Max Barber is a Senior Solicitor with Franks Ogilvie. He joined the firm in early 2023 as a Law Clerk and was admitted as a barrister and solicitor in March 2023. Max joined the firm from BNZ, where he worked in client relations and personal banking while completing his Bachelor of Laws at Victoria University.
Since joining Franks Ogilvie, Max has been involved in all aspects the firm’s work, including litigation matters ranging from a Commerce Act appeal through to appearing at a coronial inquest, a major commercial negotiation in the biosecurity sector, and law reform projects relating to water infrastructure, local government, and primary sector governance.
Summary
The Court of Appeal overturned an injunction, allowing a bank to close a client's account due to human rights abuse concerns, ruling there was no arguable case that the account closure breached the client’s rights.
Background
The Bank of New Zealand (“BNZ”) had a long-standing banking relationship (since 1999) with the Gloriavale Christian Community and associated entities (“Gloriavale”). BNZ provided transactional banking and relationship management services.
The relationship between Gloriavale and BNZ prior to the termination was generally positive.
On 10 May 2022, the Employment Court issued its judgment in Courage v Attorney-General. The court made adverse findings against Gloriavale regarding coercion, violence, and use of child labour. The court also noted serious concerns regarding sexual abuse within the Gloriavale community. Following the decision, Gloriavale made a public apology.
BNZ viewed these findings as establishing that Gloriavale’s conduct amounted to, or was likely to amount to, human rights abuses. They concluded that Gloriavale had breached the bank’s internal human rights policy, and that the banking relationship could not continue.
In July 2022, BNZ gave notice to terminate its banking services to the Gloriavale entities (“Termination Decision”). BNZ did not engage with Gloriavale to seek further information or assurances before making its decision, acting unilaterally based on their interpretation of the Courage decision and their own internal policies.
Following receipt of the notice, Gloriavale tried to find alternative banking arrangements but were unsuccessful. When BNZ was informed of this, they offered assistance in transiting to a new bank, but refused to alter their decision to terminate the banking relationship.
In December 2022,Gloriavale filed civil proceedings in the High Court alleging the Termination Decision was a breach of contract, breach of fiduciary duty, and estoppel by representation.
The High Court granted an interim injunction preventing BNZ from terminating the banking relationship pending trial.
BNZ appealed to the Court of Appeal.
The Case
The sole issue on appeal was whether any of Gloriavale’s causes of action were viable enough to meet the minimum standard for the court to issue an interim injunction (a ‘serious issue to be tried’).
Breach of contract
The Termination Decision relied on clause 8.2 of BNZ’s standard terms and conditions, which stated that BNZ could close a customer’s account “for any reason”. The contract listed examples of cases where accounts might be terminated but explicitly stated that the examples were not exhaustive.
The parties accepted the ‘reason’ for the Termination Decision was that BNZ had concluded Gloriavale had breached BNZ’s internal human rights policy.
Interpretation of clause 8.2
Gloriavale argued that clause 8.2 should be interpreted more broadly than its ordinary language suggested, that BNZ was required to have a reason to close their accounts, it must not be based on factual errors or be unreasonable.
The court rejected this broad interpretation.
The ordinary languageof cl 8.2 was clear – accounts could be terminated for ‘any reason’. While not determinative, the plain language gave a strong clue as to what the parties intended.
The background context supported the plain meaning. The clause reflected the default common law rule that the banking relationship was terminable on reasonable notice – had the parties intended to change this rule, clearer language would be expected. Other contextual clues were that the terms were uniformly applicable to BNZ customers (meaning a greater emphasis on certainty was expected), and that the customer was protected by being able to also terminate the banking relationship at notice and find a new bank.
In light of this, the court held that a reasonable observer would conclude that the contract meant exactly what it said. BNZ had an unqualified power to terminate the contract for ‘any reason’. Gloriavale’s interpretation would amount to rewriting the contract.
