Taranaki community group's interim injunction application against the sale of TSB to Heartland Group dismissed, as Kiwibank's TSB interest reiterated

A Taranaki community group's High Court attempt to injunct the proposed sale of TSB to Heartland Group Holdings has failed, with Justice 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. Trustees must then notify Heartland by August 28.

"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.

Glen West, General Manager of Business Operations at the Toi Foundation, welcomed the Court's decision. 

"Throughout this process, our focus has been on ensuring the community submissions process is conducted in a fair and appropriate way, including taking steps that exceed the requirements of the Foundation’s Trust Deed, and that Toi Foundation acts in a prudent, responsible and lawful manner. The trustees are continuing to consider all feedback received in the public submissions process alongside other relevant information before making their final decision," West said.

'We've noted our interest'

Meanwhile, David McLean, Chairman of Kiwibank's parent company, Kiwi Group Capital, has again expressed an interest in a tie-up with TSB.

"We’ve noted our interest. Ultimately it is now a decision for the trustees to make, taking into consideration the community response and the support for the various options in front of them," McLean said.  

Asked about McLean's comments, West said: "We don't have anything further to add, the trustees are continuing with the process to review the community submissions and other relevant information. We will update the Taranaki community after they have made a decision." 

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.

Justice Isac noted that the Taranaki Community Accountability Society Inc (TCAS) claimed the proposed sale is unlawful and the Trustees of the Foundation are in breach of trust, principally because of a deficient community consultation process undertaken by the Toi Foundation under its Deed of Trust.

Justice Isac said his preliminary view is the respondent/defendant is entitled to costs.

An expensive digitisation project and a smorgasbord of advisers

Justice Isac also provided background to the proposed Heartland-TSB tie-up.

"In October 2024 Toi Foundation Holdings was approached by an organisation interested in a potential merger with TSB. The directors considered this merited further exploration given the Foundation’s increased commitment to diversification and the fact that TSB would soon need to undertake a multi-year digitisation project at significant expense."

"The Board sought advice on the costs and benefits of a potential sale or merger of TSB with another bank. They were initially advised by a firm of advisers — Antipodes — on strategy and process, including preparing an Information Memorandum to solicit wider market interest. In March 2025 the Trustees engaged Deloitte to carry out vendor due diligence on TSB."

"Through this process, Toi Foundation Holdings approached potential transaction counterparties and received a number of non-binding indicative offers. After receiving advice on those offers, in November 2025 the Trustees resolved to proceed to negotiate exclusively with Heartland Group Holdings, which owns Heartland Bank," Justice Isac said. 

"The Trustees then undertook a structured due diligence process and received advice from Antipodes, Bell Gully, KPMG, Clarien Partners, Corporate Value Associates, Forsyth Barr, Grant Thornton, NZIER, a commercial barrister and MinterEllisonRuddWatts."

"In May 2026 they progressed the transaction towards a conditional merger implementation agreement, which was signed on 1 June 2026. The main conditions required to be satisfied for the agreement to become unconditional are for the Trustees to consult with the Taranaki community, pass a vote to approve the sale of TSB, and obtain Heartland shareholder and regulatory approvals," said Justice Isac.

"Mr [Max] Brough, the Mayor of New Plymouth, deposes on behalf of TCAS that the New Plymouth community is overwhelmingly opposed to the sale. There has been a petition raised with approximately 7000 signatures in opposition. Separate from the public information sessions, Mr Brough hosted a public meeting during the original consultation period which was attended by approximately 200–300 people. Ninety-nine percent of attendees opposed the sale. Their concerns include the loss of control of TSB, loss of identity, loss of value, and loss of jobs."

 Mr [Chris] Ussher [Chairman of the Toi Foundation trustees] says the Foundation expects to see returns of approximately $34 million to $37 million per year as compared with the average returns from TSB of $11 million per year in the period 2016 to 2025 if the transaction proceeds. The Foundation’s evidence is that a central reason it has looked at a potential sale is the relatively low return on equity it receives from TSB, which is lower than could be obtained from investing the equity in an investment portfolio managed by a fund manager," Justice Isac said. 

TCAS sought an interim injunction restraining the Toi Foundation from voting on the proposed sale and requiring it to apply for directions under Section 133 of the Trusts Act ahead of any such vote. Another cause of action, under Section 126 of the Trusts Act, was that the Court may review any proposed decision of a trustee on the grounds that the decision is not “reasonably open to the trustee in the circumstances."

And another cause of action was based solely on the Court’s statutory jurisdiction under sections 126 and 127 of the Trusts Act, alleging, on the basis of the available information, a decision to sell the shares wasn't reasonably open to the Trustees at all. 

Evidence from TCAS included some from Brent Goldsack, a director of Rabobank New Zealand Ltd. Goldsack is a former partner at PwC and a Fellow of Chartered Accountants Australia and New Zealand.

 The judgment is here.