A restraint of trade is a contractual restriction on specified competitive activity, such as joining another brokerage or approaching former clients. For mortgage brokers, the first task is to identify exactly what conduct the agreement restricts before planning an exit or trail-book sale.
A right to keep receiving trail does not, by itself, give you permission to contact the clients behind that income. Read the payment terms and contact restrictions separately.
What Restraint of Trade Means
A restraint of trade clause sets limits on the activities of the person or business bound by it. Its effect depends on its wording, the relationship and the law that applies. Signing a restraint does not settle whether a court would enforce every restriction.
Start by identifying the agreement’s setting:
- An employment agreement can restrict a departing employee’s competitive work or contact with the brokerage’s clients.
- A contractor agreement can bind the writer’s company as well as the individual. Read the named parties and any personal undertaking.
- An aggregator agreement can restrict conduct by the brokerage after termination. A change of aggregator does not automatically release the brokerage from those terms.
- A business-sale agreement can protect the goodwill the buyer purchases. The seller’s future work needs assessment against the particular sale restriction.
Courts assess employment restraints more strictly than restraints protecting purchased goodwill. The Victorian Court of Appeal explains this distinction in Just Group v Peck. A contractor or shareholder arrangement needs its own assessment, especially when one person signs agreements in several capacities.
The engagement and income questions belong alongside that review. The guide to employing loan writers covers the separate employment and post-exit trail arrangements.
Non-Compete, Non-Solicitation and Confidentiality
Non-compete clauses restrict competitive work, while non-solicitation clauses restrict attempts to move specified relationships to another business. A single agreement can contain both, plus restrictions on dealing with clients and using confidential information.
Restrictions Compared
| Restriction | Conduct to identify | Brokerage question |
|---|---|---|
| Non-compete | Working for, owning or assisting a competing business | Does the proposed role fall within the defined competing activity? |
| Client non-solicitation | Asking or encouraging covered clients to move business | Does the message invite a refinance or future work? |
| Staff or referrer non-solicitation | Recruiting covered staff or encouraging a referrer to move a relationship | Which people and introductions does the definition cover? |
| Non-dealing | Accepting or conducting specified business with covered clients | Does it apply even when the client makes the first approach? |
| Confidentiality | Using or disclosing protected information | Can the writer use the information for the proposed purpose? |
The Mortgage & Finance Association of Australia distinguishes non-compete and non-solicitation clauses in its discussion of brokerage protections. The clause’s actual verbs decide what needs legal assessment. A restriction on soliciting can differ from one covering solicitation, acceptance of approaches and dealing.
Read the non-solicitation period alongside the covered people. A client definition might cover clients the writer serviced during a lookback period. Another might extend to prospects, related entities or clients the writer never handled. Record each category separately.
A client initiating contact does not create an automatic exemption from a non-dealing restriction. A public departure announcement also needs assessment against its wording and audience. A neutral employment update and a targeted invitation to refinance involve different conduct.
Confidentiality needs a separate review even when no files leave the brokerage. Remembering information does not establish permission to use it. Identify the information, how the writer learned it and the contractual or other duties that protect it.
Read the Clause Against Your Brokerage Exit
Review a restraint against the work and contact you actually propose, with each term recorded beside a concrete example. Include definitions and schedules elsewhere in the agreement. They can change the reach of an apparently short clause.
Clause-Review Checklist
| Item to record | Question for the proposed exit |
|---|---|
| Bound person or entity | Does it bind the individual, their company or both? |
| Protected interest | Is the stated interest client relationships, confidential information or purchased goodwill? |
| Prohibited conduct | Does it restrict solicitation, dealing, employment, ownership or assistance to someone else? |
| Client definition | Does it cover serviced clients, all clients, prospects or related borrowers? |
| Lookback period | Which earlier period decides whether a person is a restricted client? |
| Duration and trigger | When does the restraint start, and how long does it run? |
| Geographic area | Does the area attach to an office, client location or competing business? |
| Exceptions | Are pre-existing clients, passive holdings or agreed servicing arrangements excluded? |
| Cascading alternatives | Which combinations of periods, areas and activities appear as separate restraints? |
| Governing law and forum | Which law and court does the agreement name? |
Fictional Departure Scenarios
The following scenarios isolate the conduct needing review. They do not describe customer agreements or predict enforcement outcomes.
Priya leaves a brokerage to write loans elsewhere. Her fictional agreement restricts soliciting clients she serviced in the previous 12 months for six months after departure. Priya wants to send those clients a refinance invitation. Her review must address the invitation and client group, even if her new employer is outside the old office’s suburb.
One client instead phones Priya without receiving that invitation. Priya must identify whether the agreement also prohibits dealing or accepting approaches. The fact that the client called first answers only who initiated contact.
Harbour Loans changes aggregator and wants to continue servicing its existing borrowers. Its fictional aggregator agreement restricts encouraging specified referrers to move business after termination. The brokerage must separate borrower servicing from the proposed referrer campaign. The operational guide to switching mortgage aggregators covers the move itself.
Daniel sells a trail book and later wants to write a new loan for a borrower listed in the sale schedule. His fictional sale agreement restricts dealing with those borrowers for an agreed period. The review concerns the new loan and the purchased goodwill, even if Daniel keeps an agreed share of the old trail.
Narrow and Broad Wording
Compare two fictional fragments used only to explain scope:
- A narrower fragment restricts “soliciting clients personally serviced during the preceding 12 months” for six months after departure.
