Loan Agreement Enforceability: Determining if a $300,000 Advance was a Loan or Gift and the Validity of Alleged Variations to Contractual Terms, including a 20% Interest Rate

Introduction
Based on the authentic Australian judicial case Kempe v Grine [2025] NSWDC 227, this article disassembles the Court’s judgment process regarding evidence and law. It transforms complex judicial reasoning into clear, understandable key point analyses, helping readers identify the core of the dispute, understand the judgment logic, make more rational litigation choices, and providing case resources for practical research to readers of all backgrounds.

Chapter 1: Case Overview and Core Disputes

Basic Information:

• Court of Hearing: District Court of New South Wales
• Presiding Judge: Gibson DCJ
• Cause of Action: Civil (Contractual Dispute – Recovery of Loan)
• Judgment Date: 23 June 2025
• Core Keywords:
  • Keyword 1: Authentic Judgment Case
  • Keyword 2: Loan Agreement
  • Keyword 3: Contractual Variation
  • Keyword 4: Witness Credibility
  • Keyword 5: Post-Contractual Conduct
  • Keyword 6: Interest Rate Dispute

Background:

The Plaintiff, Ms Bridget Anne Kempe, initiated proceedings against the Defendant, Ms Rosa Grine, seeking the recovery of a $300,000 loan made on or about 2 December 2018. The Plaintiff also sought interest at a rate of 20% per annum, as stipulated in a contract drafted by the Defendant’s accountant. The Defendant disputed the claim, asserting that the money was a gift, or alternatively, that the contractual terms, particularly the interest rate, had been varied, suggesting she should only be liable for a substantially reduced amount.

Core Disputes and Claims:

The central legal focus of the dispute revolved around several key issues:
1. Nature of the Advance: Whether the $300,000 advanced by the Plaintiff to the Defendant constituted a loan or a gift.
2. Contract Formation: Whether a valid and binding loan agreement was formed between the parties, particularly given the Defendant’s denial of signing or agreeing to the contract.
3. Contractual Variation: If a contract existed, whether its terms, specifically the 20% annual interest rate, were subsequently varied by agreement or conduct to a lower rate (e.g., 5%).
4. Quantum of Indebtedness: The precise amount owed by the Defendant to the Plaintiff, taking into account any valid repayments and applicable interest.

The Plaintiff claimed judgment for the principal sum plus accrued interest at 20%. The Defendant sought a finding that no money was due or owing, or that the amount payable was significantly less, specifically AUD $176,091.80.

Chapter 2: Origin of the Case

The events leading to this litigation began in 2018, a challenging period for the Plaintiff. She was navigating a difficult divorce and property settlement, which necessitated her vacating her home. The sum of AUD $300,000 that she ultimately advanced to the Defendant represented the entirety of her property settlement proceeds. Compounding these personal difficulties was her concern for her brother, Paul Sylvester, who had been residing with the Defendant prior to his death after a long illness on 16 May 2018.

Following her brother’s passing, in June 2018, the Plaintiff stayed with the Defendant at her home for two consecutive weekends. The Defendant operated a business named “Happi Chicken” from her premises. Earlier in June 2018, the Defendant had sought to enter a partnership with Ms Reanna Payne-Ball for a café and restaurant service under the name “Happi Kitchen,” an agreement also drafted by Mr Cyril Quek, who served as an accountant and chief financial officer for the corporate entities managing “Happi Chicken Pty Ltd.” This proposed partnership, however, dissolved around November 2018.

Subsequently, the Defendant began contacting the Plaintiff, who was then working at the Defendant’s restaurant in Kurri Kurri. The Defendant, aware of the Plaintiff’s marital breakdown and her anticipated property settlement funds, sought a loan to address outstanding bills and establish a new “Happi Chicken” outlet in Wickham. Initially, the Defendant sought AUD $120,000 but then suggested that “Perhaps gifting the money would be better.” This suggestion foreshadowed a key dispute in the subsequent litigation.

