TUV v CHIEF OF NEW ZEALAND DEFENCE FORCE [2022] NZSC 69

TUV v CHIEF OF NEW ZEALAND DEFENCE FORCE [2022] NZSC 69 [3 June 2022]NOTE: EMPLOYMENT COURT ORDER PROHIBITING PUBLICATION OFNAME AND IDENTIFYING PARTICULARS OF THE APPELLANTREMAINS IN FORCE.NOTE: ORDER PROHIBITING PUBLICATION OF THE TERMS OF THESETTLEMENT AGREEMENT REMAINS IN FORCE ON THE BASIS SETOUT IN THIS JUDGMENT AT [75].IN THE SUPREME COURT OF NEW ZEALANDI TE KŌTI MANA NUI O AOTEAROASC 14/2020[2022] NZSC 69BETWEEN TUVAppellantAND CHIEF OF NEW ZEALAND DEFENCEFORCERespondentHearing: 8 September 2020 and 27 September 2021Court: Winkelmann CJ, Glazebrook, O'Regan, Ellen France andArnold JJCounsel: A J Douglass and A S Butler for AppellantA L Martin, J P A Boyle and E G R Dowse for RespondentJ S Hancock for Human Rights Commission as IntervenerJudgment: 3 June 2022JUDGMENT OF THE COURTA The appeal is dismissed.B The Courts below were correct not to set aside thesettlement agreement in this case on the grounds of mentalincapacity.C There is no order as to costs.____________________________________________________________________REASONSPara NoGlazebrook, Ellen France and Arnold JJ [1]Winkelmann CJ and O'Regan J [78]GLAZEBROOK, ELLEN FRANCE AND ARNOLD JJ(Given by Ellen France J)Table of ContentsPara NoIntroduction [1]Factual background [7]Employment Relations Authority [19]Employment Court [22]Court of Appeal [25]Does s 108B apply to settlements approved under s 149? [30]The relevant provisions [31]The parties' submissions [39]Our approach [43]The statutory scheme and relevant concepts of the ERA [45]The institutions [59]Conclusions [63]Application to this case [69]Postscript [70]Non-publication orders [74]Result [76]Introduction[1] The appellant claims she was bullied and harassed whilst employed by theNew Zealand Defence Force, and wants to pursue a claim for unjustified dismissalagainst the respondent. She accepts she entered into a settlement agreement with therespondent in respect of those claims but argues that the settlement agreement shouldbe set aside because she lacked capacity to enter into that agreement at the relevanttime. The settlement agreement was signed by a mediator as provided for by s 149(1)of the Employment Relations Act 2000 (the ERA). In signing such an agreement, themediator does not provide advice to the parties about the content of the agreement but,rather, must explain to the parties the "final and binding" nature of the settlement asprovided for in s 149(3). Under s 149(2) the mediator must "be satisfied that, knowingthe effect of" s 149(3), "the parties affirm their request" that the mediator sign theagreement.[2] In considering the appellant's claim, the Employment Relations Authority(the Authority) accepted that s 149(3) was not a bar to setting aside the agreementwhere a party lacked capacity.1 The appellant's claim nonetheless foundered becausethe Authority found that she did not lack the capacity to enter into the settlement and,in any case, there was nothing to put the respondent on notice of her incapacity.[3] On appeal to the Employment Court2 and then to the Court of Appeal,3 bothCourts agreed that a s 149 agreement could be set aside on the basis of lack of capacity.The Employment Court found the appellant did not have capacity at the time sheentered into the agreement but the agreement was not set aside because the Courtconcluded that the respondent did not know and was not put on notice as to herincapacity. The Court of Appeal took the same approach.[4] In concluding the agreement should not be set aside, both Courts applied thetest in O'Connor v Hart that a contract is not voidable for mental incapacity unless theother contracting party has actual or constructive knowledge of the incapacity, orequitable fraud is established.4 The application of O'Connor v Hart in theemployment context gave rise to the issues on which leave was granted in this Court,namely:5(a) Does the test in O'Connor v Hart apply in the employment jurisdiction,in particular, to a settlement agreement that has been certified unders 149 of the ERA?(b) If not, what is the relevant test and should the settlement agreementhave been set aside in this case on the grounds of mental incapacity?[5] However, after hearing the appeal, the Court considered it was necessary toaddress whether s 108B of the Protection of Personal and Property Rights Act 19881 TUV v WXY [2017] NZERA Christchurch 222 (David Appleton) [Authority decision].2 TUV v WXY [2018] NZEmpC 154, (2018) 16 NZELR 326 (Chief Judge Inglis) [EmpC judgment].3 TUV v Chief of New Zealand Defence Force [2020] NZCA 12, [2020] 2 NZLR 446 (French,Courtney and Goddard JJ) [CA judgment].4 O'Connor v Hart [1985] 1 NZLR 159 (PC).5 TUV v Chief of New Zealand Defence Force [2020] NZSC 47. The Human Rights Commissionsought and was granted leave to intervene on the ground the proceedings raise human rights issueof general principle: TUV v Chief of New Zealand Defence Force SC 14/2020, 3 August 2020.(the PPPRA) in fact governed the position. Section 108B had not been referred to bythe parties but it requires a court to approve a settlement of claims for money ordamages where one of the parties is not capable of managing his or her own affairs.The Court sought and obtained further submissions on this aspect and held a furtherhearing.[6] The initial question for the Court now is whether s 108B is dispositive of thecase. As we see it, that question turns on whether s 108B applies at all given thescheme of the ERA, including in particular s 149. We turn to that question first aftersetting out the background.Factual background[7] The appellant began working for the respondent in 2002. She gave evidencebefore the Employment Court that in 2014 she began to feel the effects of what shebelieved was bullying conduct toward her. This included performance managementprocesses which she alleges were unjustified and part of a campaign by her managersto force her to leave as she neared the age of 65.[8] From February 2015 the appellant was on sick leave, an absence supported bymedical certificates which attributed her unwellness to stress resulting in "moderate tosevere depression and anxiety" and "significant disability". At the respondent'sinstigation, the appellant underwent a neuropsychological assessment in June 2015.The resulting report expressed the view that the appellant's overall intellectualfunction was intact but that she exhibited mildly impaired attention and somedifficulties with verbal memory. The report observed a return to work for therespondent was unlikely to be successful and recommended that the parties negotiatean appropriate way forward as soon as practicable.[9] The appellant's employment came to an end in December 2015, when asettlement agreement was entered into between the appellant and the respondent. Thesettlement process was initially handled for the appellant by her union representative,but in September 2015 the appellant engaged her own lawyer.[10] We adopt the Chief Judge of the Employment Court's summary of the processthat followed in relation to the settlement agreement:6The agreement followed a number of long-distance negotiations, which tookplace between the [appellant's] (then) lawyer on her behalf and the[respondent's] representative, either over the telephone or by way of writtencommunication. The [appellant's] lawyer had a number of interactions withthe [appellant's] son, who took an active role in communicating advice andinstructions as between the lawyer and the [appellant]. He did this because hewas concerned about his mother's ability to comprehend what was going onand to process information. Oral communications between the [appellant's]lawyer and the [appellant] herself were very limited. Some email exchangesbetween the two occurred during this time.[11] Once the terms of settlement had been agreed, the appellant's lawyer sent anemail to the appellant advising of this and explaining that it meant that neither theappellant nor the respondent would be able to raise any employment-related claimsagainst each other in the future. The lawyer also said that once the agreement hadbeen signed, it would be sent to the Mediation Service and a mediator would contactthe appellant to ask her to confirm that she fully understood and agreed to the termsof settlement.[12] The appellant and respondent signed the settlement agreement in earlyDecember 2015. As provided for by s 149 and foreshadowed by the appellant'slawyer, a mediator employed by the Chief Executive of the Ministry of Business,Innovation and Employment was contacted by the solicitor acting for the respondentand asked to sign the agreement.[13] As we have explained, when asked to sign the agreement, the mediator doesnot advise the parties about the terms of settlement. Rather, under s 149(2), themediator must explain to the parties the final and binding nature of the agreement andbe satisfied that, knowing the final and binding nature of the settlement, the partiesaffirm their request to have the settlement signed. Section 149(3)(a) provides that,where the parties affirm their request that the mediator sign the settlement agreementand the mediator signs the settlement, the terms of settlement "are final and bindingon, and enforceable by, the parties".6 EmpC judgment, above n 2, at [10].[14] Section 149 encourages performance of the terms of the settlement by creatinga jurisdiction to impose penalties for breach of the terms of the settlement, and limitsthe circumstances in which the settlement can be challenged.[15] At the foot of the agreement, the appellant signed her confirmation that shefully understood the effect of s 149, namely, that once the mediator signed the termsof settlement:1. the settlement is final and binding on and enforceable by us; and2. except for enforcement purposes, neither of us may seek to bring thoseterms before the Authority or Court whether by action, appeal, andapplication for review, or otherwise; and3. the terms of the settlement cannot be cancelled under section 7 of theContractual Remedies Act 1979; and4. that section 149(4) provides that a person who breaches an agreedterm of settlement to which subsection(3) applies is liable to a penaltyimposed by the Authority.[16] The mediator did not meet the appellant in person, instead speaking to her overthe phone. The mediator signed the agreement pursuant to s 149(1) and (3) on15 December 2015.[17] The appellant's evidence in the Employment Court was that she experienced abreakdown in August 2015. She could not remember much of what occurred fromaround August 2015 until her employment came to an end in December 2015, whenthe settlement agreement was entered into.[18] About eight months after the agreement had been signed, the appellant wasexamined by a psychiatrist, Dr Tom Levien, for the purposes of an insurance claim.By way of background, the respondent took out workplace income insurance to coverits employees. The appellant made a claim under this policy on the basis that she wasunable to work through disability, which was accepted following an assessment by anoccupational therapist in mid-November 2015. The insurance policy provided forupdated medical assessments and, following a reassessment, in his updated report of25 August 2016, Dr Levien diagnosed the appellant with an anxiety disorder, andrecommended targeted psychotherapy. The doctor concluded that the appellant was"currently totally incapacitated with regards to her previous work".Employment Relations Authority[19] The appellant filed her statement of problem in the Authority in April 2017.The respondent met the claim with the argument that it was precluded by the settlementagreement and the operation of s 149(3). The issue of the appellant's capacity and theimplications of that for the enforceability of the agreement were therefore squarelybefore the Authority, and addressed by it as a preliminary issue.[20] At the appellant's request, Dr Levien provided a further report, dated19 May 2017, which was placed before the Authority, addressing the appellant'scapacity at the relevant time. Dr Levien concluded:It is my opinion that [the appellant] was likely to have been suffering from asignificant depressive episode with ongoing anxiety symptoms at the time ofsigning the document in question.It is also my opinion that [the appellant's] ability to understand all the relevantinformation within this document is likely to have been impaired secondaryto difficulties with her attention and concentration as a consequence of hermental illness.[The appellant] does not have a memory of signing this document and this initself would indicate that her mental state was impaired at the time. In orderto have full capacity to sign this legal document, [the appellant] would haveneeded to have shown the ability to process the information rationally andcome to a logical conclusion after weighing up the possible outcomes. I donot believe that this would have been possible in [the appellant's] case,secondary to her ongoing anxiety and depression. It is my opinion that [the appellant's] mental health condition at the time ofsigning this legal document was highly likely to have resulted in significantincapacity with regard to the specific task of understanding the document,understanding the risks and potential benefits to her and understanding theconsequences of signing this document.In conclusion, [the appellant] would have likely had impaired capacity inmaking a decision to sign this legal document in the following areas:1. She would have had difficulty understanding the information relevantto the decision secondary to difficulties with concentration andattention.2. She would have had difficulties retaining that information secondaryto difficulties with concentration and attention and likely difficultieswith her memory at that time.3. She would have had difficulty weighing the information up as part ofa process of making a decision secondary to her difficulties withattention and concentration and also likely ongoing depressivesymptomatology (with a negative future outlook) leading to a wish tosever her ties with her employer as advised by her GeneralPractitioner.