Mummery J for the Employment Appeal Tribunal held the purpose of the legislation is not to help people whose businesses have failed.
It would be inconsistent with the purposes of the 1978 Act to extend protection to a person who cannot be dismissed from his position in a company without his agreement.
This result conforms both to common sense and to the industrial or commercial realities of the situation… The decision does not mean that there will always be a contract of service in such circumstances.
The liability to pay compensation could not be avoided by an attack on the validity of the contractual relations between Mr Lee and the company (which was not suggested to be a sham).
His position as a controlling shareholder did not make it impossible in those circumstances for his wife to satisfy the conditions for the payment of compensation under the insurance arrangement.