On 30 November 2018, following discussions, the Plaintiff explicitly stated, “I’ll loan you the money if we have a contract drawn up.” The Defendant agreed, confirming she would “organise it and send you my bank account details to transfer the money.” Text messages exchanged on the same day further solidified this understanding, with the Defendant informing the Plaintiff that Mr Quek was drafting the loan contract, stating, “He’s doing a contract. I will send it to you as soon as I have it.” The Plaintiff, despite a poor relationship with Mr Quek, proceeded with arrangements.

On 30 November 2018, the Plaintiff transferred AUD $300,000 into her own Greater Bank cheque account in anticipation of the loan. Unable to transfer the funds directly to the Defendant via internet banking, the Plaintiff purchased a bank cheque for AUD $300,000 in the Defendant’s favour on 1 December.

Mr Quek emailed the draft loan agreement to the Defendant on 1 December 2018. The Defendant admitted reading this draft before forwarding it to the Plaintiff on 2 December 2018. Upon receiving and reviewing the contract, the Plaintiff travelled to the Defendant’s home, where she met the Defendant and Mr Quek. The Plaintiff verified that the printed loan agreement presented for signature was identical to the draft she had received. After both parties, according to the Plaintiff, signed the document, the Plaintiff handed over the AUD $300,000 bank cheque, expecting to receive a signed copy. This expectation was not met, and no signed document was ever produced by the Defendant, laying the groundwork for the ensuing legal conflict.

Chapter 3: Key Evidence and Core Disputes

Plaintiff’s Main Evidence and Arguments:

The Plaintiff presented a coherent narrative supported by a chain of contemporaneous evidence:
* Text Messages: Exchanges on 30 November 2018 explicitly discussing a “loan” and a “contract” being drawn up by Mr Quek.
* Draft Loan Agreement: The document emailed by Mr Quek to the Defendant on 1 December 2018, and then by the Defendant to the Plaintiff on 2 December 2018, outlining the loan amount of AUD $300,000, repayment terms, and a 20% annual interest rate.
* Bank Cheque: Proof of the AUD $300,000 bank cheque issued by the Plaintiff to the Defendant on 1 December 2018, demonstrating the transfer of funds consistent with a loan.
* Oral Evidence: The Plaintiff’s testimony that she and the Defendant signed the loan agreement on 2 December 2018.
* Post-Contractual Payments: Evidence of 15 weekly cash payments made by the Defendant to the Plaintiff immediately following the loan, which were consistent with the 20% interest rate stipulated in the agreement.
* Letters of Demand: Formal letters from Sparke Helmore Lawyers (Plaintiff’s solicitors) dated 1 October 2021 and 15 December 2022, clearly demanding repayment of the principal and accrued interest according to the original loan terms.

Defendant’s Main Evidence and Arguments:

The Defendant’s defence relied heavily on oral assertions and the testimony of her accountants, but notably lacked documentary support:
* Claim of Gift: The primary argument that the AUD $300,000 was a gift, not a loan, a claim contradicted by the Plaintiff’s evidence and contemporaneous texts.
* Denial of Signed Contract: The Defendant asserted that the loan agreement was never signed or even agreed to.
* House Fire: The Defendant claimed that most of her documentary evidence, including banking records, was destroyed in a house fire on 21 October 2021.
* Linda Day’s Amortization Schedule: A schedule prepared by the Defendant’s accountant, Linda Day, which purported to show the Plaintiff was not entitled to any repayment, based on assumptions of a 5% interest rate and various deductions for accommodation.
* Accountants’ Testimony: Linda Day and her daughter Jasmine Day testified that they had never seen the loan agreement prepared by Mr Quek and were only given an oral account of its contents. They claimed the 20% interest rate was excessive and potentially subject to Division 7A tax issues.
* Smyth Turner Wall Letter: A letter from a solicitor representing the Defendant, dated 27 January 2022, asserting that the parties had agreed to a 5% interest rate and that the 20% rate was “illegal.”

Core Dispute Points:

The fundamental disagreements that formed the bedrock of the Court’s inquiry were:
1. Existence of a Contract: Was there a legally binding loan agreement, irrespective of a signed document, given the exchange of funds and initial conduct?
2. Terms of the Contract: Specifically, the agreed-upon interest rate—20% as per the Plaintiff’s document, or 5% as alleged by the Defendant.
3. Alleged Variations: Whether any subsequent conduct or discussions constituted a legally binding variation of the initial contract.
4. Credibility of Witnesses: The stark conflict between the Plaintiff’s consistent evidence and the Defendant’s, Linda Day’s, and Jasmine Day’s inconsistent and unsubstantiated claims.

