10 February 2026
Credibility and burden of proof in oral loan agreements
This article was originally published by Cat Woods for LSJ Online (10 February 2026).
Oral loan agreements are generally legally binding in New South Wales, but this is only the case when they contain some fundamental elements of a contract: a clear offer, unqualified acceptance, and mutual intention by both parties to create legal relations. When these agreements are disputed, the plaintiff is obliged to establish evidence to prove to a reasonable degree that the agreement per the terms being referenced was made.
LSJ Online spoke with Rebecca Hegarty, Partner and Practice Head at Bartier Perry’s Corporate & Commercial Team.
She explains that a Plaintiff bears the burden of proving that an oral agreement was made and the terms of that agreement. “The burden of proof is to the civil standard i.e. on the balance of probabilities. To enforce an agreement there are several key factors that would need to be established:
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there is offer and acceptance between the parties
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there is consideration – this is something of value that is exchanged between the parties, no matter how small or nominal that may be. An example would be if a lender lends money in return for the undertaking of repayment.
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there must be an intention to create legal relations such that the parties intend for the agreement to be legally binding. This can sometimes be more challenging to prove in a scenario where the agreement is oral and is made between friends.”
Two recent cases highlight the dangers of making an oral agreement in lieu of a clear, written agreement.
The New South Wales District Court in Puntoriero v Higgins [2025] NSWDC 244 centred on a disputed oral agreement for a loan to purchase property. Judge Robert Newlinds, the trial judge, commented that “One side, or the other, or perhaps both, must be deliberately and knowingly telling untruths.”
The burden of proof lies with the Plaintiffs, ultimately, and their capacity to fulfil that obligation per the Evidence Act 1995 (NSW). Simply claiming that the Defendant is lying carries no weight. To be admissible in court, evidence must be relevant to the existence or terms of the contract.
Plaintiffs Francis Puntoriero and Giuseppe Pangallo argued that the Defendant, Matthew Higgins made an oral loan agreement in May 2010. According to the claim, the Plaintiffs would loan $340,000 to the Defendant to aid him in purchasing a property, with interest on the loan at 10 per cent per annum. The total loan sum, inclusive of principal and interest, would be $680,000, payable 10 years after the loan is advanced.
The sum was allegedly handed in cash to the Defendant on 10 June 2010, witnessed by relatives of the Plaintiffs. The Defendant denied both the agreement and that he received any monies from the Plaintiffs, insisting that he borrowed monies from his friend, Trevor Lucantonio to purchase the property.
The Plaintiffs responded that they understood their loan to the Defendant would be used to repay Trevor.
In the end, on 4 July 2025, the Judge ruled in favour of the Defendant, finding that the Plaintiff’s evidence was implausible and dismissing the matter with costs. He cited the comments by Hammerschlag J in John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [94]:
“Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the court which means that the court must feel an actual persuasion of its occurrence or its existence. Moreover, in the case of contract, the court must be persuaded that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences.”
He also cited Varma v Varma [2010] NSWSC 786 (a case of aunts versus nephews in the ownership of shares held in a deceased relative’s estate), regarding the evidence of spoken words, and provision of evidence to establish the agreement was made in actuality.
Hegarty says, “It is in the interests of the parties that the wording used is clear and unequivocal. What will often assist the parties is if there is also some paper trail or conduct that corroborates the fact that an agreement was made. For example, if it is claimed an agreement was made four years ago, recollections are likely to be hazy. If a party made a contemporaneous note of the meeting at which an agreement was reached, this may lend some objective weight to a party’s position as would evidence such as a transfer from a bank account of money alleged to be a loan, evidence of any repayments being made or even a written receipt for cash handed over.”
She adds, “This is not to say that an oral agreement is unenforceable, just that it makes the task of proving your case as a Plaintiff more challenging.”
In Douglas v Mikhael & Ors [2023] NSWSC 979, the consistency of statements as evidence came into the spotlight. This case was a dispute over an alleged oral contract. Plaintiff Douglas claimed that under an oral contract made in 1999, he had paid $75,000 to the respondents, his relatives, to acquire a business, which would be held on trust for himself and the respondents.
The judge dismissed Douglas’s claim that the oral contract existed on the basis that Douglas had not sufficiently established the claim. Upon appeal (Douglas v Mikhael [2024] NSWCA 89), the Court of Appeal upheld this decision, referring to the fallibility of memory and credibility of the Plaintiff. Douglas had claimed to recall a meeting from 20 years earlier despite no written evidence nor witnesses in his favour, and inconsistencies between his affidavits and statements under cross-examination raised questions about his credibility.
Lawyers best represent their client by seeking as much objective evidence as possible
Hegarty says, “Each case will depend on its facts. We would be looking for as much objective reliable evidence as possible that may support the case. This could include diary notes of the alleged meeting and who was present, evidence of withdrawal(s) of the loan amount in cash in or around the date the loan was made or how that cash was obtained by the lender, deposit of cash received into an account by the recipient, as well as examining the plausibility and consistency of the oral evidence.”
A better alternative to oral loan agreements
Hegarty says that in the case of two parties known to each other coming to an oral agreement, the next step would be to put it in writing.
“The ideal position would be to document the loan and its terms and have the parties sign and date the document,” she says. “Often, parties think that an agreement based on trust is enough or that they wish to ‘save money’ by not having a lawyer prepare a loan agreement. However, when relationships fall apart, money is not repaid or an agreement needs to be enforced, this is when you are often faced with differing versions of events.”
Where such a measure hasn’t been taken, Hegarty says, “Litigation can be expensive and take some time before there is a hearing outcome, particularly where you are relying purely on oral evidence. Often parties don’t consider the time required to prepare such matters for a hearing, including the taking of affidavit evidence and the need to cross examine witnesses. At the end of the day, there will always be one party that walks away as unsuccessful, usually accompanied by an order that they pay the successful party’s legal costs.”
She advises, “In a written agreement the key terms of the agreement should be documented in clear unequivocal terms in order to minimise disputes arising. If it is the intention of the parties that the agreement is not binding until all parties sign, then signatures are important. Ideally, the agreement should also be dated but, worst case scenario, the date may be proved from other evidence such as emails showing exchange of signed counterparts. Parties also forget that even with a signed and dated agreement there could still be vitiating factors against the validity or enforceability of the agreement such as misrepresentation, duress, undue influence, mistake, unconscionable conduct, illegality or lack of capacity.”