[21] The Authority found that s 149(3) did not override common law principlesprotecting those suffering from disability or who were unconscionably takenadvantage of.7 But the Authority declined to set aside the settlement agreement.8 Itfound that the appellant did not lack the capacity to enter into the agreement,9 and thatin any case, there was no material indication to the respondent which would havereasonably led it to conclude that the appellant lacked capacity to enter into theagreement.10 The Authority also held that the bargain reflected in the settlementagreement was not unconscionable, and that the appellant did not enter into theagreement as a result of duress.11Employment Court[22] The appellant appealed to the Employment Court. The Chief Judge acceptedDr Levien's opinion, confirmed in a further updating report, dated 30 June 2018, thatthe appellant was incapacitated at the time she entered into the agreement.12 Inreaching this view of the evidence the Chief Judge noted that the doctor did not resilefrom that opinion during cross-examination and noted also the lack of evidencecontradicting that opinion. The Judge also considered that other evidence as to theappellant's condition, both at the time of the agreement and the later discussion withthe mediator, was supportive of Dr Levien's opinion. The Chief Judge was thereforesatisfied the appellant was mentally incapacitated when she signed the agreement andwhen she subsequently spoke to the mediator over the telephone. She also found that7 Authority decision, above n 1, at [15], applying 8i Corp v Marino [2017] NZEmpC 69, (2017)14 NZELR 606 at [37] and [45].8 At [81].9 At [69].10 At [70].11 At [73]–[74] and [80].12 EmpC judgment, above n 2, at [54].the appellant lacked the capacity to instruct her lawyer, a role that she had littleinvolvement in.13[23] The Chief Judge agreed with the Authority that, despite s 149(3), the agreementcould be set aside on the basis of lack of capacity.14 In determining whether to setaside the agreement, the Chief Judge said that the New Zealand position is that theopposing party to an agreement must have knowledge of the mental incapacity at thetime that the agreement is entered into, if an application to set that agreement aside onthe grounds of incapacity is to be successful.15 In this the Court was referring to thetwo limbs of the test in O'Connor v Hart, discussed above.16[24] Although expressing doubts as to whether such an approach was appropriateto settlement agreements in the employment jurisdiction, the Chief Judge consideredexisting authority required the Court to apply the approach in O'Connor v Hart. TheChief Judge concluded that whilst the appellant was mentally incapacitated, therespondent did not know and could not reasonably have known about the lack ofcapacity.17 The Chief Judge also addressed whether equitable fraud was made out sothat the agreement was otherwise voidable. She found that the agreement was notunconscionable, given that the appellant was represented by an experiencedemployment lawyer who negotiated an unremarkable settlement agreement based onconventional terms that were reasonably evenly weighted. She said the agreementwas fair and reasonable, and fell far short of representing an unconscionable bargain.18Finally, the Chief Judge found that the appellant had not signed the agreement underany duress.1913 At [54].14 At [45]–[46].15 At [55].16 O'Connor v Hart, above n 4, at 174, following the leading English authority on this issue,Imperial Loan Co Ltd v Stone [1892] 1 QB 599 (CA). For a discussion of this line of authority,see Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract inNew Zealand (7th ed, LexisNexis, Wellington, 2022) at 556–559.17 At [57] and [64].18 At [73].19 At [80].Court of Appeal[25] The Court of Appeal granted leave to appeal on two questions of law. The firstwas whether s 149(3) prevented the Court from setting aside the agreement on thebasis of incapacity and the second, whether the O'Connor v Hart test applied in theemployment jurisdiction.20 On the first question, the Court upheld the conclusion ofthe Employment Court, namely that s 149(3) was not a bar to setting aside theagreement where a party lacked capacity.21[26] On the second question, the Court referred to what it described as the"orthodox" approach to capacity — if a party lacks capacity and the other party knowsthat, there can be no justification for enforcing a contract between the parties wherethe incapacitated party (or their representative) wishes to set it aside.22 "Similarly",the Court said:23 if the other party is on notice that an individual may lack capacity, theyshould not be permitted to turn a blind eye to those circumstances and take thebenefit of a contract that exploits that incapacity. Rather, if they refrain frommaking inquiries, they take the risk that the contract will be set aside becausethe other party lacked capacity to enter into it.[27] "But on the orthodox approach", the Court observed, "a contracting partydealing with an individual who is not a minor" can go ahead on the basis that theindividual has contractual capacity unless they know the individual lacks capacity, "orare aware of circumstances that would put a reasonable person on inquiry about theindividual's capacity".24[28] Such an approach, the Court said, is consistent with the objective approach tocontract formation that underpins the law of contract. It creates certainty and reducesbarriers to contracting, because dealings can occur against a background of assumedcapacity without the need for inquiries or other active steps to ascertain that capacity.25In that way it reduces transaction costs which would otherwise be borne by the parties,20 CA judgment, above n 3, at [23].21 At [45], and [48]–[49].22 At [58].23 At [58].24 At [59].25 At [59].including by the individuals who are required to take steps to establish their capacityto enter into the contract.26[29] The Court did not consider the employment context was so different as torequire a different approach. Indeed, the Court saw the broader statutory frameworkregulating employment relationships as supporting such an approach.27Does s 108B apply to settlements approved under s 149?[30] It is useful at this point to set out the terms of both s 108B of the PPPRA ands 149 of the ERA.The relevant provisions[31] Section 108B is a type of provision commonly known as a "compromise rule".It protects incapacitated parties from being bound by agreements to settle certainclaims unless the agreement has been approved by the court. Section 108B providesas follows:108B Approval of court required to settle claims of specified persons(1) This section applies where money or damages are claimed by or onbehalf of a specified person, whether alone or in conjunction withanother person.(2) If the claim is not the subject of proceedings before a court, anagreement for the compromise or settlement of the claim entered intoby the specified person, or on his or her behalf by a person who, in theopinion of a court, is a fit and proper person to do so, is binding onthe specified person if the agreement, or a release of the claim, is inwriting and is approved by the court under section 108C.(3) If the claim has not been compromised or settled in accordance withsubsection (2), and has become the subject of proceedings before acourt, a settlement, compromise, or payment, or acceptance of moneypaid into court, whenever entered into or made, is valid so far as itrelates to the specified person's claim only with the approval of thecourt under section 108C.26 At [60].27 At [62]–[66].[32] The PPPRA defines "specified person" as "a person who is incapable ofmanaging his or her own affairs" and "court" as "a court in which proceedings couldbe taken to enforce the claim".28[33] The companion provision to s 108B is s 108C, which provides for the makingof applications for approval and sets out the powers of the court on such an application.In its discretion, the court may do the following:(a) refuse the application; or(b) grant its approval unconditionally; or(c) grant its approval subject to any conditions and directions that it thinksfit, including conditions and directions as to—(i) the terms of the agreement, compromise, or settlement; or(ii) the amount, payment, security, application, or protection ofthe money paid, or to be paid; or(iii) any other relevant matter.[34] Section 149 of the ERA provides that where an employment problem isresolved, a person employed or engaged by the Chief Executive to provide mediationservices and who is authorised by the Chief Executive to sign, for the purposes ofs 149, agreed terms of settlement, may sign the agreed terms at the request of theparties to the problem. The section is a safeguard provision for those who resolve theirclaims through settlement.[35] Section 149(2) sets out what the mediator must do before signing the agreedterms with emphasis on ensuring the parties understand the settlement will be final.Subsection (2) provides accordingly that the mediator must:(a) explain to the parties the effect of subsection (3); and(b) be satisfied that, knowing the effect of that subsection, the partiesaffirm their request.28 Protection of Personal and Property Rights Act 1988 [PPPRA], s 108A.[36] Subsection (3) is in the following terms:(3) Where, following the affirmation referred to in subsection (2) of arequest made under subsection (1), the agreed terms of settlement towhich the request relates are signed by the person empowered to doso,—(a) those terms are final and binding on, and enforceable by, theparties; and(ab) the terms may not be cancelled under sections 36 to 40 of theContract and Commercial Law Act 2017; and(b) except for enforcement purposes, no party may seek to bringthose terms before the Authority or the court, whether byaction, appeal, application for review, or otherwise.[37] Sections 36 to 40 of the Contract and Commercial Law Act referred to ins 149(3)(ab) are those sections allowing cancellation for repudiation,misrepresentation or breach.[38] Section 149(3A) deals with the position of settlement agreements entered intoby minors aged 16 years or over, providing that they may be bound by the settlementas if they were of full age and capacity.The parties' submissions[39] The Court raised with the parties whether s 108B was displaced by the ERAfor present purposes. Neither party nor the Human Rights Commission adopted thatposition. Both parties say that s 108B and the ERA can operate together and the latterdoes not displace the former. Rather, the difference between the parties is primarilyas to the relevance of knowledge (actual or constructive) of lack of capacity.[40] The appellant says that the respondent's knowledge of the appellant'sincapacity is irrelevant to the applicability of s 108B in this case. And, she says,because she was denied the protection of s 108B, the agreement should be set aside asunenforceable and her claim ought to be allowed to proceed in the Employment Court.[41] The Human Rights Commission supports the appellant's arguments as to theapplicability of s 108B. It considers that the purpose of s 108B is to provide aprocedural safeguard through which a settlement agreement entered into by anincapacitated person must pass.[42] The respondent argues that s 108B does not apply here — where incapacitywas not a known issue at the time of the agreement. The respondent says that, viewedin its statutory context, it is clear that the purpose of s 108B is to enable settlement incircumstances where it might not otherwise occur due to one party's inability tomanage their own affairs. It follows that it is intended to apply where the parties knowone of them is incapacitated, and therefore can prospectively engage with the court inrespect of the settlement agreement.Our approach[43] In terms of the place of the ERA in the overall statutory arrangements, theappellant's argument is that there is no incompatibility between the sections of theERA identified by the Court and s 108B. However, when the scheme of the ERA as awhole is considered, there is an incompatibility because the ERA covers the field,namely, settlement agreements entered into under s 149.[44] As we now explain, to apply s 108B to the present case would undercut thecentral concepts underlying the ERA and the institutional structures set up by the Act,as well as undermining the efficacy of the Act's dispute resolution processes. Inparticular, it would be inconsistent with the thread of good faith running through theAct and the protection provided for the integrity of individual choice. It would alsonot fit at all well with the ERA's focus on promoting mediation as the primary problemsolving mechanism and promoting the speedy and inexpensive resolution ofemployment disputes. Nor would it fit well with the emphasis in the Act on reducingthe need for judicial intervention and the roles of the institutions established under theAct.The statutory scheme and relevant concepts of the ERA[45] As this Court said very recently in FMV v TZB, the focus of the ERA is on theemployment relationship.29 That relationship in turn reflects "the statutoryincorporation of the principle of good faith"30 and that principle "underpins the Act'srelational approach".31 This is reflected in s 3(a) of the ERA, which relevantlyprovides that the object of the Act is "to build productive employment relationshipsthrough the promotion of good faith in all aspects of the employment environment andof the employment relationship".