Implied term
Gloriavale made a related argument that clause 8.2 was subject to an implied term that the discretion to terminate the banking relationship must not be exercised arbitrarily, capriciously, or in bad faith. This argument was founded on a ‘default rule’, derived from UK case law that applied to all contracts unless excluded by the parties.
The court declined to rule on whether the default rule was recognised in New Zealand law, holding that this was more appropriately assessed in a full trial. They instead decided the case on a narrower implied term that had been previously recognised in NewZealand – that all contractual discretions must be exercised in good faith and for a proper purpose.
Applying the narrower ‘proper purpose’ test, the court held that Gloriavale had failed to establish an arguable case that the term had been breached. Gloriavale had not contended that the discretion had been exercised in bad faith, and it was clear that the discretion had been exercised for the purpose for which it was granted – namely to terminate the banking relationship for any reason. There was no question that BNZ had acted for a reason other than a genuine desire to terminate its relationship with Gloriavale.
Outcome
Because the court had rejected Gloriavale’s arguments on interpretation and implication of terms, there was no serious issue to be tried that BNZ had breached the contract. However, the court went on to hold that, if the default rule were adopted, Gloriavale would have had an arguable (but weak) case on whether the Termination Decision breached an implied term of the contract.
Other causes of action
The court rejected Gloriavale’s claims based on breach of fiduciary duty and estoppel. In the case of the former, legal precedent clearly established that the banker/customer relationship was not fiduciary in nature. Regarding the latter, the court found the claim to be completely unsubstantiated.
Result
The Court held that there was no serious issue to be tried on any of the causes of action pleaded by Gloriavale. Accordingly, the High Court did not have jurisdiction to grant the injunction, and the Court of Appeal quashed the orders it had made.
The legal reasoning and commercial sense of the judgment are sound. The court was correct to note that reading any protection into clause 8.2 would have amounted to a judicial rewrite of the contract.
However, the breadth of the discretion recognised by the Court of Appeal is concerning from a freedom of expression standpoint. Controversial or unpopular bank customers now face the risk of losing banking services without good reason and without the chance to be heard. As the court recognised, there is no obligation for other banks to take on clients that have been terminated by their competitors.
It remains to be seen whether Gloriavale will appeal the case to the Supreme Court or pursue the case to trial.
For more information on this case or related issues please contact Director Brigitte Morten
Summary
A climate change advocacy group was unsuccessful in judicial review proceedings challenging the grant of two petroleum exploration permits.
Background
The Crown Minerals Act 1991 (“CMA”) creates a legal regime whereby permits are granted for the exploration, prospecting, and extraction of Crown owned minerals. The purpose of the CMA at the relevant time was to promote exploitation of Crown owned minerals for the benefit of New Zealand.
The Minister of Energy and Resources has the power to grant mineral permits under the CMA. The CMA lists various matters which the Minister must be satisfied of when granting permits, but these considerations are not stated as exhaustive. Additionally, there is a general requirement for all decision-makers under the CMA to consider the principles of the Treaty of Waitangi.
The Climate Change Response Act 2002 (“CCRA”) is the primary legislation governing carbon emissions in New Zealand. Amendments in 2019 introduced a statutory ‘net zero’ target and requirements for the government to set emissions budgets and emissions reduction plans. Section 5ZN allows any public decision-maker to have regard to these matters as they think fit.
In 2021, the Minister proposed to grant permits under the CMA to two firms allowing them to explore for petroleum in specified areas of Taranaki.
Students For Climate Solutions Incorporated(“SCSI”), an incorporated society established to enable students to address climate change concerns, challenged the permit decision in judicial review proceedings.
The High Court dismissed the challenge on all grounds. SCSI appealed to the Court of Appeal.
The case
SCSI argued that the Minister’s decision was unlawful due to failure to consider the climate change implications of the decision, as well as the principles of the Treaty of Waitangi.
