TUV v The Chief of New Zealand Defence Force

NOTE: EMPLOYMENT COURT ORDER PROHIBITING PUBLICATION OF NAME AND IDENTIFYING PARTICULARS OF
APPLICANT REMAINS IN FORCE.

NOTE: ORDER PROHIBITING PUBLICATION OF THE TERMS OF THE SETTLEMENT AGREEMENT PENDING RESOLUTION OF THE APPEAL REMAINS IN FORCE.

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI

SC 14/2020
[2020] NZSC 47

BETWEEN	TUV Applicant
AND	CHIEF OF NEW ZEALAND DEFENCE FORCE Respondent

Court:	Glazebrook, O’Regan and Ellen France JJ
Counsel:	A J Douglass and A S Butler for Applicant J C Catran and J P A Boyle for Respondent
Judgment:	15 May 2020

JUDGMENT OF THE COURT

ALeave to appeal is granted (TUV v Chief of New Zealand Defence Force [2020] NZCA 12).

B The approved ground is:

(i)Does the test in O’Connor v Hart [1985] 1 NZLR 159 (PC) (that a contract is not voidable for mental incapacity unless the other contracting party has actual or constructive knowledge of the incapacity, or equitable fraud is established) apply in the employment jurisdiction (in particular, to a settlement agreement that has been certified under s 149 of the Employment Relations Act 2000)?
(ii)If not, what is the relevant test and should the settlement agreement have been set aside in this case on the grounds of mental incapacity?

____________________________________________________________________

Solicitors:
McCarthy Law Ltd, Blenheim for Applicant
Crown Law Office, Wellington for Respondent

CaseChat Overview and Summary

The Supreme Court of New Zealand recently addressed an appeal in the case of TUV v Chief of New Zealand Defence Force. The applicant, TUV, sought leave to appeal a decision that denied her request to set aside a settlement agreement on the grounds of mental incapacity. The respondent, the Chief of New Zealand Defence Force, argued against the appeal, asserting that the established test for mental incapacity in contract law should apply in this employment jurisdiction. The case raised significant questions about the applicability of the test from O’Connor v Hart and the appropriate standard for assessing mental incapacity in employment settlements certified under the Employment Relations Act 2000.

The central legal issues the court needed to resolve were whether the test for mental incapacity in contract law, which requires the other party to have actual or constructive knowledge of the incapacity or for equitable fraud to be established, should apply in the employment context, particularly concerning a settlement agreement certified under the Employment Relations Act 2000. If this test did not apply, the court had to determine the correct standard for assessing mental incapacity in such cases and whether the settlement agreement in this instance should have been set aside.

In granting the leave to appeal, the Supreme Court acknowledged the importance of the issues raised concerning the applicability of the mental incapacity test in employment settlements. The court identified that the approved ground for appeal centred on whether the O’Connor v Hart test was applicable and, if not, what the relevant test should be. The court recognised the need for clarity on these points to ensure fair and just outcomes in similar future cases. The court concluded that the issues raised were of sufficient public importance to warrant further examination by the appellate court.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established