Seven former Mike Pero Mortgages' franchisees have taken High Court action over restraint-of-trade obligations that stop them competing with the brokerage business for two years.
The former franchisees of New Zealand's largest chain of mortgage brokers are seeking a declaration that the restraint-of-trade terms they signed up to can't be enforced.
Mike Pero (New Zealand), franchisor of the mortgage business, has since got interim court orders against the seven franchisees preventing them competing with the firm as mortgage brokers.
Details of the bust-up emerged yesterday in the Auckland High Court, where the company applied for those orders to continue against one of the former franchisees, Christchurch's James Heath.
Heath was a Mike Pero franchisee in Christchurch for 15 years and in 2009 won a New Zealand Mortgage Brokers' Association award. But he advised the franchisor earlier this year he would not be renewing his franchise agreement and was in the group that in April filed proceedings.
Mike Pero (New Zealand) is owned by Australia's Liberty Financial, and has 36 franchisees around this country. While it bears the name of its founder, Mike Pero, he no longer has any part in the business.
Queen's Counsel for the franchisor firm, Bruce Stewart, argued the company would be harmed if the interim orders weren't continued and said that eight of its other franchisees in Canterbury deserved protection.
Heath's lawyer, Paul Sills, told Justice Simon Moore yesterday that his 46-year-old client wanted to start from scratch as an independent broker and wasn't intending to use his former customer database, which was the biggest in the region.
Sills said there was no justification for the two-year non-compete period. If any term was required, he proposed a period of no longer than three months. Sills told the court his client, who has five children, would have about four to five months of financial headroom if he was unable to continue acting as a mortgage broker.
Justice Moore reserved his decision.