Loan Agreements – A Costly “Gift”: When Friendship Meets Finance

In a local lesson on loan agreements, the case of Kempe v Grine [2025] NSWDC 227 began as an agreement between friends, but ended in a courtroom showdown over $300,000—and a lesson in why clear documentation matters.

Back in December 2018, Bridget Kempe handed Rosa Grine a $300,000 bank cheque. The deal, according to Kempe, was straightforward: a loan with 20% annual interest, set out in a drafted agreement both parties signed. Grine didn’t deny receiving the money, but claimed she never signed any agreement, there was no agreement, or it was a gift, or a business investment, and there were no fixed repayment terms and the interest had been varied to 5%.

The truth was buried in emails, text messages, and repayments Grine made before things went south between them.

As the dispute unfolded, Grine’s new accountants entered the fray, backing her story – but their evidence quickly unravelled. The court found the accountants’ testimony appeared to follow a script, was riddled with contradictions, and their evidence was discounted entirely. The Judge concluded that Grine’s case lacked credibility, while Kempe’s was clear, consistent, and compelling.

Most importantly, the court found there was a valid and enforceable loan agreement—signed or not. The conduct of the parties and the documents produced told the real story. Grine’s claim that she never agreed to the loan terms didn’t stand up, particularly when confronted with her own emails and messages referring to the agreement.

The result? A hefty judgment in Kempe’s favour for principal and interest of $593,666.21 together with an order for Grine to pay the Kempe’s costs.

This case is a strong reminder that:

• Paper trails are essential, even between friends – Agreements, emails, and payment records carry serious weight.
• Verbal deals and changing stories won’t hold up – Courts look for consistency and credibility when examining a case.
• Even unsigned agreements can be binding – If your actions support the terms, a court may enforce the unsigned agreement.

The Takeaway?
Helping a friend is generous, but documenting that help is essential. When it comes to loans to friends, hope for the best, but prepare for court.

For help documenting a loan agreement, advice on what to do when you don’t have formal documents in place or assistance with a dispute, you can contact our Commercial and Litigation Teams for expert assistance on 4951 8199 or by email to lawyers@ohlaw.com.au

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