Whether a transaction results from the exercise of undue influence is a question of fact. Here you say that there was a relationship of “trust” between these two people giving personal guarantees on behalf of the borrowing company, namely a husband who was the de facto “financial director” of the borrowing company and you, his wife, who was not involved in financial decisions and relied on him.
Even though you claim that your husband handled all the financial side of the business, I have to say that you were also a director at all times, so the loan company looking to enforce the debt will stress that point saying that Your civil servant role demonstrates your close involvement in company affairs.
Your evidence that your husband said “sign here” and you agreed without question is compelling, but it would be helpful if a third party (such as your accountant or others who have observed your business in action) could independently verify this claim. Likewise, you say you have dyslexia would be best supported by an official diagnosis by a properly qualified professional.
After a series of cases where banks lost when wives argued that the marital home should not be repossessed in situations where husbands had borrowed money (including RBS plc v Etridge 2001), a protocol was been developed by lenders where money will not be advanced unless all legal steps have been taken by the owners or occupiers of any property to give express consent to any borrowing secured by it, such consent being evidenced by all parties taking independent legal advice.
Here, the lender was not taking over your home, so the protocol seems to have been more flexible, in that the lender simply recommended that you take independent legal advice and did not insist. However, from the apparent facts of your case, I can see that such a relaxation of best practices and failure to address the issue of alleged undue influence where there is a relationship of trust, has played to your advantage.
Unless the lender can contradict your argument that there was undue influence, you don’t need to accept a charge on your home, or even pay off the debt. Indeed, you can claim that your particular situation makes the personal guarantee that you have signed void.
Ask a lawyer is written by Gary Rycroft, attorney at Joseph A Jones & Co, and published twice a month on Mondays. Send your questions to [email protected]