Mr Lee incorporated a company, Lee’s Air Farming Ltd, in August 1954 in which he owned all the shares. Mr Lee was also the sole ‘Governing Director’ for life. Thus, as with Mr Salomon, he was in essence a sole trader who now operated through a corporation. Mr Lee was also employed as chief pilot of the company. In March, 1956, while Mr Lee was working, the company plane he was flying stalled and crashed. Mr Lee was killed in the crash leaving a widow and four infant children.
The company, as part of its statutory obligations, had been paying an insurance policy to cover claims brought under the Workers’ Compensation Act. The widow claimed she was entitled to compensation under the Act as the widow of a ‘worker’. The issue went first to the New Zealand Court of Appeal who found that he was not a ‘worker’ within the meaning of the Act and so no compensation was payable. The case was appealed to the Privy Council in London. They found that: the company and Mr Lee were distinct legal entities and therefore capable of entering into legal relations with one another, as such they had entered into a contractual relationship for him to be employed as the chief pilot of the company he could in his role of Governing Director give himself orders as chief pilot. It was therefore a master and servant relationship and as such he fitted the definition of ‘worker’ under the Act. The widow was therefore entitled to compensation.