The broker's de-facto partner, Gina Smith, then registered a new company called James Heath Mortgages and a website later went live saying Heath had "taken the plunge" to set up his own firm.
Mike Pero Mortgages, which believes a large number of clients could transfer to the new business, responded by getting urgent court orders against Heath to force him to comply with his franchise agreement and the restraint of trade terms.
After the company obtained interim orders in June, both sides were in the High Court at Auckland earlier this month arguing over whether they should remain in place.
In his decision on the orders today, Justice Simon Moore said it was at least seriously arguable that the restraint of trade terms are reasonable. The "seriously arguable" threshold is one of the tests for whether an injunction should be granted.
While Heath's lawyer, Paul Sills, argued his client would be unable to cover his bills if he couldn't work as a mortgage broker, the judge said the restraint of trade was not a blanket ban on working in the finance industry.
"While I do not minimise the adverse effects of Mr Heath and his family and the threat that it will be necessary to sell the family home after four to five months if an injunction is granted, sight should not be lost of the fact that Mr Heath was aware of the restraint provisions and made the decision to terminate his relationship with Mike Pero without apparently putting in place any plan for protecting his income without breaching his agreement...in this sense I am satisfied that Mr Heath has brought these consequences upon himself through his own actions," Justice Moore said.
The judge was satisfied that an injunction against Heath should be granted while the franchisees work out the dispute with Mike Pero Mortgages.
He ruled that Heath should not be involved in a mortgage broking business in Canterbury for two years or elsewhere in New Zealand for six months or until further order of the court.
Mike Pero Mortgages also sought to restrain Smith from having any involvement with Heath while she engaged in the business of mortgage broking.
While Smith cannot use the name James Heath Mortgages, the judge stopped short of granting the order sought against 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," Justice Moore said.
Mike Pero, who founded the business, is no longer involved in it, despite it still bearing his name.
