AEW v BW [2016] NSWSC 905
https://www.caselaw.nsw.gov.au/decision/57735757e4b058596cb9cdf4
21 The general law does not prescribe a fixed standard of “capacity” for the transaction of business; the level of capacity required depends on the particular business to be transacted, and the purpose of an enquiry as to capacity: Gibbons v Wright (1954) 91 CLR 423 at 434-438. That said, where a claimant for compensation is, or may be, incapable of managing his or her own affairs, there is generally a real, practical risk that he or she lacks the requisite capacity to make informed decisions about the conduct of compensation proceedings, whether that lack of capacity extends to a lack of contractual capacity at law or simply constitutes a “special disadvantage” or other quality liable, if taken advantage of, to attract equitable intervention.
22 In either case, a person who deals with such a person, or who participates in management of his or her affairs, may be exposed to a risk of loss, by reason of such conduct, if he, she or it lacks judicial or regulatory authority (or an enduring power of attorney) designed to protect the interests of the person who is, or may be, incapable of self-management. It is in the interests of those who have carriage of a claim for compensation, or of opposition to such a claim, by a claimant who is, or may be, incapable of self-management to ensure that a timely grant of authority to bind the claimant is available
23 A lawyer acting for a person who is, or might reasonably be thought to be, incapable of managing his or her own affairs may be required to confront difficult questions, requiring an exercise of mature judgement, about whether, and when, to decline to act without the appointment of a tutor or to apply for protective orders: P.L.G. Brereton, “Acting for the Incapable – A delicate balance” (2013) 35 Aust Bar Rev 244. A client incapable of managing his or her own affairs is likely, generally, to be incapable of giving instructions, and he or she may not be bound by steps taken in his or her name.
24 here needed, the protective jurisdiction of the Court is not readily circumvented or pre-empted. A failure to invoke protective measures in a timely way may mean that, after the event, if a need for intervention comes to notice, the Court may take steps, precautionary or otherwise, to protect the person and the estate of a person in need of protection.
25 If there is any reasonable ground for doubt about the capacity of a client then, in a case in which due authority to bind a client does not exist in the form of an enduring power of attorney, the course best taken is generally the prudent one of securing the appointment of a tutor, or the like, and making court approval of a settlement a condition of any settlement,