A seller restraint can support the value of an acquired mortgage client base, but it is not a substitute for a defined asset, an effective handover or evidence that clients will stay. Before signing, ask your lawyer to map exactly who is restrained, which relationships are protected, what conduct is prohibited, where and for how long, and what happens if the seller breaches.

Do not treat the longest clause as the strongest. Australian restraint law is fact- and jurisdiction-specific. Drafting must be considered against the transaction, protected interest and available evidence. This article states the general position at 4 October 2026; it does not assess any particular restraint.

Start with the interest the buyer is paying for

In a trail-book acquisition, the concern may be narrower than “competition”. Commission rights, servicing access, borrower relationships, records and goodwill do not always transfer in the same way. Ask the lawyer to connect each restriction to what is actually being acquired.

The High Court’s decision in Peters (WA) Ltd v Petersville Ltd concerned a restraint in a business sale and examined the restraint-of-trade doctrine, public interest and its relationship with competition law (High Court of Australia). It is a reminder that the label “sale of business” does not answer the legal question by itself.

Prepare a schedule identifying:

  • the transferred loans, borrowers and related entities;
  • active leads, refinance enquiries and applications in progress;
  • introducers and referrers included in the bargain, if any;
  • commission, servicing and contact rights approved by the aggregator or lender;
  • excluded clients and the seller’s retained business; and
  • the goodwill or relationship value attributed to each group.

If the purchase agreement, aggregator approval and data file describe different populations, the restraint may protect the wrong perimeter.

Ask what each restricted activity means

“Non-compete” and “non-solicitation” are not interchangeable. Ask for plain-language examples of conduct inside and outside every operative term.

Proposed restriction Question for the buyer’s lawyer
Competing Which services, business models, roles and entities are covered? Would employment by another brokerage, referral activity or credit assistance be included?
Soliciting Must the seller initiate the approach? What evidence would distinguish targeted encouragement from a general announcement?
Dealing Is the seller restricted even when a former client makes first contact? Does routine service, a refinance request or an unrelated product count?
Accepting business Can the seller decline, redirect or refer an inbound enquiry, and to whom?
Assisting or being concerned Are associates, a new employer, contractors, controlled entities and indirect assistance addressed with sufficient precision?
Interfering with referrers Which identified introducers are protected, and does the buyer actually acquire those relationships?

The client definition matters. “Any client of the seller” may capture people outside the purchased book; “clients at completion” may omit joint borrowers, related entities or live applications. Ask whether a fixed schedule or objective database field gives a clearer boundary.

Test duration, territory and cascading terms

A cascading restraint presents alternative periods, areas or activities. It is not an automatic cure. Ask why each alternative is tied to the acquired relationships, the seller’s influence and a genuine transition period.

Governing law is critical. New South Wales has specific legislation: section 4 of the Restraints of Trade Act 1976 says a restraint is valid to the extent it is not against public policy, whether or not expressed in severable terms, and gives the Supreme Court powers in the circumstances stated in that section (NSW Legislation). Other jurisdictions can approach severance and enforceability differently. Ask which law and forum apply, whether that choice is effective, and where the seller and clients actually operate.

Make the handover compatible with the restraint

The seller may need to contact clients after completion for introductions or legacy matters. Those acts should not sit ambiguously beside a prohibition on contact or dealing.

Ask the parties to create a handover protocol covering:

  • approved communication templates, timing and sender;
  • whether contact is joint, seller-led or buyer-led;
  • who answers inbound calls and services urgent borrower requests;
  • how refinance opportunities, complaints and applications in progress are allocated;
  • permitted access to systems and client records, with an end date;
  • the route for referring an excluded or retained client; and
  • a log of introductions, responses and follow-up actions.

Separate permitted transition services from post-handover restrictions. If the seller is to remain a consultant or authorised representative, obtain specialist advice on that separate role, supervision, licensing and conflicts rather than assuming the restraint resolves them.

Align confidentiality, data and client communications

A restraint does not itself authorise either party to use client information. Define confidential information, permitted handover use, access controls, return or deletion duties and how suspected misuse will be investigated. Avoid drafting that assumes the buyer can freely monitor the seller’s personal devices or receive unfiltered client files.

The OAIC says personal information handling during a business sale remains subject to the Privacy Act where it applies. It recommends de-identification where possible, controlled due-diligence access and privacy terms, and says buyers should generally avoid unnecessary collection (OAIC). Ask a privacy specialist how this affects evidence and client communications.

Examine carve-outs before they become disputes

List foreseeable exceptions: disclosed retained clients, passive shareholdings, unrelated services, general advertising, legally compelled responses, buyer-approved work and clients who independently leave.

For each carve-out, ask:

  1. Is it identified objectively rather than left to memory?
  2. Who bears responsibility for proving that it applies?
  3. Does it permit use of transferred data or only independent knowledge?
  4. Must the seller notify the buyer of an inbound approach?
  5. Does a permitted act affect any retention adjustment or deferred payment?

Plan evidence, remedies and escalation

A restriction has limited value if a suspected breach cannot be distinguished from ordinary run-off. Establish lawful evidence sources: CRM audit logs, buyer-owned channels, referral records, client exit reasons, commission movements and seller disclosures. Do not encourage covert or excessive surveillance.

Ask the lawyer to explain notice requirements, cure or dispute steps, undertakings, mediation, urgent court options, damages provisions, costs and the treatment of disputed deferred consideration. The buyer also needs an operational escalation path: who preserves evidence, who contacts the seller and who may communicate with the affected client.

Commonwealth competition law belongs in the review as well. The current Competition and Consumer Act 2010 contains an exception relevant to a sale contract provision that is solely for protecting the purchaser in respect of business goodwill, together with provisions concerning goodwill protection in notified acquisitions (Federal Register of Legislation). Ask competition counsel whether the proposed terms fit the transaction; do not assume the word “goodwill” creates immunity.

Connect restraint terms to retention adjustments

If price is adjusted for client retention, define the interaction expressly. A client loss may result from natural refinance, lender discharge, poor buyer service, seller solicitation or a permitted client choice. Those causes should not automatically produce the same payment result.

Hypothetical example: a borrower contacts the seller without prompting during the handover and asks to refinance. The seller forwards the enquiry to the buyer under the agreed protocol, but the borrower later chooses another broker. The agreement should say what records demonstrate compliance, how the client is classified for the retention calculation and how a dispute is determined. This example illustrates the issue only; it is not a view on breach or enforceability.

Before signing, ask your lawyer for an issues table showing the protected interest, restrained person, client cohort, conduct, period, area, carve-outs, evidence and remedy. Unresolved cells are commercial risks.

Frequently asked questions

Should the seller be prevented from accepting any approach from a former client?

That depends on the acquired rights, governing law, facts and proposed wording. Ask your lawyer to distinguish solicitation, dealing and acceptance, then test each against realistic inbound enquiries and permitted handover work.

Does a cascading clause guarantee that some restraint will operate?

No such assumption should be made. Its effect depends on drafting, jurisdiction and circumstances. Obtain advice on every alternative rather than treating excessive outer limits as harmless.

Can a restraint guarantee client retention?

No. Clients may refinance, repay, move or choose another adviser for reasons unrelated to the seller. Model run-off separately and use the restraint, handover plan and retention mechanism as connected but distinct protections.

Sources

Disclaimer

This article provides general information only. It does not constitute legal, tax, accounting, financial, credit, valuation or other professional advice. Circumstances differ. Obtain advice from appropriately qualified advisers before acting or entering a transaction.