Lee v. Lee’s Air Farming Ltd.
Mr. Geoffrey Lee formed Lee’s Air Farming Ltd. in New Zealand, owning 2,999 of 3,000 shares and serving as its sole director. He also worked as chief pilot under a contract with the company Tragically, Lee died in a plane crash while piloting the company’s aircraft.
Case Name:
Catherine Lee v. Lee’s Air Farming Ltd
Court: Judicial Committee of the Privy Council
Decision Date: 11 October 1960
Citation: [1960] UKPC 33; [1961] AC 12
Facts
Mr. Geoffrey Lee formed Lee’s Air Farming Ltd. in New Zealand, owning 2,999 of 3,000 shares and serving as its sole director. He also worked as chief pilot under a contract with the company
Tragically, Lee died in a plane crash while piloting the company’s aircraft.
His widow, Mrs. Lee, claimed compensation under New Zealand’s Workers’ Compensation Act 1922, which required the deceased to qualify as a worker—i.e. someone in a contract of service with an employer
The New Zealand Court of Appeal rejected the claim, reasoning that Lee could not be both employer and employee simultaneously, so no master–servant relationship existed
Legal Issue
Can a director who owns and controls a company enter into an employment contract with that company—and thus qualify as a worker for compensation purposes?
Supreme Ruling
The Privy Council allowed Mrs. Lee’s appeal, affirming that Lee and the company were distinct legal persons, even though he effectively controlled the company
Lord Morris of Borth‑y‑Gest, delivering the leading judgment, held that:
“One person may function in dual capacities … 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 … that a man … can make a contract with himself in another capacity”
Since Lee had entered into a valid contract of service with the company, he qualified as a worker, and Mrs. Lee was entitled to compensation
Legal Significance
Separate Legal Personality: Reinforces Salomon v. Salomon & Co.—a company is a legal entity distinct from its members, directors, and shareholders
Multiple Roles Compatible: An individual may simultaneously be shareholder, director, and employee, provided there is a genuine contractual relationship
Worker Definition Extended: Clarifies that entitlement to worker status and compensation hinges on contractual facts, not just titles or shareholding.
Common Law Precedent: This decision remains authoritative in UK, New Zealand, India, and other common law jurisdictions influenced by Salomon principles
Summary Table
Aspect | Outcome |
Separate legal entity | Company and Mr. Lee were legally distinct persons |
Employment contract | Valid master–servant relationship existed between Lee and his company |
Worker under statute | Lee qualified as a worker under the compensation law |
Compensation | Mrs. Lee was entitled to compensation following Lee’s death |
Broader relevance | Reinforced corporate personality principles and eligibility for compensation |
Why It Matters
Shows how ownership and control alone don’t preclude one from employee status.
Demonstrates the flexibility of corporate structure: legal separation allows varied roles.
Ecked-out usage in India under the Companies Act 2013, which adopts similar separate legal entity principles
In Conclusion
Lee v. Lee’s Air Farming Ltd is a foundational judgment confirming that a person—even a majority shareholder and director—can validly contract as an employee of the company they control. The case firmly upholds the principle of corporate personality, underlining that legal status depends on contractual reality, not formal titles.
Would you like to dive into how this applies to modern statutory schemes or compare it to contrasting cases like Gilford Motor or Adams v. Cape?