[46] Section 3(a) goes on to provide that the object of the Act is to be achieved in anumber of ways. For present purposes it is relevant that those methods are describedto include:(iv) by protecting the integrity of individual choice; and(v) by promoting mediation as the primary problem-solving mechanismother than for enforcing employment standards; and(vi) by reducing the need for judicial intervention; [47] Section 4(1)(a) imposes a duty on parties to an employment relationship, suchas that in this case, to deal with each other in good faith and not do anything, whetherdirectly or indirectly, to mislead or deceive each other.32 Section 4(4) specifies thatthe duty of good faith applies to matters such as bargaining for collective or individualemployment agreements.[48] The interpretation of the ERA must be approached in light of that purpose andshould accordingly avoid outcomes that would undermine or not incentivise good faithdealing between employers and employees. As the Court said in FMV:33Parliament was at pains to ensure that the principle of good faith should be thedriver of all employment relationships, independently of and in addition toobligations in the employment contract.[49] The logical outcome of the approach advanced by the appellant is that asettlement agreement may be reopened, even well after it has been implemented,29 FMV v TZB [2021] NZSC 102, [2021] 1 NZLR 466 at [46].30 At [47].31 At [47].32 The duty of good faith also forms the object of Part 5 of the Act dealing with collective bargainingand of Part 6 addressing individual employees' terms and conditions: Employment RelationsAct 2000 [ERA], ss 31 and 60.33 FMV, above n 29, at [50].although the employer had done everything that would be expected of a reasonableemployer acting in good faith to address the challenges its employee was facing. Thatdoes not sit readily with the scheme of the Act. In addition to not facilitating timelyresolution of employment disputes and not rewarding good faith dealing, applyings 108B as the appellant advocates may in fact incentivise employers to take steps toprotect themselves which may exacerbate, not resolve, employment relationshipproblems.[50] There are two further considerations in this context. The first is that employersmay not discriminate against people with mental disabilities as ss 104 and 105 makeclear.34 The second is that the context is an employment relationship which is subjectto a dispute. In those situations, an employer may face difficulty in suggesting to itstroubled employee that they may lack capacity, so that an assessment by a specialist isrequired. The present case provides a good illustration in that the appellant's unionrepresentative commented adversely on the respondent's request the appellant undergoa neuropsychological assessment. The facts of FMV also indicate the types ofproblems that may arise.[51] Further, on the appellant's approach there is no requirement in s 108B that theparties have knowledge (actual or constructive) of the incapacity. Applying s 108B inthe manner in which the appellant contends to set aside certified s 149 agreements isinconsistent with the way the ERA treats mental disability in other contexts, namelythe bargaining for and entering into of an individual employment agreement as set outin s 68 of the ERA. Section 68 is not directly applicable to the appellant who wasemployed under a collective (not individual) agreement and whose grievance concernsthe terms of a settlement (not employment) agreement. But s 68 is nonetheless ofrelevance to whether the ERA covers the field in cases such as the present, given theduty of good faith applies throughout the relationship.[52] Section 68 deems bargaining for an individual employment agreement to beunfair where one party, assume for these purposes it is the employer, knows or ought34 ERA, ss 104 and 105(1)(h). See also s 21(h) of the Human Rights Act 1993.to know of certain enumerated circumstances. Those circumstances include where theother party, at the time of bargaining for or entering into the agreement:35(a) is unable to understand adequately the provisions or implications ofthe agreement by reason of diminished capacity due (for example)to—(i) age; or(ii) sickness; or(iii) mental or educational disability; or(iv) a disability relating to communication; or(v) emotional distress; or[53] Section 68 accordingly adopts the O'Connor v Hart approach because it ispremised on making provision to set aside the employment agreement for unfairnesswhere one party has actual or constructive knowledge of the incapacity of the other.36The legislative history indicates that s 68 reflected a deliberate move away from theapproach in the ERA's predecessor, the Employment Contracts Act 1991. Under thatAct, the threshold test was that the contract was "harsh and oppressive", whereas thecurrent Act reflects the common law approach to unfair (or unconscionable) contractsas reflected in O'Connor v Hart.37[54] The appellant maintains that it is significant that s 68 applies only tonegotiation of an agreement and not to its termination. It is helpful to consider howthat submission would apply in the situation where an employee satisfies the Authoritythat an employer has breached s 68. In that case, s 69 empowers the Authority to grantvarious remedies including payment of compensation, variation or cancellation of theagreement or to make any other order it sees fit in the circumstances. However, theAuthority cannot vary or cancel an agreement unless the requirements of s 164 have35 Section 68(2).36 The Court of Appeal saw s 68 as confirming that a knowledge requirement like that in the secondlimb of O'Connor v Hart is "consistent with the purpose of the Act and the values that underpinit.": CA judgment, above n 3, at [66].37 Employment Relations Bill 2000 (8-1) (explanatory note) at 6; and Employment Relations Billand Related Petitions 2000 (8-2) (select committee report) at 19. See also John Hughes and others(eds) Mazengarb's Employment Law (online ed, LexisNexis) at [ERA68.3]–[ERA68.5].been met. The effect of s 164 is that a cancellation or variation order cannot be madeunless:(a) the Authority (i) has identified the problem in relation to the agreement; and(ii) has directed the parties to attempt in good faith to resolve thatproblem; and(b) the parties have attempted in good faith to resolve the problem relatingto the agreement by using mediation; and(c) despite the use of mediation, the problem has not been resolved; and(d) the Authority is satisfied that any remedy other than such an orderwould be inappropriate or inadequate.[55] Let us assume then that the Authority, minded to vary or cancel theemployment agreement because it has identified a problem in relation to an agreement,directs the parties to negotiate in good faith. The parties reach an apparent resolutionof the problem (whether with the aid of mediation services or not) and enter into asettlement agreement which involves a variation to the contract of employment andthe payment of a sum of money to the employee.38 The employer asks that a mediatorsign the agreement in terms of s 149. As we have noted, under s 149(2) and (3), themediator is required to explain the "full and final" nature of the settlement and to be"satisfied" that, in light of that explanation, the parties wish to affirm the agreement.A mediator gives the required information and, being satisfied that the parties wish toaffirm the agreement, signs off on it.[56] We consider it is improbable that s 108B would apply in these assumedcircumstances if the employee subsequently sought to challenge the validity of thesettlement agreement on the basis that they did not, through mental incapacity,understand the full implications of agreeing to it. Given that the heart of theemployment relationship problem is that the employee was unfairly taken advantageof in the negotiation of the individual employment contract as a result of mentaldisability, the assumption must be that the process leading up to the making of thesettlement agreement would accommodate any necessary supports for38 A settlement agreement for the purposes of s 149 refers to terms agreed as part of a resolution ofa "problem": see ERA, s 149(1).decision-making by the employee. In that sense, the ERA's processes are intended tobe ameliorative and facilitative.39[57] In our view, a similar analysis applies where settlement agreements arecertified under s 149. As we noted at [46] above, s 3(a)(v) of the ERA refers tomediation as "the primary problem solving mechanism other than for enforcingemployment standards". Under s 144, the chief executive of the relevant department"must" employ or engage people to provide mediation services to support allemployment relationships. "Mediation services" includes services that assist peopleto resolve their employment relationship problems promptly and effectively. Wherean employer and an employee utilise the ERA's mediation services to resolve arelationship problem and record the outcome in an agreement, that agreement is likelyto be certified under s 149. It would run counter to the scheme of the Act if eitherparty to the certified agreement could have it set aside under s 108B at some point inthe future on the ground of mental incapacity. The mediation process would providethe forum in which the issue of any mental disability could be addressed, and wouldallow appropriate steps to be taken to facilitate decision-making by the relevantperson.40[58] In the present case, the settlement agreement that was certified did not resultfrom a mediation process but rather from private negotiations. But we do not see howthe approach to the effect of certification under s 149 can vary depending on whetherthe parties did or did not utilise the ERA's mediation services. The s 149 certificationprocess is, in the scheme of the Act, a meaningful one and must be given effect.39 Winkelmann CJ at [109] says that s 68 deals with the enforceability of an individual employmentagreement, not a settlement agreement involving a money claim so that the concerns we raise donot arise. However, under s 69, the remedies for unfair bargaining include orders forcompensation. If parties to an employment agreement where the employee alleged unfairbargaining agreed during mediation to a settlement that included a money payment and had theagreement certified under s 149, it seems to us that the same problem we identify could arise.40 As we note below at [68], there is an argument that the ERA itself provides a mechanism for reliefin extreme cases. Further, there was no cross-appeal from the finding of the Courts below thats 149(3) did not prevent an agreement from being re-opened where a party lacked capacity. But,in any event, our present concern is relief under s 108B.The institutions[59] Part 10 of the ERA deals with institutions. The objects clause, s 143, identifiesvarious objectives for the ERA's institutions. An important part of the institutionalstructure is that the parties should be encouraged to resolve problems themselves,albeit with the availability of expert assistance at short notice if necessary. As thisCourt said in FMV, the two specialist employment institutions, the Authority and theEmployment Court, "are intended to give effect to the Act's overall object of buildingproductive employment relationships through the promotion of good faith".41 Notingthe objects, the Court said "[in] short, the Act is designed to empower parties toemployment relationships to resolve their own problems where possible and to avoidunnecessary adversarialism."42[60] The focus of Part 10 is accordingly on providing "practical, specialised, speedyand informal dispute resolution that is accessible to all parties".43[61] It is recognised, however, that judicial intervention may be required, initiallyby a specialist body that is not inhibited by strict procedural requirements. Overall,the scheme of the ERA contemplates that most employment disputes will be resolvedbetween the parties, possibly with the assistance of mediation services, with theAuthority being the primary forum where negotiation or mediation fails.[62] Where there is unfair bargaining in the making of an employment agreement,the ERA provides a process which gives its two primary institutions for disputeresolution — mediation services and the Authority — important roles to play. But, onthe approach of the appellant, neither has the power within the framework of the ERAto address settlement agreements with a person who lacks capacity for mental healthreasons, even if the incapacity is associated with, or limited to, the employmentrelationship. That outcome seems to us inconsistent with the scheme of the ERA.41 FMV, above n 29, at [53].42 At [54].43 At [55].Conclusions[63] Against this statutory scheme, we consider s 108B is displaced by the schemeof the ERA. The effect of s 68 is that the O'Connor v Hart principle is seen asconsistent with good faith obligations and fair dealing, and the Act's institutionalframework indicates the ERA provides a bespoke process for resolution ofemployment disputes, including those involving issues of incapacity. On thatapproach, the scheme of the ERA is that prospects of reopening are confined to thosesituations where there was actual or constructive knowledge. The prospect ofreopening s 149 settlements years later where there was no knowledge of theincapacity at the time, as the appellant contends for under s 108B, would provide allof the wrong incentives and could discourage resolution of employment disputes evenin situations where plainly resolution is the best course for all parties. That outcomewould accordingly undercut the values underlying the ERA.