James is a Partner and Head of the Dispute Resolution team and primarily handles commercial…View Profile View all
The High Court has very recently considered what is the correct way to assess a person’s mental capacity to enter a transaction. The Court identified five principles as being relevant. Those are:
1) The person requires the mental capacity to recognise the issues to be considered; to obtain, receive, understand and retain relevant information and to weigh that information when coming to a decision;
2) A person might have capacity to make one type of decision but not another;
3) A person’s mental capacity may vary over time, and should be assessed at the specific time when the decision is/was being made;
4) The main issue is whether the person has the ability to understand the transaction and not whether he actually does understand it; and
5) Although the person might need assistance in understanding the transaction, that does not stop him having the capacity to understand it. He needs the insight and understanding to see that advice is needed, the ability to find and instruct an advisor and the capacity to understand and make decisions based on the advice that he receives.
In essence, whilst the person does not have to understand every element of a transaction, they should be able to understand its key features, explained in simple language and the alternatives to it.
With an ageing population, issues such as this are likely to become more frequent as time goes by.
For further information please contact James Staton, Partner, Litigation