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?

Please answer this without plagiarism. thanks you very much

Answer 1

The Separate Legal Entity Principle is a fundamental principle of the Company Law applied on a global basis.Pursuing this Principle, a company is treated as a distinct entity from its members.

Lee v Lee's Air Farming ltd case circumscribes the point-" Companies can contract with their members, directors and outsiders".

In this case, Mr. Lee's accountant formed a company (Lee's Air Farming Ltd), and Mr. Lee was the principal shareholder and also the governing director of the company. The company contracted with the farmers to perform aerial topdressing. Mr.Lee worked for the company as a pilot and received a wage for that work. In a work accident, mr Lee died, then his wife claimed on a Worksmen Compensation Insurance Policy that the company's solicitor had taken out naming Mr.Lee as an employee. The insurer denied liability on the ground that Mr.Lee could not be a servant because he was the governing director of the company. The judicial Committee of the Privy Council upheld the claims made by Mrs. Lee and firmly rejected the agreement.

The decision in Lee v Lee's also had been applied in Industry v Bottrill Case where the court pointed out that the sole shareholder can be employed by the company and have the rights under the Employment Rights Act,1996.

The Corporate Veil got lifted on the advice given by the Privy Council.

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

A saying by Lord Morris of Borthy-y-Gest, the judge goes:

" 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 two separate legal entities".

He also said that It was never suggested(mor in their Lordships' view could it reasonably have been suggested) that the company was a sham or a simulacrum. It is well established that the emre fact that someone is a director of a company is no impediment to his entering into a contract to serve the company. If, then, it be accepted that the respondent company was a legal entity and their Lordship see no reason to challenge the validity of any contractual obligations which were created between the company and the deceased.