[64] Such an outcome also tells against providing for an exception toO'Connor v Hart in the employment field, such that settlement agreements arevoidable if one party lacks capacity to enter it where the counterparty had no actual orconstructive knowledge of the incapacity. That approach would cause issues withreopening settlement agreements potentially, as here, years later with probableextensions of limitation periods because of incapacity.44 And, as we have discussed,it opens up the prospect of intrusive medical examinations in what are meant to beemployee-friendly dispute resolution processes. Indeed, we see the difficulties inretrospective assessment of competency as apparent in the present case where theassessment was made without the benefit of information as to the full context of thesupport received by the appellant or as to the full extent of the appellant's interactionswith her lawyer.45 There is the further point, as we have discussed, that an exceptionfrom O'Connor v Hart would not sit well with s 68.[65] In addition, there is a strong argument that the approach reflected in s 149,which allows persons with disabilities to settle disputes, even by making a bad bargain,44 Limitation Act 2010, s 45.45 This appeal is of course limited to questions of law: ERA, s 214. We add that the parties allaccepted that the modern, functional, approach to capacity was the appropriate approach. Weagree.subject to appropriate procedural safeguards, is consistent with the supporteddecision-making model found in the Convention on the Rights of Persons withDisabilities.46 Article 12 is the key provision for these purposes, requiring statesparties to "recognize that persons with disabilities enjoy legal capacity on an equalbasis with others in all aspects of life" and "take appropriate measures to provideaccess by persons with disabilities to the support they may require in exercising theirlegal capacity".47[66] The United Nations Committee on the Rights of Persons with Disabilities(the Committee) addressed the correct interpretation of art 12 in a General Commentissued in 2014 noting, amongst other matters, that "support" is a "broad term thatencompasses both informal and formal support arrangements, of varying types andintensity".48 The Committee also said there was an obligation on states parties toabolish substitute decision-making regimes and to replace these with supporteddecision-making alternatives.49 Further, the "primary purpose" of the safeguardsassociated with supported decision-making "must be to ensure the respect of theperson's rights, will and preferences".50[67] Moreover, if there is to be an exception to O'Connor v Hart to deal with unfairagreements entered into by persons with disabilities even if the other party did notknow of the disability or failed to make inquiries having been put on notice, there ismerit in the proposition that this should be a generic exception, that is, not one limitedto the employment field. We do not need to consider that prospect here because there46 Convention on the Rights of Persons with Disabilities 2515 UNTS 3 (opened for signature30 March 2007, entered into force 3 May 2008). This Convention has been ratified byNew Zealand. The right to freedom from discrimination on the grounds of disability has beenprotected for over 50 years by the International Covenant on Civil and Political Rights 999 UNTS171 (opened for signature 16 December 1966, entered into force 23 March 1976), to whichNew Zealand is a party. It is also expressly affirmed in our domestic legislation. Section 19 ofthe New Zealand Bill of Rights Act 1990 provides that everyone has the right to freedom fromdiscrimination on the grounds set out in the Human Rights Act 1993, of which disability is one.The definition of disability captures intellectual disability or impairment: Human Rights Act,s 21(1)(h).47 Articles 12(2) and (3). See also the obligation in art 12(4) to ensure there are appropriate andeffective safeguards.48 United Nations Committee on the Rights of Persons with Disabilities General comment No 1(2014) Article 12: Equal recognition before the law UN Doc CRPD/C/GC/1 (19 May 2014)at [17].49 At [26].50 At [20].was a finding by the Employment Court that the terms of the settlement were, in fact,fair to the appellant.51 In any event, as adopting a generic approach would go wellbeyond the scope of the present case, we take the point no further.[68] We add that s 152(2)(a) of the ERA does enable agreed terms of settlementsigned under s 149 to be challenged on the ground that the provisions of s 149(2)and (3) were not complied with. This would obviously apply where the requiredinformation was not given at all. If s 152(2) was not simply procedural, as wasaccepted in argument, but rather applied to an employee who says they did notunderstand the import of the information provided because of lack of capacity thatcould, we suggest, allow s 149(3) to be read as ensuring finality subject to the remedialjurisdiction under s 152(2)(a).52 That approach would fit with our view of the statutoryscheme. However, we take that point no further given that there was no cross-appealfrom the finding of the Courts below that s 149(3) did not prevent an agreement frombeing reopened where a party lacked capacity. Nor was the point addressed directlyin argument before us.Application to this case[69] Accordingly, we consider the Courts below were correct not to set aside thesettlement agreement in this case because the respondent did not have actual orconstructive knowledge of the appellant's incapacity at the time of entering into theagreement. O'Connor v Hart applies and the question of whether or not the agreementshould be set aside was governed by the ERA, not by s 108B.Postscript[70] Given our conclusion that s 108B has no application in relation to settlementagreements certified under s 149 of the ERA, it is not necessary for us to resolve thecompeting submissions between the parties as to the interpretation and scope of51 We see no merit in the appellant's submission that this finding should be ignored because it wasmade in the context of assessing whether an unconscionable bargain had been established.52 Hughes and others, above n 37, at [ERA152.4].various aspects of s 108B.53 However, as an observation in support of the respondent'sposition, we note that the language of the provision implies the approval is prior to thesettlement, not subsequent. For example, the heading to s 108B and the language ofs 108B(1) address the need for approval "to" settle claims. Similarly, the reference ins 108B(2) is to settlement of a claim by a person acting on behalf of the disabled personand the opinion of the court that this person "is fit and proper" rather than, for example,referring to fitness at some earlier point in time.[71] In addition, we make the observation that there are features of s 108B whichsupport the view that the section does not apply to s 149 settlement agreements. First,there must be an issue whether a claim such as the present for reinstatement andrestoration of mana is aptly caught by reference in s 108B(1) to a settlement of claimsfor "money or damages". Compromise of such claims is the focus of Part 9A of thePPPRA, in which s 108B sits.[72] Second, there is a question as to whether the Authority, given its features,comprises a "court" for these purposes. As we have seen, a "court", is defined for thepurposes of s 108B as any court in which such a claim would be brought.[73] Finally, we do not consider it is possible to view s 108B separately from s 108Dand s 108E. Those two provisions relevantly provide for money payable under asettlement approved under s 108C to be held on trust for the person who lacks capacity.This feature suggests s 108B is something of a hangover from the days when thePublic Trustee would receive and hold monies from such settlements on behalf of adisabled person.54Non-publication orders[74] The Employment Court order prohibiting publication of the name andidentifying particulars of the appellant remains in force. At the hearing, the appellant53 We agree with Winkelmann CJ (at [101] below) that, in cases where s 108B does apply, it shouldbe interpreted to require supported decision making rather than substituted decision making by thecourt. Had s 108B applied in this case, the support that the appellant had received, particularlythat of her son, would have been highly relevant.54 Part 9A of the Act was a late addition to the PPPRA, inserted in 2002 by s 170(1) of the PublicTrust Act 2001. The Public Trust Act repealed and replaced the Public Trust Office Act 1957,which until then contained the predecessor provision to s 108B.sought, with consent from the respondent, a clarification of that non-publication ordermade by the Employment Court to include all whānau and iwi affiliations of theappellant, the town in which she resides, the location of her employer and particularsof other employees that could be identified. We consider these details would fallwithin the scope of the current Employment Court order suppressing publication ofthe appellant's identifying particulars and confirm that this is the position to the extentsuch clarification is necessary.[75] Shortly after the appellant filed her application for leave in this Court, an orderwas made by consent preventing publication of the terms of the settlement agreementpending resolution of the application for leave to appeal or, if leave was granted, theappeal. As the appeal has now been determined, the order will lapse in the absence ofa further order. Accordingly, we extend the order until 5 pm on 9 June 2022 andreserve leave for the parties to file a memorandum within that time frame, if they seeka new order to the same effect.Result[76] In accordance with the views of the majority, the appeal is dismissed. For thereasons we have given the Courts below were correct not to set aside the settlementagreement in this case on the grounds of mental incapacity.[77] As the appellant is legally aided in relation to this appeal, we make no order asto costs.WINKELMANN CJ AND O'REGAN J(Given by Winkelmann CJ)Table of ContentsPara NoIntroduction [78]Section 108B of the PPPRA [84]The parties' submissions as to the application of s 108B [88]Issues to be addressed [90]New Zealand's international obligations to persons withdisabilities [92]Does s 108B apply to the settlement of employment relationshipproblems where the agreement has been signed by a mediator inaccordance with s 149 of the ERA? [104]Does s 108B apply to compromise agreements where the incapacitywas not known at the time of settlement? [124]The majority's postscript [145]Conclusion [149]Introduction[78] The issue on this appeal is the level of procedural protection the law affords tothose who are incapable of managing their own affairs at the time they enter into anagreement to settle a claim for money or damages arising out of their employment.The Protection of Personal and Property Rights Act 1988 (PPPRA) defines those whoare incapable of managing their own affairs as "specified people".55 Section 108Bprovides that agreements specified people enter into to settle or compromise a claimfor money or damages will be valid only insofar as it has been approved by a courtunder s 108C of that Act. But at common law the general law of contract providesthat those lacking mental capacity are nevertheless bound by contracts they enter intounless the other party knew or had notice of their incapacity or equitable fraud isestablished — this is known as the rule in O'Connor v Hart.56[79] In this case, the Employment Court found that the appellant lacked capacitywhen she settled her employment claim.57 Which rule should apply to her? Thes 108B rule which applies to contracts settling certain categories of claims or the moregeneral common law rule relating to the enforceability of contracts?[80] We consider that s 108B applies to the settlement of claims for money ordamages arising out of employment relationship problems where one of the parties tothe settlement was a specified person at the time of contract.58 Section 108B thereforeapplies in this case, with the consequence that the settlement agreement at issue in this55 Section 108A.56 O'Connor v Hart [1985] 1 NZLR 159 (PC).57 TUV v WXY [2018] NZEmpC 154, (2018) 16 NZELR 326 (Chief Judge Inglis) [EmpC judgment]at [54].58 For ease of reference, we refer to settlements and settlement agreements generically in thesereasons, but these terms should be read as referring to settlements and settlement agreementsinvolving a money or damages claim. Sections 108B and 108C apply only to claims for moneyor damages.proceeding is not enforceable unless and until it is approved by a court under s 108Cof the PPPRA.59 We therefore disagree with the majority's finding that the rule inO'Connor v Hart rather than s 108B applies to the settlement agreement here.