Chapter 4: Statements in Affidavits

The affidavits served as the primary means by which both parties presented their factual accounts and supporting evidence to the Court. The Plaintiff’s affidavit consistently detailed the sequence of events leading to the loan, the agreement to formalise it with a contract, and the subsequent efforts to recover the funds. Her narrative was largely corroborated by contemporaneous documents like text messages and banking records.

In contrast, the affidavits of the Defendant, Linda Day, and Jasmine Day exhibited significant issues. A notable aspect was the near word-for-word identicality between Linda Day’s and Jasmine Day’s affidavits, raising immediate concerns about their independence and the authenticity of their individual accounts. During cross-examination, Linda Day initially attempted to justify this similarity by claiming shared mindsets or describing the same events, but her explanations were unconvincing. This raised a serious question about the preparation of their evidence, suggesting a “cut and paste” approach rather than individual recollection.

The strategic intent behind the Judge’s scrutiny of these affidavits was to ascertain the veracity of each witness’s testimony. By comparing the written statements with contemporaneous documents and probing inconsistencies during cross-examination, the Court aimed to distinguish between factual accounts and self-serving assertions. The identical nature of the Day’s affidavits and their subsequent inability to provide frank explanations under cross-examination revealed a deliberate attempt to present a unified, albeit potentially fabricated, version of events. This procedural direction by the Judge underscored the importance of independent and truthful evidence presentation, particularly when challenging the existence or terms of a contract. The Court was ultimately tasked with determining where the boundary lay between untruths and facts within these conflicting statements.

Chapter 5: Court Orders

Prior to the final judgment, the Court presided over a hearing that spanned 2 – 4 June and 13 June 2025. While specific interlocutory orders are not detailed in the final judgment, the procedural trajectory clearly involved a comprehensive presentation of evidence and oral arguments from both parties. The Court directed the Defendant to respond to inquiries regarding inconsistent correspondence in her submissions in reply, highlighting the judicial expectation for a thorough and transparent defence. These arrangements allowed for a full examination of the factual and legal arguments before the Court rendered its final decision.

Chapter 6: Hearing Scene: Ultimate Showdown of Evidence and Logic

The hearing served as the arena for the ultimate confrontation of the parties’ narratives, with witness credibility emerging as a decisive factor. The Plaintiff gave evidence in a frank and straightforward manner, making concessions where appropriate and providing precise responses, which lent significant weight to her account.

In stark contrast, the Defendant proved to be an unreliable witness. Her claims of lacking documents, ostensibly due to a house fire, were difficult to credit, especially given the continuous correspondence from the Plaintiff’s solicitors, which would have necessitated the retrieval of such material.

The testimony of Linda Day and her daughter, Jasmine Day, the Defendant’s accountants, was particularly problematic. Their affidavits were found to be virtually identical, a coincidence Linda Day implausibly attributed to shared mindsets. Under cross-examination, Linda Day gave evasive answers, continued in monologues, and ignored the Court’s warning not to discuss the case with her daughter during an adjournment, further eroding her credibility.

A critical point of confrontation involved Linda Day’s repeated assertion that she had never seen the original loan agreement prepared by Mr Quek. This claim directly contradicted an email exchange between Linda Day and the Defendant’s then-solicitor, Ms McAllister, dated 1 February 2019, where Ms McAllister attached a “draft Loan Agreement between Bridget and Happi chicken for your assistance.” Linda Day’s response email even questioned the interest rate, suggesting she was indeed reviewing a document with an interest rate higher than 5%. This clear inconsistency undermined her entire testimony.

The Court held:

“Neither Linda Day nor Jasmine Day should be regarded as a witness of credit. I propose to disregard their evidence entirely.”
This categorical rejection of the accountants’ evidence stemmed from their implausible explanations, contradictions with contemporaneous documents, and observable evasiveness during cross-examination. This left the Defendant’s case substantially weakened, as it relied heavily on their testimony to establish alleged variations and a lower interest rate.

