In a case which raised important issues relating to mental capacity and the execution of legal documents, a stroke victim’s plea that he had ‘no idea what he was signing’ when he guaranteed his wife’s £1.3 million debt has fallen on fallow ground at the High Court.
The wife had defaulted on her obligations to pay the debt, which she had incurred in connection with a share option agreement. She was threatened with bankruptcy when her husband signed the guarantee in the presence of a solicitor who certified that the terms of the document had been fully explained to him.
When the wife continued to be unable to fulfil her obligations, a statutory demand in respect of her debt was served on her husband. He had suffered an acute stroke some years earlier which had impaired his ability to understand verbal and written communications as well as his general competence in everyday tasks.
It was submitted that the statutory demand was invalid because the husband had been ‘completely incapable of understanding things like legal documents’. His lack of understanding should have been obvious to all concerned and his wife had attacked the involvement of an independent solicitor as ‘a charade’.
Those arguments were dismissed by a judge, who noted that all the family assets were in the husband’s name and that he had maintained his position as director of a substantial family company following his stroke. Despite the brain damage he had suffered, he and his wife had continued to manage their affairs ‘in a reasonably orderly manner’.
In dismissing the husband’s appeal, the Court found that it was ‘fanciful’ to suggest that the wife’s creditor had actual knowledge that he was mentally incapable of validly signing the guarantee. The document had been drawn up at the offices of a reputable law firm and it was ‘inherently unlikely’ that the independent solicitor who dealt with the matter would have accepted instructions from the husband if he had been obviously incapacitated.