Question

Provide a case summary of the case “Lee v Lee’s Air Farming Ltd [1960] UKPC 33” using the IRAC method. What legal principle came out of this case in relation to why the court lifted the corporate veil in this case? (10 marks)

Can you do in IRAC method please.

Answer 1

Answer:  “Lee v Lee’s Air Farming Ltd [1960] UKPC 33” using the IRAC method:

Issue:

Company employed Mr Lee who was a majority shareholder and “governing director for life”. Mr Lee held 2999 of the 3000 issued shares in the company and 1 of the share was held by the wife as a nominee for him. Mr Lee was the director of the company and also employed as a chief pilot. He was killed while crop spraying. His wife wanted to claim workers compensation under the Workers’ Compensation Act 1922.

Whether Mr Lee is categorised as a worker and entitled to claim compensation under the Workers’ Compensation Act 1922?

Rule:

According to Workers’ Compensation Act 1922, a worker means “any person who has entered into or works under a contract of service or apprenticeship with an employer, whether by way of manual labour, clerical work, or otherwise, and whether remunerated by wages, salary, or otherwise. The respondent company denied that the deceased was not a “worker” within the meaning of the Workers’ Compensation Act, 1922, and its amendments. This denial of the respondent company was based on the fact that the deceased was, at the time of the accident, the controlling shareholder and governing director of the respondent company.

Analysis:

Privy Council applied Salomon and found that the company was a separate entity under Salomon and therefore he could be an employee as he was killed as pilot. Lord Morris said it was possible for a person to do so in a dual capacity hence can’t deny possibility of contractual relationship between deceased and company because of Salomon.

It is said that the deceased could not both be under the duty of giving orders and also be under the duty of obeying them. But this approach does not give effect to the circumstance that it would be the company and not the deceased that would be giving the orders. Control would remain with the company whoever might be the agent of the company to exercise. The Judicial Committee of the Privy Council reasserted that a company is a separate legal entity, so that a director could still be under a contract of employment with the company he solely owned.

The Privy Council advised that Mrs Lee was entitled to compensation, since it was perfectly possible for Mr Lee to have a contract with the company he owned. The company was a separate legal person.

Conclusion:

Lee was a “worker” within the meaning of s. 2 and the appellant was entitled to compensation under the Act, since Lee’s special position as governing director and principal shareholder did not preclude him from taking on the company’s behalf a contract of employment with himself, nor preclude him from entering into, or working in the capacity of servant under, a contract of service with the company. There appears to be no great difficulty in holding that a man acting in one capacity can make a contract with himself in another capacity. The company and the deceased were separate legal entities..