Lending money to a friend NZ: $10,470, a car and a tribunal that called it a loan

What everyone thought was agreed

He had money trouble. He asked her for help with rent and food and medication.

Then he needed a car.

She says he agreed to pay the money back once he'd finished a fitness competition.

That was the deal as she told it. Nobody wrote it down.

The moment nobody wrote it down

The money went across between February and June 2023. Transfer after transfer into his account.

She wasn't flush herself. Her bank statements showed she took out a $10,000 loan to help buy the car and pay for his medication.

She paid the seller the full price of the $5,000 car.

None of it came with a note saying what it was. There was a promise about a fitness competition and a lot of trust.

This is how most of these start. Someone you like is in a hole. You can help, so you do.

Nobody stops to write a contract for rent money. It feels cold. It feels like you don't trust them.

Time passes

The friendship went downhill within months.

He refused to pay back any of the money.

By the time she went to the Disputes Tribunal she was claiming more than $27,000. That included around $16,985 she'd spent on food, mostly takeaways.

What he said afterwards

He gave the tribunal three explanations for the transfers.

It was a gift.

Or it was payment for a fitness plan he'd written for her.

Or it was his share of money from helping her when she worked in food delivery.

He did accept he owed her something for the car. He said he'd paid half of it. She showed she'd paid the seller the whole thing.

He said she'd offered $2,000 for the fitness plan. She proved she'd paid him $1,000 for it in April.

He also gave the tribunal a recording where he asked her how much she owed him. Big sums came up as jokey bets, including $1,000 on whether a spoon was wood or plastic.

The tribunal wasn't moved. "The conversation was clearly in jest."

Lending money to a friend in NZ: how the tribunal decides

When the tribunal has to pick between loan and gift, it looks at the whole picture.

Who could afford what.

What the money was actually for.

How long the two people had known each other.

What the tribunal decided

The tribunal said it was unlikely the transfers were a gift.

She'd borrowed money herself to cover his costs. They'd only been friends a short time. The money went on rent and medication and a car.

That doesn't look like presents. So the tribunal treated the $10,470 as a loan. He has to pay it back.

The takeaways were different. They'd eaten that food together.

The tribunal said nothing suggested that money was like a loan. The $16,985 claim was declined.

The fitness plan claim didn't get him far either. Nothing was provided to prove what the plan was worth.

So the result split down the middle of her claim. The money she could tie to his rent, his medication and his car came back. The meals they shared did not.

Why this one went her way

She had bank statements. Every transfer was dated and sitting in her account history.

She had the receipt trail for the car. She had the loan she'd taken out to fund it.

That's what carried her. The evidence of her own finances made a gift look unlikely.

The shared takeaways had no trail like that. So that part of her money stayed gone.

It's worth noticing how close this came to going the other way. Strip out her own $10,000 loan and the bank statements and you're left with her word against his.

That's exactly where the dad in our earlier post ended up. Same tribunal, same question, different paperwork, different result.

The fix

She won. But she won after a hearing, more than a year after the money went out, and only on the part she could prove.

The promise to repay after the fitness competition was never on paper. Neither was the amount. Neither was what counted as part of the deal.

One page signed in February 2023 would have covered all of it.

Here's the money.

It's a loan.

It comes back by this date.

That's what the Friends & Family Loan Agreement does. It records the amount, that it's a loan and how it gets repaid. Both people sign before the money moves.

It works for a mate or a new friend just as well as for family. It also makes the awkward conversation shorter. If someone won't sign a page saying they'll pay it back, you've learned something cheap.

Earlier this week we wrote about the opposite result. A dad lost his claim because nothing showed his $5,000 was a loan: https://agreepro.com/blog/lending-money-to-family-nz-dad-daughter-5000.

Source: RNZ, Break-up legal claim: Woman seeks $27k over takeaways, car for man met on dating site, 23 June 2024.