Both parties accepted that mandatory considerations were those matters that the governing statute expressly or impliedly required the decision-maker to take into account. It was not open for a court to impose its own view on decision-makers as to what was sensible to consider.
There was also no dispute between the parties that combustion of petroleum was a leading cause of climate change.
Failure to consider climate change implications
The parties agreed there was no express requirement in the CMA to consider climate change.
However, SCSI argued that a requirement to consider climate change was implied by the reference to ‘for the benefit of New Zealand’ in the CMA’s purpose section. They argued that the ‘for the benefit of New Zealand’ wording meant that exploitation of Crown minerals should only occur if it was determined that the exploitation was in New Zealand’s benefit. Assessment of public benefit in this case required the Minister to consider climate change impacts, and this interpretation was supported by the scale of the climate emergency as well as the intent behind s 5ZN of the CCRA.
The court unanimously rejected SCSI’s interpretation of the purpose of the CMA. ‘For the benefit of New Zealand’ did not qualify the CMA’s purpose of promoting mineral exploitation. Rather, it was clear that Parliament regarded promotion of this objective and benefit to New Zealand as one and the same.
This was supported by Parliamentary materials that showed that when the purpose clause was added to the CMA, the main concern was economic development. Environmental concerns were intended to be dealt with in other legislative regimes. Subsequent case law in the High Court had confirmed this interpretation in other contexts.
Accordingly, the proper interpretation of the CMA was that Parliament had not intended a requirement for climate change to be considered.
Failure to consider Treaty of Waitangi principles
SCSI argued that failure to consider climate change implications in this case amounted to a failure to consider Treaty principles, as Maori stood to be disproportionately affected by climate change.
The court unanimously rejected this argument. Proper consideration of the Treaty principles in this context required consulting iwi and hapū around the permit area and assessing impacts of the permit on them. The Minister had considered this. A broad policy assessment weighing economic benefits with climate change impacts was not required as it would be inconsistent with the scheme and purpose of the CMA.
Were climate change implications a permissible consideration?
The High Court had held that not only was climate change not a mandatory consideration under the CMA, it was not a permissible consideration either. The court held that the CMA, as the more specific legislation, overrode the more general permission under s 5ZN of the CCRA for decision-makers to consider climate change matters. The effect of this decision was that any Minister under the CMA who considered these matters substantively would act unlawfully.
The majority of the Court of Appeal declined to reach a concluded view on this issue, holding that it unnecessary to decide the case.
However, in a separate judgment, Mallon J came to the opposite conclusion to the High Court. Climate change matters were a permissible consideration under the CMA – there was no limitation under that Act on what matters a Minister could consider, and there was clear intent that s 5ZN applied generally to all public decision-makers. Additionally, there would be occasions where it would be perverse for a Minister not to consider climate change when granting mineral permits, such as where New Zealand was on track to significantly exceed an emissions budget.
Result
The appeal was dismissed on all grounds.
Amendments to the CMA following the permit decision mean that this decision is of lesser relevance to the interpretation of the CMA specifically.
The broader relevance of the decision relates to its treatment of s 5ZN of the CCRA. Unfortunately, the law is left in an unsatisfactory state. Cooke J’s decision in the High Court is directly in conflict with Mallon J’s comment in the Court of Appeal. Neither decision is binding precedent on future judicial reviews in the High Court. The legal uncertainty leaves room for future litigation about the extent to which public decision-makers can factor climate change concerns into their decision-making.
For more information on this case or related issues please contact Director Brigitte Morten
Summary
Three vaping related businesses were unsuccessful in challenging regulations setting the maximum permissible nicotine concentration in vaping products.
Background
In 2020, Parliament amended what is now the Smokefree Environments and Regulated Products Act 1990 (“Act”) by including vaping-related products as ‘notifiable products’ under the Act. Section 84(1)(a) of the Act allows the Governor-General to make regulations prescribing safety requirements for notifiable products.