The Defendant’s failure to call Ms McAllister, her solicitor who had received and discussed the draft loan agreement, also weighed heavily. Mr McGrath, counsel for the Plaintiff, successfully argued for a Jones v Dunkel inference, leading the Court to conclude that Ms McAllister’s evidence would not have assisted the Defendant’s case. This absence of a crucial witness who possessed knowledge of the contractual documents further highlighted the deficiencies in the Defendant’s defence.

The factual matrix of the case, supported by the Plaintiff’s credible testimony and undisputed contemporaneous documents like the text messages and bank cheque, drove the Court’s decision. The explicit discussions of a “loan” and a “contract” in text messages prior to the fund transfer, coupled with the Defendant’s actions in arranging the contract’s drafting and making initial payments, provided an objective chain of evidence that overwhelmingly supported the Plaintiff’s claim that a loan agreement was formed on the terms of the draft. The Defendant’s attempts to portray the advance as a gift or to claim a variation of the interest rate were undermined by the lack of credible evidence and the clear, albeit disputed, terms of the drafted agreement.

Chapter 7: Final Judgment of the Court

On 23 June 2025, the Court delivered its final orders, finding in favour of the Plaintiff.

The Court’s orders were as follows:
(1) Judgment for the Plaintiff for the sum of AUD $593,666.21.
(2) Defendant to pay Plaintiff’s costs.
(3) Liberty to apply in relation to interest and costs.

Chapter 8: In-depth Analysis of the Judgment: How Law and Evidence Lay the Foundation for Victory

Special Analysis:

This case offers profound insights into the critical role of contemporaneous documentation and witness credibility in contractual disputes, particularly when one party relies on unsubstantiated oral claims. The Court’s rigorous assessment of the Defendant’s and her witnesses’ credibility, juxtaposed against the Plaintiff’s consistent and corroborated account, was paramount. The application of a Jones v Dunkel inference due to the uncalled solicitor further underscored the importance of presenting all relevant evidence. The Court’s decision to award a lesser sum than its own calculation, solely because the Plaintiff’s counsel sought a more conservative figure, is a noteworthy and somewhat unusual exercise of judicial discretion, demonstrating a pragmatic approach to finalising the dispute while acknowledging the Plaintiff’s generosity.

Judgment Points:

1. Contract Formation by Conduct: The Court firmly held that a valid loan agreement was established, even if the formal document was unsigned by both parties. The acts of the parties—the explicit discussions of a loan, the drafting and exchange of the agreement, the transfer of funds via bank cheque, and the initial repayment pattern—were conclusive. This reinforces the principle that mutual assent and intention can be evinced through conduct, negating the absolute necessity of a signature for contract validity, as highlighted in PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd [2007] VSCA 310.
2. Rejection of “Gift” Claim: The Defendant’s assertion that the AUD $300,000 was a gift was rejected due to a complete lack of supporting evidence and the inherent implausibility of the Plaintiff gifting her entire property settlement to someone with whom she did not have an intimate relationship. The Court considered the objective evidence (text messages, loan agreement context) to dismiss this defence.
3. No Valid Contractual Variation: The Defendant’s claims of an agreed reduction in the interest rate from 20% to 5% were dismissed. For a variation to be binding, it must meet all elements of contract formation, including clear offer, acceptance, and consideration. The Defendant’s vague assertions of a waiver of entitlements or consideration (such as free board) were not adequately particularised, nor was any consideration proven, aligning with principles established in W & K Holdings (NSW) Pty Ltd v Laureen Margaret Mayo [2013] NSWSC 1063.
4. Credibility as Decisive: The Court’s comprehensive rejection of Linda Day’s and Jasmine Day’s evidence, explicitly stating they were not witnesses of credit, was a critical factor. Their identical affidavits, implausible denials of seeing the key contractual document (contradicted by their own emails), and evasive cross-examination effectively undermined the Defendant’s entire case for variation or a gift.
5. Effect of Jones v Dunkel Inference: The Defendant’s failure to call Ms McAllister, the solicitor who had handled the draft loan agreement, led to a Jones v Dunkel inference. This meant the Court could conclude that Ms McAllister’s evidence would not have assisted the Defendant’s case, filling an evidentiary gap in the Plaintiff’s favour regarding the handling and signing of the contract.