[81] We reason that s 108B performs an important function — it is protective of therights of persons with a disability, rights which New Zealand committed to uphold andpromote when it ratified the United Nations Convention on the Rights of Persons withDisabilities (the Convention).60 By its terms, and consistent with its purposes, s 108Bapplies to the circumstances of the appellant. If it is not to apply we would expect tosee its application expressly excluded. There is nothing in the scheme or provisionsof the Employment Relations Act 2000 (ERA) which can or should be read to excludethe operation of s 108B, nor a purpose which requires that exclusion.[82] The reasoning supporting the majority's conclusion that s 108B does not applyis, in broad brush, as follows:(a) Section 149 of the ERA "covers the field" in respect of the settlementof employment relationship problems.(b) Applying s 108B does not sit well with other provisions in the ERA, inparticular ss 68, 69 and 164.(c) The s 108B requirement of court approval is inconsistent with theobject of the ERA — of building productive employment relationshipsthrough the promotion of good faith — and the stated means ofachieving this including by protecting the integrity of individual choice,59 It was common ground before us that TUV was a specified person given the finding of theEmployment Court that she was "more likely than not mentally incapacitated when she signed theagreement and when she subsequently spoke to the mediator over the telephone": EmpC judgment,above n 57, at [54].60 Convention on the Rights of Persons with Disabilities 2515 UNTS 3 (opened for signature30 March 2007, entered into force 3 May 2008) [the Convention]. The Convention was ratifiedby New Zealand on 25 September 2008. See the majority reasons above at [65], n 46 for adiscussion of the relationship between the Convention and the International Covenant on Civiland Political Rights 999 UNTS 171 (opened for signature 16 December 1966, entered into force23 March 1976).promoting mediation as the primary problem solving mechanism andreducing the need for judicial intervention.61(d) Applying the provisions of the ERA to the exclusion of s 108B is moreconsistent with New Zealand's obligations under the Convention.[83] We will address shortly why we consider that these are not sufficient norpersuasive reasons to disapply the legislative requirements of s 108B. But first weprovide necessary explanation and context in relation to s 108B, and then set out theargument the Court received as to the application of s 108B to this case, the latter notbeing addressed in the majority reasons.Section 108B of the PPPRA[84] Before the enactment of the PPPRA the rights of persons lackingdecision-making capacity were dealt with through the court's parens patriaejurisdiction and a patchwork of legislative provisions.62 The PPPRA is now theprimary legislative vehicle for dealing with adults who lack decision-making capacity.It creates a protective system, giving the Family Court — the key player in thePPPRA — powers to apply and oversee this system.[85] Section 108B sits within Part 9A and somewhat apart from the rest of thePPPRA's statutory framework in that it applies whether or not a person has beenbrought within the protective scheme provided by the PPPRA. Part 9A is solelyconcerned with the compromise of claims by63 and the handling of money or damagesawarded to,64 a person who is incapable of managing his or her own affairs.Section 108B is a type of provision commonly known as a "compromise rule" — onethat protects an incapacitated party from being bound by a settlement agreement unlessthe agreement has been approved by the court. As we come to, compromise rules have61 Employment Relations Act 2000 [ERA], s 3.62 Iris Reuvecamp and John Dawson (eds) Mental Capacity Law in New Zealand (Thomson Reuters,Wellington, 2019) at 10.63 The Protection of Personal and Property Rights Act 1988, ss 108B and 108C.64 Sections 108D and 108E.a long history and are common in the statute books and rules of court in common lawjurisdictions.65[86] The text of 108B is set out in the majority judgment.66 In order to follow thearguments made on this appeal, it is necessary to also have regard to s 108C, itscompanion provision, which governs applications for approval and provides:108C Applications for approval of court(1) An application for the approval of a court under this section may bemade by or on behalf of a specified person, or by any other party tothe agreement or proceedings.(2) On an application for its approval under this section, the court, in itsdiscretion, may—(a) refuse the application; or(b) grant its approval unconditionally; or(c) grant its approval subject to any conditions and directions thatit thinks fit, including conditions and directions as to—(i) the terms of the agreement, compromise, orsettlement; or(ii) the amount, payment, security, application, orprotection of the money paid, or to be paid; or(iii) any other relevant matter.[87] Also relevant are ss 108D and 108E. These empower the court approving asettlement to direct that all or part of money or damages to which the specified personis entitled under the settlement is to be held on trust by a corporation or persondesignated by the court, or to be held by the manager of the estate of the specifiedperson.The parties' submissions as to the application of s 108B[88] The appellant's position is that settlement of an employment relationshipproblem where one of the parties is a specified person is invalid, notwithstanding s 14965 See below at [136].66 Above, at [31].of the ERA, unless and until it is approved pursuant to ss 108B and 108C of thePPPRA. The appellant argues that it is irrelevant to the application of s 108B whethereither party knew of the incapacity at the time of the settlement. This is also theposition of the intervener, the Human Rights Commission.[89] The respondent does not contend that s 108B is displaced where the s 149processes have been followed (which is the finding of the majority). It accepts that as 149 settlement agreement may be voidable under s 108B but says this is only where,in accordance with the principles in O'Connor v Hart,67 the other party to the contracthad actual or constructive knowledge of the lack of capacity at the time they enteredinto the agreement, but failed to obtain approval of the settlement under s 108C. If,however, the incapacity was not known of at the time the agreement was entered into,s 108B has no effect and the agreement remains valid and enforceable. This, says therespondent, is how s 108B should be applied in all contractual situations (whether ornot the contract in question is the settlement of a claim for damages or money) —mirroring the common law principles in O'Connor v Hart.Issues to be addressed[90] We address the issues raised by the appeal as argued by the parties, and by thejudgment of the majority, as follows:(a) Does s 108B apply to the settlement of employment relationshipproblems where the agreement has been signed by a mediator inaccordance with s 149 of the ERA?(b) Does the rule in O'Connor v Hart govern the exercise of the s 108Cdiscretion?[91] Before we embark on consideration of these issues it is helpful to place ss 108Band 108C within the context of New Zealand's international obligations.67 O'Connor v Hart, above n 56.New Zealand's international obligations to persons with disabilities[92] As was acknowledged by the parties, because these provisions directly affectthe rights and interests of persons with disabilities, they fall to be interpreted againstthe backdrop of New Zealand's obligations under the United Nations Convention onthe Rights of Persons with Disabilities. It is well established that legislation shouldbe read, so far as possible, consistently with New Zealand's international obligations.68[93] Although the need for protection from discrimination has long beenacknowledged,69 the implementation of that protection has been slow. Over time,recognition has grown internationally that protecting disabled persons fromdiscrimination can be fraught, and has the potential to erode, rather than protect, theirrights.70 The United Nations General Assembly agreed to a new treaty in relation tothose with disabilities in 2006 — the Convention, which came into force in 2008.71The overarching purpose of the Convention is set out at art 1:The purpose of the present Convention is to promote, protect and ensure thefull and equal enjoyment of all human rights and fundamental freedoms by allpersons with disabilities, and to promote respect for their inherent dignity.Persons with disabilities include those who have long-term physical, mental,intellectual or sensory impairments which in interaction with various barriersmay hinder their full and effective participation in society on an equal basiswith others.[94] New Zealand ratified the Convention in 2008, after the enactment of thePPPRA and the ERA, but the obligations New Zealand undertook are relevant to theinterpretation of that legislation nevertheless.72 New Zealand also signed the68 New Zealand Air Line Pilots' Assoc Inc v Attorney-General [1997] 3 NZLR 269 (CA) at 289;Ye v Minister of Immigration [2009] NZSC 76, [2010] 1 NZLR 104 at [24] per Blanchard, Tipping,McGrath and Anderson JJ; Zurich Australian Insurance Ltd v Cognition Education Ltd [2014]NZSC 188, [2015] 1 NZLR 383 at [40]; Helu v Immigration and Protection Tribunal [2015] NZSC28, [2016] 1 NZLR 298 at [143] per McGrath J and at [207] per Glazebrook J; andOrtmann v United States of America [2020] NZSC 120, [2020] 1 NZLR 475 at [96].69 See the majority reasons, above at [65], n 46.70 Sylvia Bell Protection of Personal and Property Rights (2nd ed, Thomson Reuters, Wellington,2017) at [Intro1.2].71 The Convention, above n 60.72 Section 11 of the Legislation Act 2019 provides that legislation applies to circumstances as theyarise. It replaces s 6 of the Interpretation Act 1999. Section 6 was described in Fairfax v Ireton[2009] NZCA 100, [2009] 3 NZLR 289 at [179] as a "re-expression in less metaphorical terms"of the more colourful s 5(d) of the Acts Interpretation Act 1924 which expressed the principle asthe "law shall be considered as always speaking". See discussion in Ross Carter Burrows andCarter Statute Law in New Zealand (6th ed, LexisNexis, Wellington, 2021) at 540.Optional Protocol to the Convention in 2016, which allows those who allege to bevictims of a Convention breach to take their complaint before the UN Committee.73The Convention relies on a social model of disability, premised on the idea that theenvironment around those with disabilities will often control their ability to participateequally in normal life.74 The Convention seeks to redress the physical and socialbarriers confronting those with disabilities, and to promote their ability to participatein all aspects of life, including socially, economically and culturally.75[95] The definition of "disability" in the Convention is based on this conceptualframework. While recognising that people can have long-term impairments, it alsoacknowledges that disability can result from "the interaction between persons withimpairments and attitudinal and environmental barriers that hinders their full andeffective participation in society on an equal basis with others".76 To reduce barriersand to promote the full participation of all people, the Convention imposes a duty onstates parties to reasonably accommodate people's impairments.77 It also formulatesthe concept of supported decision-making — the idea that those who lack capacityshould not have decisions made for them (substituted decision-making) but shouldrather be supported and helped to make decisions for themselves.78[96] As acknowledged by the majority, art 12 of the Convention is the key provisionfor the purposes of this appeal, addressing the issue of legal capacity for persons withdisabilities. It provides :Article 12: Equal recognition before the law1. States Parties reaffirm that persons with disabilities have the right torecognition everywhere as persons before the law.2. States Parties shall recognize that persons with disabilities enjoy legalcapacity on an equal basis with others in all aspects of life.3. States Parties shall take appropriate measures to provide access bypersons with disabilities to the support they may require in exercisingtheir legal capacity.73 Optional Protocol to the Convention on the Rights of Persons with Disabilities 2518 UNTS 283(opened for signature 30 March 2007, entered into force 3 May 2008).74 Bell, above n 70, at [Intro1.2].75 Clare Barrett (ed) Brookers Family Law — Incapacity (looseleaf ed, Thomson Reuters) at 1–601.76 The Convention, above n 60, preamble, recital (e).77 Article 5(3).78 Article 12.4. States Parties shall ensure that all measures that relate to the exerciseof legal capacity provide for appropriate and effective safeguards toprevent abuse in accordance with international human rights law.Such safeguards shall ensure that measures relating to the exercise oflegal capacity respect the rights, will and preferences of the person,are free of conflict of interest and undue influence, are proportionaland tailored to the person's circumstances, apply for the shortest timepossible and are subject to regular review by a competent,independent and impartial authority or judicial body. The safeguardsshall be proportional to the degree to which such measures affect theperson's rights and interests.5. Subject to the provisions of this article, States Parties shall take allappropriate and effective measures to ensure the equal right of personswith disabilities to own or inherit property, to control their ownfinancial affairs and to have equal access to bank loans, mortgagesand other forms of financial credit, and shall ensure that persons withdisabilities are not arbitrarily deprived of their property.