Mr Barkov decides to enter into a new business with his friend Anita. They agree that Anita would handle accounts as she is experienced in that area. Mr Barkov would handle other aspects of the business. After some discussion they decide to start a company called BA Limited (BAL). BAL agrees a commercial lease, for a fixed term of 3 years, for a warehouse in West Auckland. The lease contract with the landlord is signed by Mr Barkov and Anita as directors of BAL. The landlord insists that Mr Barkov also enter into a personal guarantee (a contract) which states that he is personally liable to the landlord if BAL should default in payment. Having a warehouse enables BAL to start operation and they employ two drivers. On the first day of operation however one of BAL's truck drivers negligently causes an accident on the motorway causing $50,000 worth of damage to a luxury car. Mr Barkov has heard of the principle of separate legal entity and has assumed that he cannot be held personally liable under the lease should there ever be a problem, but he decides he should check this assumption since he knows little about the law. He also assumes that neither he nor the company can be liable for the truck driver's negligence. He decides he should check this as well.

Before starting BAL Mr Barkov had done a careful analysis drawing on his experience in the marine business. His analysis showed that there was a gap in the market that BAL could fill. Mr Barkov thought that the lease of the warehouse was essential as the first step in the new venture. Anita was concerned about the long term cost of the three year lease, but Mr Barkov assured her that this step was necessary to create a profitable business and that there was no other suitable warehouse available for lease in Auckland for a term of less than 3 years. Anita finally accepted that the company would have to enter into the lease contract.

However soon after BAL launches, a competitor appears with rival products that are very competitive with BAL's in both quality and price.

Explain the principle of separate legal entity in relation to companies and, with reference to the principles of attribution, discuss who is liable out of BAL, Mr Barkov and Anita under the lease. Also discuss (again with reference to the principles of attribution) whether any person, other than the negligent truck driver, is liable to the owner of the luxury car for the damage caused.