- A broader fragment restricts “dealing with any current or former client of any group company” for two years across Australia.
For the narrower fragment, establish what counts as personal servicing and solicitation. For the broader fragment, identify which group companies and former clients it reaches. Ask why the proposed duration, conduct and area are needed to protect the stated interest. Neither fragment is an approved model term or an enforceability verdict.
A contractor agreement template can help organise an engagement’s terms. A business sale agreement addresses the sale documents. Neither replaces advice on a restraint matched to the proposed activity.
Income, Records and Client Contact
Keep four questions separate when you review a departure:
- What contractual trail entitlement survives the exit?
- Who receives and accounts for commission payments?
- Who holds the client records and must retain them?
- Who can contact or service each client, and for which purpose?
Incorrect assumption: continuing trail payments let the departing writer export the client list and offer those clients new loans.
Correct approach: establish the payment entitlement separately, then identify permission for record access and the proposed client contact under the relevant agreements and law.
For entities covered by the Australian Privacy Principles, the Office of the Australian Information Commissioner explains limits on using or disclosing personal information. A different use generally needs a permitted basis, such as valid consent or another applicable exception. Marketing also needs assessment under the separate direct-marketing rules.
A restraint waiver does not remove independent privacy or credit-record duties. ASIC’s responsible lending disclosure guidance explains consumers’ rights to request written assessments within seven years. Agree who preserves the records and responds to requests. Do not treat an exit as authority to erase files or copy them into a personal account.
Enforceability and Australian Jurisdiction
A restraint’s enforceability depends on the protected interest, its reasonable scope and the applicable legal framework. A duration or geographic area alone cannot establish the result.
Employment restraints can protect confidential information and customer connections. Protecting an employer from competition by itself is insufficient. The party seeking enforcement must establish the circumstances that justify the restraint. Purchased goodwill can support a different assessment from an employee’s departure.
NSW, Victoria and Queensland
NSW has a statutory framework under the Restraints of Trade Act 1976. Section 4 makes a restraint valid to the extent it is consistent with public policy, even without severable wording. Other grounds of invalidity remain possible. This gives NSW a different starting point from the common-law approach.
In Hanna v OAMPS Insurance Brokers, the NSW Court of Appeal upheld a restraint following an assessment of its wording and circumstances. The cascading alternatives were not automatically invalid for uncertainty. That result supplies no universal period for mortgage brokers.
Victoria and Queensland apply common-law restraint principles rather than NSW’s statutory mechanism. Under that approach, a restraint starts presumed invalid unless justified by the circumstances. Courts consider reasonableness between the parties and the public interest. Removing an independent part of a clause differs from rewriting it to create a reasonable restriction.
The Victorian decision in Just Group v Peck illustrates the limits on interpreting and severing broad employment restraints. In Queensland, GBAR v Brown examines whether restrictions protect employment relationships or goodwill sold. The court refused the requested interim injunction. The substance of the arrangements affected that assessment.
Identify the governing-law clause and proposed forum before applying a state’s rules. The parties’ relationship and the actual dispute also affect which rules apply.
Federal Reform Proposals
The government’s 2026 draft non-compete legislation proposes restrictions on employment non-competes and co-worker non-solicitation terms. An exposure draft is a proposal, not an operative ban. Treasury describes the intended reforms as subject to legislation passing.
The draft’s explanatory material limits its employment provisions to national system employment. It treats business-sale terms outside that employment relationship separately. Genuine contractor arrangements need their own assessment. Do not assume an employment reform releases a contractor, aggregator member or trail-book seller from an existing restraint.
The proposed application rules also distinguish new and varied arrangements from existing arrangements. Assess an exit under the law applying to that agreement and conduct, including any enacted commencement or transition rules.
Enforcement or Challenge
A brokerage or buyer seeking enforcement can ask a court for an urgent interim injunction while a dispute proceeds. The court considers the case’s prospects and the balance of convenience. An allegation of breach does not itself establish entitlement to an order.
A restrained broker can contest the clause’s meaning or validity, negotiate undertakings or seek court relief where appropriate. Obtain advice promptly after a demand or threatened application. Keep the correspondence and evidence of intended conduct. Do not test the clause by approaching clients first and waiting for a response.
Resolve the Restrictions Before You Act
Obtain a documented position on the proposed role and client contact before carrying out restricted activity. Give your adviser enough information to assess the actual proposal:
- The signed agreements, definitions, schedules and later variations.
- Any sale, settlement, release or restraint deed signed separately.
- The new role’s duties or the seller’s proposed future work.
- The client and referrer groups involved, including the relevant lookback period.
- The exact announcement, invitation or response you intend to send.
- The planned record access and arrangements for continuing client servicing.
Ask the party entitled to enforce the restraint for a written release, waiver or agreed contact protocol where needed. The document must identify the relevant parties and agreements. It must specify the permitted conduct, covered clients and duration, with any conditions or information restrictions.
An informal assurance that “you can keep your clients” leaves the conduct undefined. Obtain wording that addresses the proposed new loans, inbound enquiries and any agreed servicing work. Establish who has authority to grant the permission and whether another agreement needs a separate release.
Confirm the records arrangements separately. OAIC’s security guidance requires covered entities to protect personal information from unauthorised access and disclosure. Retention required by law can continue even when another copy must be returned or removed.
Before acting, match each planned contact and task to the written position. Preserve confidential information and route ongoing servicing through the people authorised to perform it. Resolve any uncovered activity before adding it to the new role or approaching the client.