[97] The Convention does not define capacity, nor does it provide a particularcapacity standard. But at its heart the Convention is directed to ensuring that disabledpeople have the appropriate support to enable them to fully enjoy their civil andpolitical rights, on an equal basis with others, rights which include the exercise of legalcapacity. In its General Comment on Article 12 the United Nations Committee on theRights of Persons with Disabilities (the Committee) defines "support" for thesepurposes as a "broad term that encompasses both informal and formal supportarrangements, of varying types and intensity".79[98] Of particular relevance to this appeal is art 12(4), which outlines the safeguardsthat must be present for the exercise of legal capacity. In the General Comment, theCommittee said that the "primary purpose of these safeguards must be to ensure therespect of the person's rights, will and preferences".80[99] Importantly, the Committee has said that the "best interests" principle, whichis common in many legislative models, should no longer be used, because it is not asafeguard that complies with art 12 in relation to adults.81 The "best interests"principle, where a decision is made by another person "based on what is believed to79 United Nations Committee on the Rights of Persons with Disabilities General comment No 1(2014) Article 12: Equal recognition before the law UN Doc CRPD/C/GC/1 (19 May 2014) at[17].80 At [20].81 At [21].be in the objective 'best interests' of the person concerned, as opposed to being basedon the person's own will and preferences", is a form of substitute decision-making.82This should be replaced with an approach which uses significant effort to determinethe will and preferences of an individual. If it is still not practicable to determine this,then the "best interpretation of will and preferences" must replace the "best interests"determinations.83[100] The apparent purpose of the PPPRA, apparent even from its title, is theprotection of those with disabilities and of their property.84 It is clear from Part 9Athat the court exercises its powers on behalf of the protected person to protect themfrom exploitation and abuse — as we have noted, this is a statutory expression of theHigh Court's parens patriae jurisdiction.85 This protective purpose is reinforced by thepower that the court is given under ss 108D and 108E to impose trust obligations infavour of the specified person in respect of any money paid.[101] On its face, Part 9A appears to adopt an approach that provides for substitutedecision-making (by the court, on behalf of the incapacitated person) which is at oddswith the approach of art 12. But as both parties submitted, notwithstanding itshistorical derivation, Part 9A must be interpreted as having a rights-enhancingpurpose, consistent with New Zealand's obligations under the Convention. Thatincludes supporting the incapacitated person so that they have equal access to thebenefit of the exercise of their legal rights, and are able to participate as fully as theycan, with support, in decision-making affecting their legal interests. Part 9A achievesthis purpose, in part by enabling the specified person to effectively settle proceedings,and ensuring that the settlement is for their benefit. But construed in light of theConvention, the s 108C discretion to approve a settlement is expressed broadly enoughfor a court to apply the social model of disability, requiring supported decision-makingtechniques (rather than a substituted decision-maker) where appropriate to enable thespecified person to participate to the fullest extent possible in the decision to settle inaccordance with their own will and preferences.82 At [27].83 At [21]. See also [29(b)].84 See also the long title to the PPPRA.85 See above at [84].[102] We expect that whether the agreement is fair and reasonable, and whether thespecified person has had adequate support to enable their participation in the decisionto settle, are matters that a court will have regard to in making a decision under s 108C.[103] In this case, the appellant did receive support to assist her with herdecision-making. She had the informal support of her son and the assistance of legalrepresentation. But that support was not tailored in light of her incapacity — it couldnot have been, since the fact of that incapacity was not known at the time. Whateversupport the appellant did receive, the Employment Court has found that she did nothave legal capacity at the time that she signed the agreement, nor at the time that shereceived the explanation from the mediator.86 It is on that basis that we proceed toconsider the issues on this appeal.Does s 108B apply to the settlement of employment relationship problems wherethe agreement has been signed by a mediator in accordance with s 149 of theERA?[104] Consistent with the requirements of s 10 of the Legislation Act 2019 we baseour conclusion that Part 9A of the PPPRA applies to s 149 agreements on the text,purpose and context of the provisions of the ERA and PPPRA.[105] We start with the critical point that s 108B provides a generic regime for thesettlement of claims for money or damages by or on behalf of a specified person. If itis interpreted in light of the Convention, as we say it should be, it can assist thespecified person to participate as fully as possible in decision-making affecting theirinterests.87 We would expect to see s 108B expressly disapplied where not intendedto apply. Yet there is nothing in the language of the ERA or the PPPRA to suggest thats 108B does not apply to the settlement of employment relationship problems ingeneral or to s 149 agreements in particular.[106] As we see it, there is not only an absence of any indication that s 108B is notintended to apply to employment relations problem settlements, the indications are to86 EmpC judgment, above n 57, at [54].87 See above at [101]–[102].the contrary. Section 149 expressly provides for the override of aspects of othergeneric contractual regimes, yet makes no mention of s 108B:(a) Section 149(3)(ab) provides that following the s 149(2) affirmation, as 149 agreement may not be cancelled under ss 36 to 40 of theContract and Commercial Law Act 2017 (CCLA), provisions whichotherwise apply generically to contracts.(b) Section 149(3A) addresses the relationship between s 149 and thegeneral contractual regime for minors (contained in Part 2, Subpart 6of the CCLA). While Subpart 6 of the CCLA regulates theenforceability of all contracts entered into by minors (defined as aperson under the age of 18 years),88 the CCLA addresses theenforceability of contracts settling claims as a particularsubcategory — providing that the settlement is binding on the minoronly if approved by the court.89 However, s 149(3A) provides thatminors aged over 16 are bound by the terms of a s 149 agreement as ifof full age thereby disapplying part of the contractual regime forminors — for settlement agreements entered into by those aged 16 orover.[107] On the other side of the legislative puzzle, it is also worth noting that Part 9Aof the PPPRA expressly addresses where its provisions do not apply. Section 108Gprovides that nothing in Part 9A limits or affects the Deaths by AccidentsCompensation Act 1952.90 Yet it makes no similar provision in respect of s 149.[108] As noted above, the majority also see inconsistency between the application ofPart 9A of the PPPRA and the scheme of the ERA. They say that applying s 108B toinvalidate certified s 149 agreements is inconsistent with the way the ERA treatsmental disability in other contexts, namely the bargaining for and entering into ofindividual employment agreements as set out in s 68 of the ERA. Section 68 defines88 Contract and Commercial Law Act 2017, s 85.89 Sections 103–107.90 See also s 21 of the Deaths by Accidents Compensation Act 1952, to the same effect.bargaining for an individual employment agreement as unfair if, amongst other things,one of the parties is unable to understand adequately the implications of the agreementby reason of diminished capacity and the other party knew or ought to have knownabout that. Section 69 prescribes the remedies the Employment Relations Authority(the Authority) can then provide in the case of unfair bargaining, which includecancelling or varying the agreement, or ordering compensation.[109] While it is true therefore that s 68 adopts the O'Connor v Hart approach toenforceability, this is in a different context to that in which the compromise rule as setout in s 108B applies — at issue in s 68 is the enforceability of an individualemployment contract, not a settlement agreement resolving a money claim. There istherefore, on the face of things, no inconsistency between the application of Part 9Aof the PPPRA and the scheme of the ERA.[110] But the majority say that the additional overlay provided by s 164 of the ERAis significant in that it is suggestive that s 108B is not intended to apply where an issuearising under s 68 is resolved through a mediated settlement signed off in accordancewith s 149. Section 164 provides that the Authority can only make a s 69 order if theparties have attempted to resolve the problem in good faith negotiation by usingmediation and have failed to do so. What happens, the majority asks, if the Authority,minded to cancel or vary the agreement under s 69 directs the parties to mediation, thedispute is settled and the employer asks the mediator to go through the s 149processes? The mediator then explains to the other party the 'full and final" nature ofthe agreement, and being satisfied the parties wish to affirm the agreement, signs offon it. The majority says that it is improbable that s 108B could apply in thesecircumstances with the effect that the settlement is not enforceable until approved bya court, because given the background to the mediation it can be assumed that themaking of the settlement agreement would accommodate any necessarydecision-making support for the employee.[111] Even in light of this hypothetical example of the operation of the ERA we stillsee no inconsistency between the s 164 processes and the application of s 108B.Rather to the contrary — the example highlights the importance of the s 108Bprotections. As the majority assumes, protective measures would need to be takenshould the incapacity which gave rise to the original unfairness persist at the time ofsettlement. At some point the adequacy of the protective measures put in place mayfall to be determined if the enforceability of the settlement is challenged on thegrounds of lack of capacity. On the majority's approach they would fall to bedetermined under the test in O'Connor v Hart. On our approach they would fall to bedetermined (and indeed could conveniently be determined in advance) under s 108C.It seems to us that on the majority's hypothetical scenario, the application of ss 108Band 108C is more supportive of certainty and finality – with the certainty that courtapproval would provide.[112] As we discussed earlier, the majority also consider that the application ofs 108B has effects inconsistent with the object of the ERA — of building productiveemployment relationships through the promotion of good faith — and the meansdescribed in s 3 for achieving this such as by protecting the integrity of individualchoice, promoting mediation as the primary problem solving mechanism and reducingthe need for judicial intervention. We set out again the relevant part of s 3, for ease ofreference:(a) to build productive employment relationships through the promotionof good faith in all aspects of the employment environment and of theemployment relationship—(i) by recognising that employment relationships must be builtnot only on the implied mutual obligations of trust andconfidence, but also on a legislative requirement for goodfaith behaviour; and(ii) by acknowledging and addressing the inherent inequalityof power in employment relationships; and(iii) by promoting collective bargaining; and(iv) by protecting the integrity of individual choice; and(v) by promoting mediation as the primary problem-solvingmechanism other than for enforcing employment standards;and(vi) by reducing the need for judicial intervention; [113] The first point we make in relation to the majority's schematic analysis is thatmade by the Human Rights Commission in argument before us. The ERA does notelevate interests of contractual certainty and the promotion of mediation above thestatutory objectives of good faith behaviour and recognition of the imbalance of powerbetween employer and employee. These last two objects lie at the core of the statutoryscheme. They are objects best served by the application of Part 9A of the PPPRA tos 149 settlements so that inherent inequality of power within employmentrelationships is not exacerbated in the case of a disabled employee, and so that issuesof incapacity that exist are addressed fairly and in good faith.