"Woke" Banking? Summarising the BNZ v Gloriavale Case
On 31 October 2024, the Court of Appeal delivered its judgment in Bank of New Zealand v Christian Church Community Trust [2024] NZCA 645 (BNZ v Gloriavale). The Court, reversing a High Court injunction, ruled there was no proper basis to compel BNZ to continue providing banking services to Gloriavale entities pending a trial.
The case has garnered renewed attention due to the introduction of the “Woke Banking Bill,” a member's bill from New Zealand First drawn from the ballot on 20 February 2025. The proposed legislation aims to prohibit banks from denying services to businesses based on environmental, social, and governance (ESG) considerations.
Context
The Gloriavale Christian Community is a small, isolated religious group located at Haupiri on the West Coast of New Zealand's South Island known for its strict fundamentalist Christian beliefs and practices. For over 40 years the Gloriavale community has exclusively banked with BNZ, which provided banking services to Gloriavale's various trusts, partnerships and companies.
In 2022, the Employment Court issued the landmark Courage decision1 concluding the Gloriavale community engaged in unlawful employment practices depriving employees as young as six from the protections and benefits of employment law, including minimum wage and leave entitlements.
On 8 July 2022, BNZ notified Gloriavale it intended to terminate its banking relationship, explaining that continuing to provide banking services to Gloriavale, in light of the Courage decision, would be inconsistent with its internal human rights policy.2
BNZ's standard terms and conditions enable it to close a customer's account or end any other product or service “for any reason” upon giving 14 days' notice. BNZ initially gave the Gloriavale entities three months' notice of the termination, during which attempts to establish alternative banking arrangements were unsuccessful. This deadline was extended once by agreement following a request by Gloriavale.
The Injunctions
Gloriavale claims BNZ is prevented from closing its accounts and terminating its relationship based on the express terms of the contract between BNZ and the Gloriavale entities. It also alleges BNZ owes the entities a fiduciary duty that would be breached by closing the accounts. These issues need to be determined in a full trial. Gloriavale sought and obtained two interim injunctions in the High Court requiring BNZ to continue to provide services to them in the meantime.3
The Appeal
BNZ appealed the High Court's decision that required it to continue providing banking services to Gloriavale entities pending a trial. The Court of Appeal found that clause 8.2 did not limit BNZ's common law right to unilaterally close a customer's account. Beyond the obligation to provide 14 days' notice, BNZ retained an unequivocal right to terminate its banking services.
Gloriavale's arguments were unsuccessful:
- They argued that a common law 'default rule' required BNZ to exercise its power of termination honestly, in good faith, and not arbitrarily, capriciously, or unreasonably.
- They also claimed an 'expanded default rule,' based on Braganza v BP Shipping Ltd [2015], applied, which necessitated that the decision-maker consider relevant matters and disregard irrelevant ones, similar to public law constraints.
The Court held an interlocutory appeal is 'not the appropriate setting' to determine whether New Zealand courts should adopt either approach. It further concluded that even if the 'default rule' or 'expanded default rule' applied in New Zealand, it was not seriously arguable that BNZ acted dishonestly, in bad faith, capriciously, arbitrarily, or was irrational in terminating the agreement with Gloriavale (i.e., BNZ's conduct was not unreasonable in the sense that no reasonable bank would have acted in the way that it did in the circumstances).
Claims that BNZ had breached a fiduciary duty owed to Gloriavale and represented to them that banking services would continue to be provided indefinitely were both swiftly dismissed. The Court reaffirmed the relationship between a bank and its customer is contractual in nature, not fiduciary, and held that a claim in estoppel added nothing to Gloriavale's claim of contract breach.
Conclusion
The Court of Appeal's decision has significant implications for both the banking and commercial sectors. The judgment reaffirms the traditional position that banks are entitled to terminate their services with reasonable notice. New Zealand legislation does not require BNZ or other banks to provide minimum banking facilities to customers without alternative banking options, and the courts cannot impose such a requirement as a matter of common law. If no other bank is willing to accept the Gloriavale entities as customers, “that reluctance cannot be laid at the door of BNZ.”
The case confirms that banks may have legitimate commercial and reputational interests in adopting and acting on policies related to social and environmental responsibility and human rights. Justice Goddard provided an example: “it would not be arbitrary, capricious, or irrational for a bank to adopt an environmental responsibility policy and decide not to provide banking facilities for a major polluter pursuant to that policy, however good that banking relationship may have been.”
With New Zealand First's Members' Bill drawn from the ballot on 20 February 2025, banks taking a stand on ESG issues may face increased public scrutiny. The proposed Financial Markets (Conduct of Institutions) Amendment (Duty to Provide) Amendment Bill, dubbed the “Woke Banking Bill”, would prohibit banks from denying services to businesses based on ESG considerations. Any withdrawal of services would need to be based solely on commercial grounds, with banks found in breach of the proposed rules liable for fines of up to NZD500,000. It remains to be seen whether the Bill will be supported though its first reading.
We will continue to monitor for developments in this space. In the meantime, please get in touch with your usual DLA Piper contact or another one of our team if you have any questions.
1Courage v Attorney General [2022] NZEmpC 18.
2BNZ's letter noted: “BNZ follows a strong human rights policy. Under this policy, BNZ must not tolerate, or be complicit in, any activities that contribute to adverse human rights impacts.”
3Christian Church Community Trust v Bank of New Zealand [2022] NZHC 3271 [First injunction decision]; Christian Church Community Trust v Bank of New Zealand [2023] NZHC 2523, [2023] 3 NZLR 190 [Second injunction decision].