Legal Basis:

The Judge referred to fundamental principles of contract law, including:
* Offer and Acceptance: The sequence of text messages, the drafting of the agreement, and the transfer of the bank cheque demonstrated a clear offer of a loan on specific terms and acceptance by conduct.
* Intention to Create Legal Relations: The formality of drafting a loan agreement and the substantial sum involved unequivocally pointed to an intention to create legally binding relations.
* Consideration: The mutual promises of loan and repayment, coupled with the 20% interest, constituted valid consideration.
* Interpretation of Post-Contractual Conduct: The Court relied on case law such as Esanda Finance Corporation Limited v Atanasivska [2014] NSWDC 169 at [29], which confirms that a pattern of repayment consistent with contractual terms can establish the existence of a contract.
* Credibility Assessment: Principles governing the assessment of witness credibility, including the examination of consistency with contemporaneous documents and demeanor under cross-examination.
* Evidentiary Rules: The application of the Jones v Dunkel inference when a crucial witness is not called.

Evidence Chain:

The Plaintiff’s victory was built on a robust and consistent evidence chain:
* Initial Discussions & Intent: Text messages between the Plaintiff and Defendant clearly articulating the intention to create a loan and the Defendant’s agreement to arrange a contract.
* Formal Document: The draft loan agreement, prepared by the Defendant’s accountant and circulated by the Defendant to the Plaintiff, unequivocally setting out the loan amount, repayment date, and 20% interest rate.
* Execution of the Loan: The bank cheque for AUD $300,000, representing the full amount of the loan, transferred from the Plaintiff to the Defendant.
* Post-Agreement Conduct: The Defendant’s initial cash payments to the Plaintiff, which closely aligned with the 20% interest stipulated in the agreement, providing strong objective evidence of adherence to the contract terms.
* Ongoing Demands: Consistent and formal letters of demand from the Plaintiff’s solicitors, reiterating the loan terms and seeking repayment, to which the Defendant’s responses were either evasive or unsubstantiated.
* Inconsistent Defence: The Defendant’s and her accountants’ contradictory oral evidence and the absence of any credible documentary evidence to support claims of a gift or variation.

Judicial Original Quotation:

The Court’s evaluation of the core disputes and witness credibility was sharp and decisive:

“The defendant was a similarly unreliable witness. Her claims of not having any documents are hard to credit when it is clear that she would have been aware of the need to provide this material from the date the plaintiff’s solicitors first wrote to her.”
This statement highlights the Court’s skepticism regarding the Defendant’s inability to produce supporting documents, especially in light of ongoing legal demands, suggesting a deliberate omission rather than genuine loss.

On the critical issue of contract formation despite the absence of a jointly signed document, the Court determined:

“Even if I were satisfied that there is insufficient evidence to find that the loan agreement was in fact signed by the parties, it is clear from their conduct that they reached agreement on 2 December 2018 that the loan was to be on the terms set out in the agreement drafted by Mr Quek. The parties’ actions confirm their acceptance of those terms and absence of a signature in such circumstances would not mean that no contract was in existence: PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd [2007] VSCA 310; 20 VR 487.”
This unequivocally establishes that the Court found a binding contract based on the parties’ conduct, even without a definitive finding on actual signatures.

Regarding the Defendant’s key witnesses, the Court delivered a clear assessment:

“Neither Linda Day nor Jasmine Day should be regarded as a witness of credit. I propose to disregard their evidence entirely.”
This categorical rejection was crucial, as the Defendant’s alternative theories (gift, 5% interest) heavily relied on their testimony. By disregarding their evidence, the Court effectively removed the evidentiary basis for the Defendant’s counter-claims.

Concerning the inherent implausibility of the “gift” claim, the Court stated:

“The defendant alternatively submitted that the monies were advanced as a gift. There is no evidence to support any such contention. The plaintiff denied in cross examination that the money had been advanced as a gift and the exchange of text messages between the plaintiff, the defendant and Mr Quek confirm this. The inherent implausibility in the plaintiff making a gift of what amounted to her entire worldly possessions to a person with whom she did not have a close relationship must also be taken into account.”
This statement reveals the Court’s common-sense application of objective circumstances, finding the gift claim inconsistent with the Plaintiff’s financial situation and the nature of her relationship with the Defendant.

