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Lee v Lee’s Air Farming Ltd.

[1961] AC 12

The Privy Council

Viscount Simons, Lord Reid, Lord Tucker, Lord Denning, Lord Morris

Fact:

This was an appeal case by the appellant in respect of the death of her husband. Mr. Lee
who had formed a company, Lee’s Air Farming Limited and held nearly all its shares. He was the
managing director, but by profession a pilot. The company was formed to conduct an aerial top-
dressing business. He appointed himself the chief pilot for the company. He was in capacity as a
governing director and controlling shareholder to exercise the full and unrestricted control over all
the operations of the company. Therefore, due to its statutory obligations the company had insured
itself against liability to pay compensation in the case of accident that may happen to him.

Subsequently, while piloting an aircraft belonging to the company in the course of aerial
top-dressing operations, the aircraft crashed and he was killed in the accident. Therefore, the
appellant claimed the £2,430 compensation on behalf of herself and her four infant children and
she also claimed a sum for funeral expenses against the company alleging that at the time of the
accident her husband was a “worker’ employed by the respondent company as according to the
Workers’ Compensation Act, 1922. The respondent company had denied the claim on the reason
that the deceased was not a “worker” but instead as the controlling shareholder and governing
director at the respondent company during the time of the accident.

The New Zealand Court of Appeal previously refused to hold that Mr. Lee was a worker,
holding that a man could not in effect, employ himself. Therefore, an appeal was brought before
the Privy Council.

Issue:

Whether the position of the deceased as sole governing director made it impossible for him to be
the servant of the company in the capacity of chief pilot of the company.
Provisions Involved:

Section 2 & 3(1) of the Workers’ Compensation Act 1922

Judgement & Reasons:

The court then allowed the claimed by the appellant. The decision was made on the reason
Mr. Lee was a “worker” that shall fall within the section 3(1) of the Workers’ Compensation Act
1922 that stated that he also entitled to the right for the compensation for any injury and accident
that occurs in the course of the employment.

The court also stated that although Mr. Lee was the controlling shareholder, sole director
and chief pilot of Lee’s Air Farming Ltd, he was also considered an employee of the company and
thus the company was a separate legal entity, even though Lee’s Air Farming Ltd was essentially
a ‘one-man entity’. There appears to be no greater difficulty in holding that a man acting in one
capacity can give orders to himself in another capacity than there is in holding that a man acting
in one capacity can make a contract with himself in another capacity.

The court in the opinion that the company and the deceased were separate legal entities.
The company had the right to decide what contracts for aerial top-dressing it would enter into. The
deceased was the agent of the company in making the necessary decisions.