Company law; separate legal identity of company; single person acting as director, shareholder and employee of a company.
Facts: Lee formed a company (Lee's Air Farming Ltd) to carry out aerial top-dressing of crops. He was the controlling shareholder in the company, and was appointed as its managing director. Lee was also employed as the company's chief pilot, for which he was paid a salary. The company insured itself against liability to pay compensation to its workers in the case of injuries. Lee was killed in a crash while flying for the company. His wife, Catherine, claimed compensation from the company on the basis that, when he was killed, Lee had been employed by the company as a 'worker' within the meaning of the Workers Compensation Act 1922 (NZ).
Issue: Did the position of Lee as the controlling shareholder and director of the company preclude him from also being a person who worked under a contract of service with an employer, within the meaning of the Workers Compensation Act 1922?
Decision: Lee was employed as a worker within the meaning of the Act.
Reason: Lee and the company were separate legal entities and could validly have more than one kind of legal relationship with each other. Lord Morris of Borth-y-Gest said (at 30): "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. Any profits earned would belong to the company and not to the deceased. If the company entered into a contract with a farmer, then it lay within its right and power to direct its chief pilot to perform certain operations. The right to control existed even though it would be for the deceased in his capacity as agent for the company to decide what orders to give. The right to control existed in the company, and an application of the principles of Salomon's case demonstrates that the company was distinct from the deceased. As pointed out above, there might have come a time when the deceased would remain bound contractually to serve the company as chief pilot though he had retired from the office of sole governing director. Their Lordships consider, therefore, that the deceased was a worker…"