[114] Applying s 108B to s 149 agreements, the majority says, is inconsistent withthe object of protecting the integrity of individual choice — an employer may have totake steps to protect themselves such as insisting on a specialist assessment — whileall the time taking care not to discriminate against its employee on the grounds ofdisability as is prohibited by ss 104 and 105 of the ERA. But even on the majority'sapproach, if the employer knows, or has notice of the incapacity, this is an issue theymay have to confront. Employers should be able to deal with the issue withoutcrossing the line into discrimination, by simply proceeding in a respectful and goodfaith manner.[115] The majority say that applying s 108B to a s 149 agreement will slow downthe resolution of disputes and will not reward good faith dealing in the context ofresolving employment relationship problems. An employer who entered into asettlement agreement in good faith could face a settlement being reopened long afterit was made.[116] We agree that the application of s 108B may at times slow down settlements.That is the effect of ensuring that a specified person receives the support they need toassist them in making an individual choice or, where they are not able to be supportedinto decisional independence, to ensure that they are protected from exploitation oroppression, however that may arise. This approach is consistent with the ERA's objectof protecting the integrity of individual choice. Indeed it is hard to see how binding aspecified person to a "choice" made by them without decisional capacity can be saidto respect the integrity of individual choice as the majority would have it.[117] As to the undermining of settlements, it is important to stress first that this willonly occur when incapacity for the purposes of Part 9A is later established to haveexisted at the time of settlement — unlikely to be a frequent event. And even then, acourt will only decline to approve the settlement where the court considers it shouldnot, in the exercise of its protective jurisdiction, approve the settlement.[118] The majority say that applying Part 9A to s 149 agreements would underminethe use of mediation as the primary problem solving mechanism. However the s 108Bprocess need not displace the use of mediation processes for specified persons incircumstances where mediation can appropriately be used, such as where appropriatearrangements are in place to support their participation. And if mediation cannot beappropriately used because of disability, then it should not be used. We also note thats 108B does not eliminate the role of s 149(3). When the s 149 settlement is approvedunder s 108B, s 149(3) will have its full and usual effect.[119] Important to our reasoning is also the fact that an interpretation which appliesPart 9A to s 149 settlement agreements is supported by the purposes of the PPPRA.We also consider that, if the PPPRA is interpreted as we suggest above, it is alsoconsistent with New Zealand's obligations under the Convention. The application ofthe framework created by ss 108B and 108C to agreements settling employmentproblems is both protective and promoting of a specified person's enjoyment of andparticipation in their civil rights.[120] What of the majority's approach which has Part 9A of the Act displaced fromthe employment context if the s 149 process has been followed, but not otherwise?And which displaces s 108B in the case of a s 149 agreement even where the disabilitywas known about by the employer at the time of settlement — the latter not being aposition argued for by the respondent. How does that sit with the purposes of Part 9Aof the PPPRA and with New Zealand's commitments under the Convention?[121] The majority identify what they say is a strong argument that the approachreflected in s 149, which allows people with disabilities to settle employmentrelationship problems, even by making a bad bargain, but subject to appropriateprocedural safeguards, is consistent with the Convention's supported decision-makingmodel.[122] In our view, the majority overstates the nature of the s 149 safeguard. There isnothing in the s 149 process to protect a disabled person from exploitation or abuse,nor to encourage or ensure support for their participation in the decision-making.There is no framework which supports decision-making by specified persons, norequirement that the mediator ensure the parties understand the true nature and effectof the terms of settlement, and no requirement that the mediator be satisfied that theterms of the settlement are fair and reasonable. The procedural safeguards are slightwhen viewed in the context of a compromise agreement entered into by a specifiedperson. They amount to nothing more than the mediator explaining the fullimplications of the terms being final and binding and enforceable by the parties. Theslight nature of that protection is exemplified in this case by the fact that the mediatorconducted their entire interaction with the appellant over the phone.[123] We conclude therefore that the application of Part 9A, and s 108B in particular,to s 149 agreements is consistent with the text, purpose and context of both the ERAand the PPPRA. We consider this approach is also more consistent withNew Zealand's international obligations than that of the majority.Does s 108B apply to compromise agreements where the incapacity was notknown at the time of settlement?[124] The respondent submits that Part 9A, and s 108B in particular, only applieswhere the parties knew or were on notice as to any capacity issues at the time ofsettlement. It says that to apply s 108B when the capacity issues were unknown at thattime would create considerable difficulties for parties wishing to settle claims and isunnecessary given the other protective mechanisms provided by the common law,which are sufficient to protect vulnerable people.[125] The respondent says that the interpretation we adopt of requiring approval of asettlement entered into without knowledge of the incapacity is inconsistent with theinherently prospective nature of the protective scheme created by Part 9A of thePPPRA. It argues that the mechanisms in Part 9A are in many ways frustrated if notapplied prior to, or at the time of, settlement and are likely to work injustice. Inparticular:(a) Section 108B(2) contemplates that a fit and proper person can enter intoa settlement on a specified person's behalf. However, it appears thatthe court's approval is required before this can be done.(b) The court's powers under s 108C(2)(c), to grant approval subject toconditions and directions in respect of matters including quantum andterms, are inherently prospective. The respondent submits that it isquestionable whether such directions could be made in cases where thesettlement has already been performed, especially if the terms includea positive reference from the employer and resignation from theemployee.(c) Sections 108D and 108E set out procedures and rules when the courtdirects under s 108C that any money be held on trust. Again, says therespondent, it is not possible for such orders to be made and for thisprocedure to be complied with if the agreement has already beenperformed and the money paid.[126] Again we start our analysis with the text of the legislation, and with theobservation that there is nothing in the text of s 108B to limit its application, as therespondent contends, to applications for approval before a claim is finally settled andto settlements where the incapacity was a known issue at the time of settlement.91 Theprovision is expressed in language which, on a plain reading, encompassescompromise agreements entered into at any point in time — a settlement "wheneverentered into or made, is valid so far as it relates to the specified person's claim onlywith the approval of the court".92 Its language also encompasses settlements whereone party lacks contractual capacity, whether or not that was known to the othercontracting party at the time of contract. The latter view is supported by the fact thats 108B extends to contracts entered into by the specified person on their own behalf,91 The respondent's submission tends to conflate the issue of the timing of settlement (whethersettlement occurred before approval or was rather conditional on it) with that of whether incapacitywas known about at the time of the settlement. But, in any case, there is nothing in this argument.We note that the majority also tentatively observes at [70] that s 108B is prospective in application,undertaking a contextual analysis which does not address the critical words "whenever enteredinto".92 PPPRA, s 108B(3).not only those entered into by a person acting on their behalf.93 This is an indicationthat the provision is not solely addressed to situations where formal processes havealready been engaged to protect the incapacitated person, such as the involvement ofa litigation guardian.[127] As to the respondent's point (a), there is nothing to suggest that s 108B requiresthe court to approve the fit and proper person before the agreement is entered into.94At whatever point the court becomes involved, it will wish to be satisfied that a partypurporting to contract on behalf of the specified person is a fit and proper person.[128] As to (b) and (c), there is no reason why the consent processes in s 108C couldnot be used to ensure a just outcome even post-settlement — no reason, for example,why a refusal to approve could not have attached to it a direction for the repayment ofmoney already paid under the agreement, or a condition that the money already paidbe held on trust for the specified person.[129] Both the respondent's and majority's approach involve reading down the plainwords of a provision which, on its ordinary meaning, is of broad application and isrights enhancing.[130] In our view, an interpretation that has s 108B applying even when theincapacity was not known of at the time of settlement is the most consistent with theConvention requirement that states parties have laws that protect and ensure the fulland equal enjoyment of all human rights and fundamental freedoms by all personswith disabilities, and that promote respect for their inherent dignity.95 Those freedomsinclude the freedom to contract.96 It is not consistent with respecting the inherentdignity of a person subject to disability to hold them to contracts they entered intowithout capacity, and outside the protective mechanisms the law provides. We acceptthe Human Rights Commission's submission that an interpretation of Part 9A thatallows retrospective approval of settlements is the reading most consistent with93 In Dunhill v Burgin [2014] UKSC 18, [2014] 1 WLR 933 the United Kingdom Supreme Courtconsidered that these words in the equivalent United Kingdom legislation "hint at" the inclusionwithin the rule of cases where no litigation friend has been appointed: at [22].94 A point also made by the majority at [70].95 Article 1.96 Article 12.New Zealand's obligations under art 12 of the Convention, as it enables the court todetermine whether measures taken relating to the exercise of legal capacity wereproportional and tailored to the disabled person's circumstances as required byart 12(4). The court's power under ss 108B and 108C enables it to ensure that therights and preferences of the incapacitated person are not overborne or overlooked.[131] Whilst the principles in relation to the application of the s 108C discretion areyet to develop, there is no reason to think that other factors, such as absence ofknowledge of the disability coupled with detrimental reliance by the employer, willnot also be able to be taken into account. The ability to adjust the interests of theparties through the s 108C discretion seems to us to be more compatible with the rightsguaranteed by the Convention, than is the application of the O'Connor v Hart test —a test which, if applied in this context, prioritises certainty of contract over givingeffect to the disabled person's preferences or protecting their interests.97[132] The respondent says that the retrospective application of Part 9A is inconsistentwith the presumption of capacity in the PPPRA and in the general law. However, thePPPRA does not create a general presumption of competence. Provisions in thePPPRA creating presumptions that could be so categorised are of limited scope.Section 4 provides that people subject to property orders have the same "rights,privileges, powers, capacities, duties, and liabilities" as any other person, but that issubject to the provisions of the PPPRA or any other enactment. And ss 5, 24 and 93Bdescribe particular presumptions of competence applying in relation to Parts 1(personal rights), 3 (property rights) and 9 (enduring powers of attorney) of the Act,but not expressed as applying to Part 9A.[133] There are also difficulties with the argument in relation to the general law.While the law of contract can be seen to operate on the basis of a presumption ofcompetence, that is of course subject to statutory exceptions. And such exceptions doexist, like the statutory regime in relation to minors. As referred to above at [106],ss 104 and 105 of the CCLA provide that agreements to compromise or settle claims,97 See the discussion by Lady Hale in Dunhill v Burgin, above n 93, at [19] of the fact specificevaluation likely to be involved in the decision to retrospectively approve a compromise of rightsby a person lacking capacity who had not been represented by a litigation guardian for thesettlement. The court was not in that case asked to approve the settlement.even claims not the subject of a proceeding before a court in New Zealand, are bindingon a minor only if approved in court.98 We note the absence of any stipulation to theapplication of that rule that the other contracting party know of the minor's age at thetime of settlement.