Premium Plumbing Pty Ltd (Premium) required further capital for expansion and two years ago it borrowed $200,000 from Eastpac Bank Ltd (Eastpac). Recently, an unforeseeable misfortune occurred, causing Premium to suffer a large loss. It immediately advised Eastpac and stopped trading.One of the directors, who was also the largest shareholder, made a loan to the company 5 years ago and has an agreement that entitles him to be paid before any other creditor. After repaying the director, Premium has insufficient funds to meet its obligations to the bank. Eastpac is considering ways to recover its money.

(i)Would Eastpac Bank Ltd be successful in arguing that as directors control the company, there is no real separateness between the parties and the company is not legally capable of entering into a contract that entitles the director to priority for his loan?

(ii)Are the directors, shareholders, or employees liable for the debts of Premium Plumbing Pty Ltd?