Analysis of the Losing Party’s Failure:

The Defendant’s case failed primarily due to:
* Lack of Credible Evidence: The Defendant presented unreliable oral testimony that was often inconsistent, contradicted by her own contemporaneous communications, and lacked independent documentary support. The claims of a house fire destroying documents, while plausible in isolation, did not explain the absence of records that should have been obtainable from banks or other third parties, or the failure to produce any revised contractual documentation.
* Failure to Substantially Prove Alleged Variations: The Defendant could not demonstrate that any alleged variations to the contract, particularly the reduction of the interest rate to 5%, met the legal requirements for forming a new, binding agreement, including the provision of valuable consideration.
* Unreliable Witnesses: The critical testimony of Linda Day and Jasmine Day was entirely disregarded by the Court due to glaring inconsistencies, implausible explanations, and evident coordination, leaving the Defendant without professional corroboration for her claims.
* Uncalled Witness: The failure to call Ms McAllister, a key solicitor privy to early contractual discussions, allowed the Court to draw an adverse inference, suggesting her testimony would not have aided the Defendant.
* Inconsistent Post-Contractual Conduct: While some payments were made, the Defendant’s actions were largely inconsistent with her claims of a gift or a varied, lower interest rate, especially given the initial payments that mirrored the 20% interest.

Quantum

The Plaintiff sought recovery of AUD $300,000, less cash repayments totalling AUD $18,000 and payments into her account totalling AUD $23,915, resulting in a net principal of AUD $258,085. The Plaintiff’s calculation of simple interest at 20% on this net principal led to a total claim of AUD $593,666.21.

The Plaintiff’s calculation, as presented in her schedule, was as follows:
Loan
Principal: AUD $300,000
Prepaid in cash: (AUD $18,000)
Paid into Plaintiff account: (AUD $23,915)
Net Principal: AUD $258,085.00

Interest
1/12/2018 – 30/11/2024 (6 years x 20% simple interest not compounded)
AUD $258,085 x 20% x 6 = AUD $309,702.00
1/12/2024 – 02/06/2025 (183 days simple interest not compounded)
(183/365) x 20% x AUD $258,085 = AUD $25,879.21
Total Interest: AUD $335,581.21
Total Claim (Principal + Interest): AUD $258,085.00 + AUD $335,581.21 = AUD $593,666.21

The Court noted that the Plaintiff’s calculation treated the repayments as a reduction of the principal amount, rather than as interest payments, which technically would benefit the Defendant. The Court also corrected the Plaintiff’s counsel’s calculation for the period between the hearing dates (2 June 2025) and the decision date (23 June 2025), adding AUD $2,969.75.

The Court then presented what it considered the “correct amount” based on applying repayments against interest first, and calculating interest on the full principal until a payment was made:
Loan
Principal: AUD $300,000

Interest
1/12/2018 – 30/11/2024 (6 years x 20% simple interest not compounded)
AUD $300,000 x 20% x 6 = AUD $360,000.00
1/12/2024 – 23/06/2025 (204 days simple interest not compounded)
(204/365) x 20% x AUD $300,000 = AUD $33,534.24
Total Accrued Interest: AUD $393,534.24

Repayment
Prepaid in cash: (AUD $18,000)
Paid into Plaintiff account: (AUD $23,915)
Total Repayments: (AUD $41,915)

The Court’s calculated quantum would have been AUD $300,000 (Principal) + AUD $393,534.24 (Interest) – AUD $41,915 (Repayments) = AUD $651,619.24.

However, the Court explicitly stated:

“However, I propose to award the sum sought by the plaintiff, and not the sum that could have been claimed. I take into account that Mr McGrath was in fact providing a benefit to the defendant by coming to this calculation. I am content to award this sum sought by Mr McGrath on that basis. It is a very substantial reduction.”
Thus, the Court awarded the Plaintiff the sum of AUD $593,666.21 as requested by her counsel, acknowledging this to be a generous reduction in favour of the Defendant.

