Lee v Lee's Air Farming Ltd [1960]
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Lee v Lee's Air Farming Ltd [1960] UKPC 33 is a landmark decision in company law, particularly dealing with the concept of the corporate veil and the separate legal personality of a company. The Judicial Committee of the Privy Council emphasised the distinct legal identity of a company, asserting that even if an individual is the sole owner and director of a company, they can still enter into a contract of employment with that company.
Geoffrey Lee, the husband of Catherine Lee, established Lee's Air Farming Ltd, a company engaged in aerial fertilisation in Canterbury, New Zealand. Geoffrey Lee held 2999 of the 3000 shares in the company, served as the sole director, and was employed as the chief pilot. Unfortunately, Geoffrey Lee lost his life in a plane crash. Catherine Lee sought compensation under the Workers' Compensation Act 1922 for her husband's death, but for this, he needed to qualify as a 'worker' under a contract of service with an employer.
The key legal issue was whether Geoffrey Lee, as the sole owner and director of the company, could be considered a worker under a contract of service with the company and, therefore, eligible for compensation. The Court of Appeal of New Zealand held that Lee could not be considered a worker when effectively serving as the employer, stating that the roles of employer and employee were incompatible.
The Privy Council disagreed with the Court of Appeal, asserting that the company and Geoffrey Lee were separate legal entities. Lord Morris of Borth-y-Gest emphasised that the company was not a sham or a mere simulacrum; it had a genuine legal identity. The decision affirmed that an individual, even if a director and owner of a company, could enter into a valid contract of employment with that company. It was clarified that the control and orders would be attributed to the company, not the individual, even if he acted in various capacities within the company.
The case reinforces the principle of the separate legal personality of a company, shielding its owners and directors from personal liability for the company's obligations. It is often cited in discussions about the corporate veil and the extent to which the law recognises the distinction between a company and its owners or directors. The decision has implications not only in New Zealand but also in the broader context of company law, including the United Kingdom and other jurisdictions influenced by common law principles.
Geoffrey Lee, the husband of Catherine Lee, established Lee's Air Farming Ltd, a company engaged in aerial fertilisation in Canterbury, New Zealand. Geoffrey Lee held 2999 of the 3000 shares in the company, served as the sole director, and was employed as the chief pilot. Unfortunately, Geoffrey Lee lost his life in a plane crash. Catherine Lee sought compensation under the Workers' Compensation Act 1922 for her husband's death, but for this, he needed to qualify as a 'worker' under a contract of service with an employer.
The key legal issue was whether Geoffrey Lee, as the sole owner and director of the company, could be considered a worker under a contract of service with the company and, therefore, eligible for compensation. The Court of Appeal of New Zealand held that Lee could not be considered a worker when effectively serving as the employer, stating that the roles of employer and employee were incompatible.
The Privy Council disagreed with the Court of Appeal, asserting that the company and Geoffrey Lee were separate legal entities. Lord Morris of Borth-y-Gest emphasised that the company was not a sham or a mere simulacrum; it had a genuine legal identity. The decision affirmed that an individual, even if a director and owner of a company, could enter into a valid contract of employment with that company. It was clarified that the control and orders would be attributed to the company, not the individual, even if he acted in various capacities within the company.
The case reinforces the principle of the separate legal personality of a company, shielding its owners and directors from personal liability for the company's obligations. It is often cited in discussions about the corporate veil and the extent to which the law recognises the distinction between a company and its owners or directors. The decision has implications not only in New Zealand but also in the broader context of company law, including the United Kingdom and other jurisdictions influenced by common law principles.
