The judge in this case was required to confirm the correct test for whether someone has the mental capacity to enter into a transaction. It was suggested that the following test laid down in Chitty is wrong: "At common law, the understanding and competence required to uphold the validity of a transaction depend on the nature of the transaction. There is no fixed standard of mental capacity which is requisite for all transactions. What is required in relation to each particular matter or piece of business transacted, is that the party in question should have an understanding of the general nature of what he is doing".
It was suggested that "understanding of the general nature of what he is doing" understates the degree of comprehension required.
The judge summarised the general principles relevant to ascertaining mental capacity. He confirmed that what is important is whether the person had the ability to understand the transaction, not whether he/she actually understood it. Furthermore, "in a case where a person needs advice and assistance to enable them to understand the transaction, the question of capacity is to be assessed by reference to the complexity of the transaction proposed, and the advice and assistance that they need to understand it, not the advice and assistance that they actually received". Accordingly, the test in Chitty was wrong insofar as it directs attention to the understanding that the person actually has, rather than the understanding which he/she would be capable of having if given the advice and assistance that they need.
The judge went on to find that the summary in Chitty was otherwise accurate: "although it would be possible to misinterpret it as only requiring the capacity to form a general impression of the nature of a contract, rather than the capacity to absorb, retain, understand, process and weigh information about the key features and effects of the contract, and the alternatives to it, if explained in broad terms and simple language" (the latter being the correct test). It was therefore not necessary for the person to have capacity to understand every detail of the proposed transaction.