Implications

1. Document Everything: Always insist on written agreements for significant financial transactions, and keep copies of all related documents, emails, and text messages. Oral agreements, while enforceable, are incredibly difficult to prove without corroborating evidence.
2. Verify Claims: Be cautious of claims made by the other party without independent verification. In this case, the accountants’ claims were debunked by their own emails.
3. Credibility is Key: Your honesty and consistency as a witness can make or break your case. Inconsistencies and implausible explanations will severely undermine your credibility in Court.
4. Seek Early Legal Advice: If you are involved in a dispute, obtain legal advice promptly. Lawyers can help secure evidence, manage communication, and prevent detrimental actions (like failing to respond to letters of demand).
5. Understanding “Gift” vs. “Loan”: If you lend money, ensure your intentions are clear and documented. If you claim a payment was a gift, be prepared to prove that there was no expectation of repayment and that it was a gratuitous transfer.

Q&A Session

Q1: What if a loan agreement is never signed? Is it automatically unenforceable?
A1: Not necessarily. As demonstrated in this case, a contract can still be formed and legally binding through the conduct of the parties. If there is clear evidence of an offer, acceptance, consideration, and an intention to create legal relations (such as through text messages, email exchanges, and the actual transfer of funds), a court can find that a contract exists, even without a formal signature on a written document. However, having a signed agreement significantly simplifies proof and reduces potential disputes.

Q2: Can I change the terms of a contract (like the interest rate) after it has been made?
A2: Yes, contractual terms can be varied, but the variation itself must meet all the legal requirements of a new, valid contract. This means there must be a clear offer and acceptance of the new terms, and critically, new consideration must be provided for the variation to be legally binding. Vague discussions or unilateral assertions of a change are usually not sufficient. It is always best to formalise any variations in writing and ensure all parties agree and provide consideration.

Q3: How important is witness testimony in a case like this, especially if documents are missing?
A3: Witness testimony is very important, especially when documentary evidence is sparse or disputed. However, the Court will rigorously assess the credibility of each witness, looking for consistency, plausibility, and corroboration with any available documents or other evidence. If a witness’s testimony is found to be inconsistent, evasive, or contradicted by other reliable evidence (even their own prior statements or emails), their entire evidence may be disregarded, as happened to the Defendant’s accountants in this case. Therefore, the truthfulness and reliability of a witness are paramount.

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Appendix: Reference for Comparable Case Judgments and Practical Guidelines

1. Practical Positioning of This Case

Case Subtype:

Contractual Loan Dispute – Enforceability and Variation. This case primarily deals with the formation and enforcement of a private loan agreement and the validity of alleged subsequent variations.

Judgment Nature Definition:

Final Judgment. This judgment conclusively determines the rights and liabilities of the parties in relation to the claims brought before the Court.

2. Self-examination of Core Statutory Elements

This case predominantly involves principles of common law contract and civil litigation.

Commercial Law and Corporate Law

• Core Test (Contract Formation): Are the four essential elements present: Offer, Acceptance, Consideration, and Intention to create legal relations? The Court in Kempe v Grine examined text messages, the drafting of the loan agreement, the transfer of funds, and initial payments to ascertain the presence of these elements, even in the absence of a signed document.
• Contractual Variation: For a variation to be valid, it must also satisfy the requirements of contract formation. This typically means a clear offer and acceptance of the new terms, supported by new consideration from all parties. The Defendant’s claims of variation failed due to a lack of clear agreement and evidence of consideration.

Civil Litigation and Dispute Resolution

• Core Test (Limitation Period): Has the Limitation Period expired? In New South Wales, the general limitation period for contract actions is six years from the date the cause of action accrues (e.g., from the date repayment was due). This case concerned a loan made in December 2018, with a repayment date of 1 December 2022, and proceedings filed in July 2024, falling well within the limitation period.
• Core Test (Discovery/Disclosure): Has the duty of Discovery/Disclosure of evidence been satisfied? Parties have an obligation to discover and produce all relevant documents. The Defendant’s failure to produce documents, citing a house fire, was viewed with skepticism by the Court, especially when key records (like bank statements) could be re-obtained.

