Lee v Lee's Air Farming Ltd

APPEAL (No. 18 of 1960) from a judgment of the Court of Appeal of New Zealand (December 18, 1958) holding on a case stated by the Compensation Court of New Zealand under the Workers' Compensation Rules, 1939, that on the facts set out in the case the appellant's deceased husband could not hold the office of governing director of the respondent company and also be a servant of the company.

The following facts are taken from the judgment of the Judicial Committee: The judgment of the Court of Appeal of New Zealand from which this appeal was brought, was given as their opinion upon a case stated by the judge of the Compensation Court. It was provided by rule 5 of Chapter VIII of the Workers' Compensation Rules, 1939, that

“In any action or other proceeding the court or a judge thereof may state a case for the opinion of the Court of Appeal on any point of law arising in the action or proceeding.”

This procedure was adopted by the judge of the Compensation Court in the action which was brought by the appellant in respect of the death of her husband. She claimed £2,430 compensation on behalf of herself and her four infant children and she also claimed a sum for funeral expenses. The claim was made in reliance upon the provisions of the Workers' Compensation Act, 1922, as amended by later statutes. The appellant's late husband died in an aircraft accident in Canterbury, New Zealand, on March 5, 1956, while engaged in the capacity of an aircraft pilot in aerial top-dressing operations. The claim of the appellant rested upon her allegation that at the time of his death her husband was a “worker” in that he was employed by the respondent company. The respondent company denied that the deceased was a “worker” within the meaning of the Workers' Compensation Act, 1922, and its amendments. It was provided by section 3 (1) of the Act as follows:

“3. — (1) If in any employment to which this Act applies personal injury by accident arising out of and in the course of the employment is caused to a worker, his employer shall be liable to pay compensation in accordance with provisions of this Act.”

Under the relevant part of the statutory definition the term “worker” meant

“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 denial of the respondent company that the deceased was a “worker” 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. In 1954 the deceased had instructed a firm of public accountants in Christchurch to form a company for the purpose of conducting an aerial top-dressing business. On August 5, 1954, “Lee's Air Farming Limited,” the respondent company, was incorporated. The nominal capital of the company was £3,000 divided into three thousand shares of £1 each. The deceased was allotted 2,999 shares; the remaining share according to the memorandum of association was to be taken by a solicitor. The articles of association included the following:

“32. Subject as hereinafter provided Geoffrey Woodhouse Lee shall be and he is hereby appointed governing director and subject to the provisions of clause 34 hereof shall hold that office for life and the full government and control of the company shall be vested in him and he may exercise all the powers and authorities and discretions vested in the directors generally and that notwithstanding he is the sole director holding office and he may exercise all the powers of the company which are not by statute required to be exercised by the company in general meeting and any minute entered in the minute book of the company's proceedings signed by the governing director shall, in any matter not expressly required by statute to be done by the company in general meeting have the effect of a resolution of the company.

“33. The company shall employ the said Geoffrey Woodhouse Lee as the chief pilot of the company at a salary of £1,500 per annum from the date of incorporation of the company and in respect of such employment the rules of law applicable to the relationship of master and servant shall apply as between the company and the said Geoffrey Woodhouse Lee.

“34. The governing director may retire from office upon giving one month's notice in writing of his intention so to do, and the office of governing director shall be vacated if the governing director (a) ceases to be a director by virtue of section 148 of the Act; or (b) becomes bankrupt or enters into a composition with his creditors; or (c) becomes prohibited from being a director by reason of any order made under section 216 or 268 of the Act; or (d) becomes of unsound mind or becomes a protected person under the Aged and Infirm Persons Protection Act, 1912; or (e) becomes incapable of carrying out the duties of a director.

“35. The governing director may at any time convene a general meeting of the company.

“36. The governing director shall not be disqualified by his office from holding any office or place of profit in the company or from contracting with the company whether as vendor, purchaser or otherwise, nor shall any such contract or arrangement or any contract or arrangement entered into by or on behalf of the company in which the governing director shall be interested be avoided nor shall the governing director be liable to account for any profit realised by any such contract or arrangement by reason of the governing director holding such office or of the fiduciary relations thereby established.

“DIRECTORS

“37. If and whenever there shall cease to be a governing director the number of directors of the company shall not be more than lour or less than two...