Lee v Lee's Air Farming Ltd

• Mr Lee incorporated Lee's Air Farming Ltd in New Zealand and held 2,999 out of 3,000 issued shares
• He was appointed sole governing director with full powers of management
• He was also employed by the company as its chief pilot at a fixed salary
• Mr Lee was killed in an aerial top-dressing accident while working as pilot
• His widow claimed workers' compensation under the Workers' Compensation Act 1922
• The company's insurer denied the claim, arguing Lee could not be both employer and employee

1. Whether the controlling shareholder and governing director of a one-man company can simultaneously be a "worker" employed by that company
2. Whether a valid contract of service can exist between a company and its controlling member

• The Privy Council held that the company and Mr Lee were distinct legal entities following the Salomon principle. There was nothing to prevent a person from functioning in dual capacities: as the directing mind of a company and as its servant under a contract of employment. The contract of service was genuine, and Lee was a "worker" within the meaning of the compensation statute.
• The Board emphasized that the company was a separate entity capable of entering into contractual relations with any person, including its own controlling shareholder.

The principle of separate corporate personality extends to employment relationships: a controlling shareholder-director can enter into a valid contract of service with the company. The two capacities (master through the company and servant in personal capacity) are legally distinguishable because the company is a separate person at law.