Lord Browne-Wilkinson said that because the lender, Barclays Bank, did not explain the implications of the transaction to her and did not recommend that she seek independent legal advice, she is freed from the charge.
But the ruling emphasized that a wife can only be released from her obligations if her partner has misrepresented the situation, has had undue influence, or has otherwise wronged her legally.
At Westminster yesterday, Mrs O'Brien said: 'This has cost me a lot . . . but if it helps some people to keep their homes . . . then it's worth it.'
Pat Griffiths, national coordinator of the Bank Action Group, which helped Mrs O'Brien publicise her case, estimates that 'thousands' of women in Britain are in similar situations.
Belinda Fahlberg, an Australian solicitor with the Family Law Group at Oxford University, said the case is part of an international phenomenon, known in Australia as 'sexually transmitted debt'.
But the British Bankers Association said that the judgment is unlikely to have any implications for British banks, because they have been following the Law Lords' recommended procedures under a voluntary code of conduct since 1992. A spokeswoman said: 'The judgment has fairly specific connotations and the number of cases it will affect is very small'.
Mr O'Brien, a chartered accountant, had an interest in a company, Heathrow Fabrications Ltd, which in 1987 frequently exceeded its overdraft. When Barclays agreed that Mr O'Brien could increase the overdraft to pounds 135,000, Mrs O'Brien was required to sign a document for a second mortgage on the family home, as security for Mr O'Brien's debts.
Mr O'Brien told his wife that she was guaranteeing a pounds 60,000 loan for three weeks. She took him on trust, and the bank branch failed to explain the loan to Mrs O'Brien or recommend that she take independent financial advice.
In months, the debt had mounted to pounds 154,000 and her home was about to be repossessed. Mrs O'Brien lost her case against repossession but the decision was overturned by the Court of Appeal, which said banks have a special duty of care to wives who provide security for their husband's debts. She repaid the pounds 60,000 she believed she was liable for, but Barclays took the case to the House of Lords to recover the rest. The O'Briens are still living together.