The applicants were three related companies that manufacture, import and sell vaping products.
On 11 August 2021, The Smokefree Environments and Regulated Products Regulations 2021 (“Original Regulations”) came into effect. The applicants had challenged the validity of these regulations in earlier proceedings.
While these proceedings were afoot, the government began enacting regulations to correct defects in the Original Regulations (“Amendment Regulations”) that had been brought to their attention as a result of the legal proceedings. The Amendment Regulations reduced the maximum allowable nicotine concentration in certain vaping products from 50mg/mL to 28.5mg/mL.
Upon learning this, the applicants filed judicial review proceedings claiming that the Amendment Regulations were unlawful.
The case
The Amendment Regulations are secondary legislation. Secondary legislation is law made by someone other than Parliament, usually under the authority of an empowering Act of Parliament. The making of secondary legislation is amenable to judicial review in the same way as any other exercise of power by a public decision-maker.
When the Governor-General makes secondary legislation, they act on the advice of the responsible Minister, formally conveyed through the Executive Council.
The applicants’ challenge to the Amendment Regulations was based on a number of judicial review grounds. Broadly, these were based on inadequate consultation and a lack of evidence of a link between nicotine concentration in vaping products and resulting user harm.
Inadequate consultation
The applicants claimed that the Minister was required to consult with them prior to making the Amendment Regulations (as representatives of the industry to be regulated) and had failed to do so. They also alleged that their consultation with various other groups had been inadequate.
The court held that there was no legal duty to consult in the circumstances. They affirmed that there was no general duty to consult in the absence of express statutory language, other than in cases where a particular individual had a legitimate expectation of being consulted(as they have special circumstances that differentiates them from the general public).
As the Act said nothing about consultation when making regulations under s 84(1)(a) (in contrast to other powers under the Act which did require consultation), the court inferred that Parliament did not intend a consultation requirement. The circumstances of the applicants were not sufficient to give rise to a legitimate expectation of consultation.
Accordingly, the applicants’ claim failed on this ground. Consultation was described as a ‘healthy practice’ but not a mandatory requirement in the circumstances.
Lack of evidence of correlation between nicotine concentration and harm
The applicants advanced a number of grounds relating to the Amendment Regulations being contrary to expert evidence. The applicants argued that the expert position was that there was no correlation between nicotine concentration in vaping products and the level of resulting harm.
The applicants argued that the Governor-General had made the regulations without considering the expert evidence they relied on, which they argued was a mandatory relevant consideration. The court rejected this argument, holding that Governor-General (and Executive Council which advised them) were concerned with high level public policy only, and were not obliged to consider technical expert evidence when making secondary legislation.
The applicants made a related argument that the Amendment Regulations were unreasonable or were ultra vires (‘outside the power of’) the Act because they went against the weight of expert evidence. If, as the applicants alleged, there was no link between nicotine concentration and harm, the Amendment Regulations could not rationally fall within the scope of the power to ‘prescribe safety requirements’ for vaping products.
The court emphasised that judicial review ground of ultra vires was concerned with whether the secondary legislation complied with the empowering Act, not the court’s assessment of its merit. Secondary legislation would exceed the scope of the empowering Act if it was not rationally connected to the purpose of the empowering provision. However, if this unexacting requirement is satisfied, a court would not entertain a challenge to secondary legislation merely because it viewed the evidence as pointing in a different direction.
In this case, the court held that this rationality requirement was satisfied. The Minister had acted in good faith and the evidence was “capable of supporting” a link between nicotine concentration and harm. Accordingly, the Amendment Regulations “were not totally irrational” and the applicants’ challenge on this ground failed.
Result
The court rejected the applicants’ claim on all grounds and the Amendment Regulations remained in force.
The decision clarifies some important points about judicial review of secondary legislation, including that:
For further information on this case or similar issues please contact Director Brigitte Morten
