Reference no: EM132205327

Alastair is the major shareholder and managing director of EDC Ltd. To obtain capital for the business Alastair has provided a personal guarantee and used his home to secure a mortgage to Fidelity Finance. When Alastair’s father Gerald retires as an insurance broker, Gerald becomes involved in EDC and helps out with its administration and the accounts. To fund further expansion of EDC, Gerald and his wife Elaine also provide personal guarantees to Fidelity. Gerald has direct communication with Fidelity about EDC’s finances including the guarantees.

EDC subsequently runs into difficulties and goes into voluntary liquidation. Fidelity seeks to enforce the guarantees and exercise its rights under the mortgage.

When Gerald and Elaine learn that the guarantees are being called upon they are horrified. Gerald says that he only agreed to give a guarantee because he was pressured by Alastair and he was emotionally dependent on him. Elaine says that as her husband and son were both involved in the company that was good enough for her and that when it came to signing the documents she did not need to ask what they were for.

Applying the principles of undue influence, advise Fidelity whether it will be able to enforce its guarantee against (a) Gerald and (b) Elaine. Refer to a case to support your answer.