[134] The respondent also points to provisions within the PPPRA that it says showthat the PPPRA limits any adverse consequences, particularly for unknowing parties.These include s 53 (powers of persons subject to property orders to deal with theirproperty), s 54 (testamentary powers of person subject to property order), s 94A(7)(creation of an enduring power of attorney) and s 103C(5) (effect of attorney's actionsprior to receiving notice of revocation). It says that to apply Part 9A retrospectivelyas the appellant contends is inconsistent with a legislative scheme which limits theadverse consequences for parties who deal with a person, not knowing of theirincapacity. We do not propose to go through these provisions in detail other than tosay first that they deal with a different category of transaction than Part 9A — they donot address compromise agreements. Secondly, while these sections demonstrate arange of approaches to the particular categories of transactions they address, theoutcomes provided for are not out of keeping with likely outcomes if Part 9A is appliedretrospectively. For example, s 53 provides that dispositions of property madepersonally by a person subject to a PPPRA property order is avoidable by that personor by their manager appointed under the Act. But it also provides that the court has adiscretion to protect parties from the adverse consequences of that invalidity wherethey received the disposition in good faith and have so altered their position in relianceupon the validity of the transaction that it would be inequitable to grant relief, eitherin part or in full.99 As we note above, it is possible that similar principles will informthe exercise of the s 108C discretion.[135] The respondent relies upon Australian authority in which agreements enteredinto with an incapacitated party have been held to be valid unless the other party knewof the incapacity. We have not found the Australian authorities that were referred to98 We have already noted that this rule is modified for minors over the age of 16 by s 149(3A) of theERA: above at [106].99 PPPRA, s 53(8).us, or that the Court had identified for the parties,100 helpful. The courts were notrequired to engage with a statutory provision similar to s 108B, and they contain little(in some cases no) discussion of compromise rules within the relevant rules of court.[136] Of greater assistance is the decision of the United Kingdom Supreme Court inDunhill v Burgin.101 This case involved a settlement agreement entered into as a resultof a claim for damages for personal injury sustained in a road traffic accident. Theparties were both legally represented and agreed to a compromise at the door of thecourt, under which the appellant was to be paid £12,500 with costs in full and finalsettlement of her claim. This was a gross undervaluation of her claim — by the timeof the Supreme Court decision, the appellant's advisers put the claim as being worthover £2,000,000, and the respondent's put it at around £800,000.102[137] The compromise rule in the United Kingdom was set out in r 21.10(1) of theCivil Procedure Rules 1998 (UK),103 which provided that where a claim is made by oron behalf of a protected party: no settlement, compromise or payment and no acceptance of money paidinto court shall be valid, so far as it relates to the claim, by, on behalf of oragainst the protected party, without the approval of the court.[138] Also relevant was r 21.2(1), which mandated that a protected party "must havea litigation friend to conduct proceedings" on his or her behalf, and r 21.3(4) whichstated that any steps taken before a protected party has a litigation friend "shall be ofno effect unless the court otherwise orders".[139] The appellant sought a declaration that she had not had capacity at the time ofthe settlement, and an order that the settlement be set aside. The Supreme Courtupheld the finding that the appellant had lacked capacity (and was therefore a protectedparty). It followed that under the Civil Procedure Rules, she should have had alitigation friend throughout the proceedings. In first deciding it would not100 TUV v Chief of New Zealand Defence Force SC14/2020, 16 November 2020. See, for example:Rossi v Qantas Airways Ltd (No 2) [2020] FCA 1080; Macura v Sarasevic [2019] NSWSC 1409;Bell v de Castella [2018] ACTSC 170; and Affoo v Public Trustee of Queensland [2011] QSC 309,[2012] 1 Qd R 408.101 Dunhill v Burgin, above n 93.102 At [4].103 As amended by the Civil Procedure (Amendment) Rules 2007 (UK).retrospectively validate the settlement (under r 21.3(4)), the Court said that "[w]hileevery other step in the proceedings might be capable of cure, the settlement finallydisposing of the claim is not".104[140] The question was then whether this automatically meant that the settlementwas of no effect, due to r 21.10(1). The respondent raised two arguments against this.First, the respondent said that the rule only applied where the protected party had alitigation friend, as only then was the other party to the settlement put on notice thatthe settlement requires court approval. In this case, it had never been suggested thatthe respondent either knew or ought to have known of the appellant's lack of capacity.The Court rejected this argument, saying that it would involve writing words into therule which were not there: "[i]f anything, the words hint at the reverse, as they refer toa claim made 'by or on behalf of' a patient or protected party".105[141] The respondent's second argument was that without the limitation for whichhe first contended, the compromise rule would be ultra vires, as this would change thesubstantive common law rule requiring the other party's knowledge of theincapacity.106 The argument was that the Civil Procedure Rules cannot alter thesubstantive law. Accordingly, if the rule's effect was to alter the common law test, itwould be ultra vires.107[142] The Court found that the compromise rule did carve out an exception to thecommon law rule, as it was not restricted to cases where the claimant had a litigationfriend at the time of settlement, or where the other party knew of the incapacity.Nonetheless, it held that the compromise rule was not ultra vires.108 Therefore, the104 Dunhill v Burgin, above n 93, at [20].105 At [22] (emphasis added).106 The rule originated from the case of Imperial Loan Co Ltd v Stone [1892] 1 QB 599 (later followedin New Zealand in O'Connor v Hart, above n 56).107 The judgment therefore focused in large part on the issue of the vires of the compromise rule.That is not an issue in this case as in New Zealand the compromise rule is contained in a statutoryprovision.108 Lady Hale, at [30], found that the compromise rule was intra vires for two reasons. First, sheconsidered the Court was bound by a prior Privy Council authority to that effect, unless it foundgood reason to depart from it. Secondly, it was intra vires because the Civil Procedure Act 1997(UK) expressly provides that "[a]mong the matters which Civil Procedure Rules may be madeabout are any matters which were governed by the former Rules of the Supreme Court or theformer county court rules". This could be read as conferring an express power to make rules ofcourt modifying the substantive law to the extent that the previous rules did so, whether or notthose rules were intra vires. The compromise rule existed in the previous rules.settlement in that case required court approval, despite incapacity not being a knownissue at the point of settlement. The Court said that it had "not been invited to curethese defects nor would it be just to do so".109 The settlement was set aside and thecase allowed to go to trial.[143] In the course of her judgment, Lady Hale addressed policy arguments advancedby the respondent to support a requirement for proof of knowledge of the incapacityas a prerequisite to the application of the compromise rule. Since these echo some ofthe arguments advanced in this case, we set the relevant passages out below:[32] Much was made in the course of argument of the competing policyarguments, some of which I touched upon at the outset of this judgment. Inparticular, Mr Rowley emphasised the need for finality in litigation, thestresses and strains which prolonged litigation places on both litigants and thecourts, the difficulty of re-opening cases such as this so long after the event,and the alternative protection given to the parties by their legal advisers, whoshould bear the consequences of their own mistakes. Against this Mr Meltonemphasised the disadvantages of claims for professional negligence whencompared with claims for personal injuries, principally the discount for thechance that the claim might not have succeeded and the inability to make aperiodical payments order. He also points out that lack of insight is a commonfeature in head injury cases, so that the parties should be encouraged toinvestigate capacity at the outset. A litigant in person would, of course, haveno legal advisers against whom to make a claim, but the legal position cannotdiffer according to whether or not a party is, or is not, represented by lawyers.[33] Policy arguments do not answer legal questions. But to the extent thatthey are at all relevant to the issues before us, the policy underlying the CivilProcedure Rules is clear: that children and protected parties require anddeserve protection, not only from themselves but also from their legaladvisers. [144] To conclude on this issue, we consider that s 108B does apply to compromiseagreements regardless of whether the incapacity was known about at the time ofsettlement. The text and policy of the provision supports such a reading. It is theinterpretation most consistent with the provisions of the Convention, and is supportedby the approach taken to a very similar provision by the United Kingdom SupremeCourt in Dunhill.109 At [34].The majority's postscript[145] The majority identify as an issue whether a claim, such as the present, forreinstatement and restoration of mana is aptly caught by reference in s 108B(1) to asettlement of claims for "money or damages". But, in addition to claiming restorationof the mana of the appellant and her whānau and seeking recommendations to preventfurther racial harassment in the workplace, the appellant also claims lost wages andcompensation for humiliation, loss of dignity and injury to feelings. The claimtherefore seeks money or damages. The fact it seeks other remedial orders cannotmean that s 108B does not apply.[146] The majority also query whether the Authority can be categorised as a courtfor the purposes of s 108B. The appellant and the Human Rights Commission eachargued that, given the central role the Authority plays in the ERA statutory scheme,the word 'court' in s 108B should be given a purposive reading so as to encompass theAuthority. We think that the ERA provides the answer to this issue. Section 162provides:162 Application of law relating to contractsSubject to sections 163 and 164, the Authority may, in any matterrelated to an employment agreement, make any order that theHigh Court or the District Court may make under any enactment orrule of law relating to contracts, including—(a) Part 2 of the Contract and Commercial Law Act 2017:(b) the Fair Trading Act 1986.It seems to us that this section is broad enough in scope to empower the Authority tomake orders under Part 9A, relating as those provisions do to contracts settling orcompromising claims, including claims arising under employment agreements.[147] Finally, the majority say that it is not possible to view s 108B separately fromss 108D and 108E which provide for money paid under s 108C to be held on trust forthe person who lacks capacity. They comment that this feature suggests s 108B issomething of a hangover from the days when the Public Trustee would receive andhold monies from such settlements on behalf of disabled persons.[148] There is no requirement that settlement funds be subject to orders underss 108D and 108E. And while it is true that Part 9A has statutory antecedents in thePublic Trust Act 2001, the purpose of these provisions has remained constant andremains relevant — the protection from exploitation or abuse of those who may bevulnerable because of incapacity. It highlights also a purpose of Part 9A that will belost on the majority's approach — the protection of the specified person not just fromthe other contracting party, but also from third parties who would take advantage ofthe proceeds of settlement. This legislative history does not in our view support areading down or brushing aside of the provisions, if that is what the majority suggests.Conclusion[149] For these reasons we consider that s 108B applies in accordance with its text,purpose and context, to the settlement at issue on this appeal, with the result that theagreement settling the appellant's claims against the respondent is not binding uponher until approved by a court. We would therefore have allowed the appeal. Giventhis is a minority judgment, it is not necessary to go on to address what steps wouldfollow from the adoption of our approach, in particular, whether the respondent shouldbe permitted to seek approval under s 108B.Solicitors:McCarthy Law Ltd, Blenheim for AppellantCrown Law Office, Wellington for RespondentJ S Hancock for the Human Rights Commission as Intervener