Taranaki community group's interim injunction application against the sale of TSB to Heartland Group dismissed

A Taranaki community group's High Court attempt to injunct the proposed sale of TSB to Heartland Group Holdings has failed, withJustice Andru Isac labelling the case's claims "legally and factually weak."

The High Court hearing was heard last Thursday, with the trustees of TSB's shareholder, charitable trust the Toi Foundation, scheduled to vote on the proposed Heartland takeover on Wednesday, August 26. The backing of at least 75% of the nine trustees is required.

"For the foregoing reasons, even if I had concluded TCAS had standing to bring this claim, it has failed to establish a serious question to be tried on the merits of its allegations. While I do not discount the possibility that with discovery and further evidence at trial it might strengthen its position, as the evidence currently stands I consider its claims are legally and factually weak. In some important respects I consider they are untenable," Justice Isac said.

"Standing back and considering the overall interests of justice, I consider the risk of harm that might arise to the [Toi] Foundation and its charitable purposes from the grant of interim relief clearly outweighs the claimed harms advanced by the applicant. There is a rational basis for the Foundation’s consideration of a potential sale of TSB. While it is understandable that a significant proportion of the Taranaki community would prefer that the Bank remains wholly owned by the Foundation, there is a financial trade-off from continuing ownership. These competing and difficult questions are matters the Community Trusts Act and executive Government have given to the Trustees to resolve."

"Overall, I am satisfied the interests of justice do not favour the grant of an interim injunction even if there had been jurisdiction to grant one in the terms sought," said Justice Isac.

Daniel Grove, a lawyer who represents the Taranaki Community Accountability Society Incorporated, said they are considering the judgment.

In June Heartland announced it had signed a deal with the Toi Foundation to buy all TSB's shares in a deal valued at $620 million. Heartland has a special shareholder meeting scheduled for September 30 to consider the TSB proposal, and expects the deal to be completed by year's end.

In a Tuesday morning share market announcement, Heartland Group Holdings acknowledged the judgment dismissing the interim injunction application filed by the Taranaki Community Accountability Society Incorporated against the Toi Foundation trustees.

"Heartland’s Special Shareholder Meeting remains subject to Toi Foundation trustee approval of the Proposed Transaction. Heartland expects a decision from Toi Foundation trustees this week. There are currently no changes to the timeline for the Proposed Transaction," Heartland Group Holdings said.

The proposal includes that immediately after the sale of TSB by the Toi Foundation to Heartland, Heartland's subsidiary Heartland Bank and TSB would merge to create TSB Heartland Bank Limited. 

According to the judgment, the total sale consideration amounts to 76 per cent of TSB’s book value. Heartland Group’s total number of shares on issue will increase to give effect to the merger, and Toi Foundation's resulting 17.5 per cent shareholding in TSB Heartland Bank is calculated by reference to Heartland Group’s enlarged share capital immediately following the deal's completion. The proposed sale would increase Heartland Bank’s New Zealand asset base by about 170 per cent.

The judgment is here.