Though N was dealer, South started off proceedings by bidding 1♥ out of turn. Director was called promptly, and started off giving a ruling:
"You can accept the call, in which case the auction proceeds normally as if South was dealer. As an alternative, you can reject the call out of turn, in which case bidding reverts to North and South is silenced throughout."
Here, South interrupted, and said "I don't think I'm silenced; can you show me that in the lawbook please?"
Director looked in the book, didn't see anything about South being silenced, and ruled that play continues unless South bid something other than hearts. The auction proceeded as in the diagram; S made 3HX for a top. Later on during the session, EW discuss the hand at your table (you're the club's chief TD), and explain the ruling. You recognise that something isn't right, confirm in the lawbook that North, not South, is silenced throughout, and have to unpick the mess. NS say "We just did what the director told us; we should get to keep our top!" whereas EW say "A correct ruling would probably lead to S opening 4♥, W doubles, and +100 to EW is a very good score".
How do you rule?