3. Equitable Remedies and Alternative Claims

When strict statutory or common law contractual claims are difficult to establish, principles of Equity can sometimes offer alternative avenues for relief.
* Promissory Estoppel:
* Did the other party make a clear and unequivocal promise or representation? (e.g., a clear promise to waive interest or convert a loan to a gift).
* Did you act in detrimental reliance on that promise? (e.g., spending the money differently, not seeking alternative finance).
* Would it be unconscionable for the other party to resile from that promise?
* Result Reference: If these elements are proven, Equity may “estop” the other party from going back on their word, even in the absence of a formal contractual variation or consideration. This might have been a theoretical alternative for the Defendant to argue a lower interest rate, but her evidence was insufficient to establish a clear promise or unconscionable conduct by the Plaintiff.
* Unjust Enrichment / Constructive Trust:
* Has the other party received a benefit (money or labor) at your expense? Is it against conscience for them to retain that benefit without payment?
* Result Reference: While not directly applicable for the Defendant in this case (as the Plaintiff was seeking repayment, not claiming a benefit from the Defendant), a Plaintiff who has advanced funds without a clear loan agreement might argue for restitution based on unjust enrichment if the Defendant would be unjustly enriched by retaining the funds. The Court may order the restitution of the benefit or declare that you hold a beneficial interest in the asset via a Constructive Trust.

4. Access Thresholds and Exceptional Circumstances

Regular Thresholds:

• Contractual Limitation Period: Six years from the date the cause of action arises for general contract claims in New South Wales. For a loan with a fixed repayment date, this is typically six years from that date.

Exceptional Channels (Crucial):

• Limitation Period Expired? Extensions may be granted in specific circumstances, such as if fraud, deliberate concealment, or latent damage is discovered after the standard period. While not directly relevant to the outcome of Kempe v Grine, it’s a vital consideration in civil litigation.
• Suggestion: Do not abandon a potential claim simply because you do not meet the standard time or conditions. Carefully compare your circumstances against the exceptions, as they are often the key to successfully filing a case.

5. Guidelines for Judicial and Legal Citation

Citation Angle:

It is recommended to cite Kempe v Grine [2025] NSWDC 227 in legal submissions or debates involving:
* The enforceability of loan agreements based on conduct and contemporaneous evidence, even in the absence of a fully signed document.
* The rigorous assessment of witness credibility, especially when oral evidence contradicts documentary evidence or when witnesses’ affidavits are suspiciously similar.
* The application of the Jones v Dunkel inference where a relevant witness is not called.
* The legal requirements for valid contractual variations, particularly the need for clear agreement and fresh consideration.

Citation Method:

• As Positive Support: When your matter involves a dispute over an unsigned loan agreement where the parties’ conduct clearly indicates a binding contract, or where a party’s claims of variation lack evidentiary support, citing this authority can strengthen your argument. It powerfully illustrates how courts prioritise objective evidence and consistent conduct over unsubstantiated oral claims.
• As a Distinguishing Reference: If the opposing party cites this case, you should emphasize the unique aspects of your matter to argue that this precedent is not applicable. For example, if your case involves undisputed evidence of a clear oral agreement to vary, or genuine documentary evidence of a gift, you could distinguish Kempe v Grine based on its specific findings regarding the Defendant’s lack of credible evidence and the implausibility of her claims.

Anonymisation Rule:

When discussing or citing this case in any professional context, strictly use professional procedural titles such as Plaintiff / Defendant. Do not use the real names of the parties.

Conclusion
Everyone needs to understand the law and see the world through the lens of law. The in-depth analysis of this authentic judgment is intended to help everyone gradually establish a new legal mindset: True self-protection stems from the early understanding and mastery of legal rules.

Disclaimer
This article is based on the study and analysis of the public judgment of the District Court of New South Wales (Kempe v Grine [2025] NSWDC 227), aimed at promoting legal research and public understanding. The citation of relevant judgment content is limited to the scope of fair dealing for the purposes of legal research, comment, and information sharing.
The analysis, structural arrangement, and expression of views contained in this article are the original content of the author, and the copyright belongs to the author and this platform. This article does not constitute legal advice, nor should it be regarded as legal advice for any specific situation.

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