Wilaci appointed receivers the following month, in June last year.
Torchlight now wants the High Court to rule that the demand is unenforceable while Wilaci wants judgment for the multi-million dollar sum.
The case kicked off today, when Kerr gave evidence in Auckland before Justice Matthew Muir.
Kerr described the lead up to the loan from Wilaci, which advanced A$37 million for part of a deal Torchlight entered into with Bank of Scotland International across the Tasman.
While Kerr said a A$1 million fee was initially discussed, this was upped to A$5 million, which he agreed to because it was too late to go elsewhere for financing.
A A$500,000 per week fee for late payment was then also included in the agreement and Kerr told the court he had no alternative but to accept it, despite the terms being "incredibly unfair".
"I was put in an impossible situation and was exploited despite my experience," Kerr said.
The case is expected to run all week and Kerr's cross-examination by Queen's Counsel Nathan Gedye will continue tomorrow morning.