Joint and several liability is a legal concept that can expose one party to the full financial burden of another’s default or wrongdoing. If you’re a business owner, lender, professional adviser, or someone entering a contract with others, understanding how this doctrine works is critical to protecting your interests.
This article, by our contract law team, explains how joint and several liability works, where legislation has modified it, and what practical steps you can take to manage exposure.
Key takeaways
Joint and several liability allows a claimant to recover the entire loss from any one liable party.
Personal injury claims remain jointly and severally liable across Australia.
Proportionate liability applies to economic loss and property damage in most States and Territories.
Contract wording must clearly state whether liability is joint, several, or joint and several.
Partners in a business partnership are generally jointly liable for debts and jointly and severally liable for wrongful acts.
What Does Joint and Several Liability Mean?
When more than one person is legally responsible for a debt or wrongdoing, the law recognises three types of liability:
Joint Liability: All parties make one shared promise. If one pays, all are discharged.
Several Liability: Each party is only responsible for their agreed portion.
Joint and Several Liability: Each party is both individually and collectively responsible for the entire obligation. The claimant can sue any one party for the full amount.
Example: If two business partners jointly and severally guarantee a loan, the lender can recover 100% from either – even if one never received the funds.
When Does Joint and Several Liability Apply in Australia?
Personal injury Claims
All States and Territories preserve full joint and several liability for personal injury and death claims.
Economic loss and property damage
Most jurisdictions have replaced joint and several liability with proportionate liability for economic loss or property damage arising from failure to take reasonable care.
Jurisdiction | Key provision | Effect |
NSW | Economic loss & property damage are proportionate; personal injury excluded | |
Victoria | Wrongs Act 1958 Pt IVAA | Same policy as NSW |
Queensland | Civil Liability Act 2003 Pt 2 Div 2 A | Mirrors NSW model |
WA | Civil Liability Act 2002 Pt 1F | