The NZ Civil Aviation Act allows rule breaches, however in the event that the emergency isn't one that arises in flight (and while the events of this SAR flight evolved during flight, it wasn't an in-flight emergency, it was still "the urgent transportation of persons or other supplies") one of the conditions is that the person must still be lawfully entitled to operator the aircraft.
Part 135 only allows flight crew members or representatives of the director to manipulate controls. So it might be an interesting legal test as to whether the PIC can breach that rule in the event of a flight like this (one operated under section 13A of the Act). Because they are still the PIC, and lawfully entitled to operate the aircraft, they are just letting another person manipulate the controls. That is, does the PIC remain the "person lawfully entitled to operate the aircraft" even when they aren't in control.
Overall, in cases like this I wonder what we don't know. I'd bet a small amount that there's plenty of history leading up to the decision to take this to court, history beyond just the simple suspension of a medical and a single illegal flight.