022.Costs[95] If the parties cannot agree on costs, then the applicant may file and servememoranda (no more than five pages with a Schedule) within 15 working days of thisjudgment. The respondent may file a response within a further five working days. Iwill thereafter determine costs on the papers.Cull JSolicitors:Duncan Cotterill, Christchurch, for PlaintiffsRussell McVeagh, Auckland, for Respondents58 Decision of Dunningham J, above n 2, at [29].