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Former Mike Pero broker banned

Former Mike Pero mortgage adviser James Heath has failed to overturn his restraint of trade agreement and set up a new business.

Thursday, August 27th 2015, 5:45PM 3 Comments

Christchurch-based Heath chose not to renew his Mike Pero franchise agreement when it expired on June 30 this year and attempted to then set up a new business, even though he knew about the restraint of trade clauses in his agreement.

Those clauses stopped him from being a mortgage adviser within New Zealand for six months and within Christchurch and Canterbury for two years after the agreement was terminated.

Mike Pero sought, in June, an urgent injunction in the Auckland High Court to restrain Heath and his de facto partner Gina Smith from setting up a new business after it discovered the pair had been planning to start a new firm, James Heath Mortgages Ltd.

Justice Simon Moore had little hesitation in granting Mike Pero interim relief before the case goes to a full hearing.

The full hearing includes other former Mike Pero franchisees who are trying to overturn their restraints of trade clauses.

Justice Moore said the courts “have consistently granted injunctions to uphold a restraint of trade where a departing transferee seeks to simply rebrand their services and continue business by competing with the franchisor with little or no material change to the business.”

With regards to the Mike Pero franchise agreement he said: “I am satisfied that it is at least seriously arguable that the restraints are not unreasonable.”

Judge had “no doubt Heath and Smith intend to compete with Mike Pero.

He says that is demonstrated by Smith applying to join the NZ Financial Services Group as a broker; the fact that a new website went live, allegedly accidentally; the fact that Heath had established a new company and this company was incorporated the day after Heath and other franchisees started court action to overturn their restraint of trade agreements and that the new business would be in the same building as Heath operated his Mike Pero franchise from.

Justice Moore accepted that “an inevitable consequence of granting interim relief will result in hardship to Mr Heath and Ms Smith I am far from satisfied it would be of the catastrophic levels which are frequently encountered in applications of this sort.”

However, he acknowledged they may have to sell their house.

The judgment also noted that “Heath must have known that Mike Pero would respond in the way it has when confronted with the prospect of a former franchisee setting up business in direct competition contrary to its contractual obligations.

“It is inconceivable he did not contemplate the consequences and the need for him to take steps to secure alternative employment which would not breach the terms of the restraint. I am satisfied that any harm to the respondents is capable of being adequately protected by damages and note that in this regard Mike Pero has provided an undertaking as to damages.”

He also said “Heath has brought these consequences upon himself through his own actions”, particularly by not putting in place any plan for protecting his income.

Mike Pero was unsuccessful in securing orders against Smith has she wasn’t bound by the franchise agreement like Heath.

Smith could set up a mortgage advisory business but cannot use the name James Heath Mortgages, nor can Heath assist her.

"The injunction already granted prevents Mr Heath from being involved a mortgage broking business in any way whatsoever. He cannot assist Ms Smith if she elects to start such a business. Any restriction that goes beyond this would be both punitive and unwarranted."

READ THE FULL JUDGMENT HERE

 

Tags: Mike Pero

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Comments from our readers

On 28 August 2015 at 9:22 am AdviserMan said:
This is an appalling judgement, and again shows the lack of understanding Judges have in NZ OF THE REAL WORLD.
Blocking any person from earning a living honestly, is a crime in itself. I would be contesting this in a higher court. Telling a professional person to sell their assets, and Ban them from doing what they are qualified to do is absolute stupidity. A smarter outcome would be the obvious, ban him from contacting any former clients for a 2-3 year period, which is standard business practice when selling a business or leaving an employer.
You can always sell insurance, unless that activity is banned also?
On 28 August 2015 at 9:39 pm I was wondering said:
Unfortunately Heath did willingly sign a franchise agreement with Mike Pero. He was aware of the terms and conditions when he signed up. Obviously he now has no way to evade these terms and conditions.
On 31 August 2015 at 10:51 am Dirty Harry said:
I was always told that RoT's weren't worth the paper they're written on. Sounds like the Pero contracts are very tough, to the point that they are onerous. To the point that you would have to think twice before signing it. To the point that, if you were operating under it, you'd want out, as several have recently done.

At what point is it so much in favour of the franchisor that, short of leaving the industry or country, it has effectively become a lifetime commitment?

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.94 - - -
AIA - Go Home Loans 8.49 ▼6.19 ▼5.69 ▼5.69
ANZ ▼7.89 6.79 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 6.19 5.69 5.69
ASB Bank 8.39 ▼6.19 ▼5.69 ▼5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.90 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - ▼6.19 5.79 5.79
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One ▼7.94 - - -
BNZ - Rapid Repay ▼7.94 - - -
BNZ - Std ▼7.94 6.45 5.89 5.79
BNZ - TotalMoney ▼7.94 - - -
CFML 321 Loans 6.70 - - -
CFML Home Loans 6.95 - - -
CFML Prime Loans 8.75 - - -
CFML Standard Loans 9.70 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - ▼5.99 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 8.15 ▼6.19 ▼5.75 5.69
Co-operative Bank - Standard 8.15 ▼6.69 ▼6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.60 6.10 -
First Credit Union Standard 8.50 7.20 6.70 -
Heartland Bank - Online 7.99 6.69 6.35 6.15
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC ▼7.49 ▼6.15 ▼5.69 ▼5.69
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 8.25 7.19 6.69 6.59
Kiwibank - Offset 8.25 - - -
Kiwibank Special - 6.29 5.79 5.79
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.75 6.69 6.19 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.49 ▼6.95 ▼6.29 ▼6.29
SBS Bank Special - ▼6.35 ▼5.69 ▼5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.94 5.45 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
TSB Bank 9.19 7.09 6.59 6.59
TSB Special 8.39 6.29 5.79 5.79
Unity 8.64 6.29 5.79 -
Unity First Home Buyer special - 6.20 - -
Wairarapa Building Society 8.50 ▼6.50 ▼5.89 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 8.39 6.47 6.10 5.79

Last updated: 9 October 2024 9:07am

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