Court of Appeal overturns injunctions in Gloriavale banking case

Blockbuster decision in the banking world late yesterday: the Court of Appeal has overturned two interim injunctions by the High Court that prevented BNZ from terminating Gloriavale as a customer.

Those injunctions had been widely criticised – including by me – as cutting across a bank’s long established right to terminate banking services to a customer on reasonable notice.

The Court of Appeal ruled that Gloriavale could not show that there was a serious question to be tried. Clause 8.2 of the bank’s standard terms provides that the bank can close a customer’s account “for any reason”, and then gives some examples “without limitation”. The High Court ruled that it was seriously arguable that this clause required the bank to have good reason to close the account, and that it needed to exercise its contractual discretion reasonably and in the same way as in a “public law” context.

The Court of Appeal rejected this, saying that the phrase “for any reason” means what it says, and that the High Court’s approach would involve an “illegitimate rewriting” of the clause. Further, although the Court said that there was an open question as to the extent to which the courts will imply a term limiting a party’s ability to exercise a contractual power or discretion, the Court ruled that on any view, it is not seriously arguable that BNZ breached any such term.

The Court concluded that it was “firmly of the view that there is no serious question to be tried” – a welcome conclusion. However, while the Court of Appeal issued its decision promptly, it’s unfortunate that it’s taken 2 years since the original High Court decision for this conclusion to be reached.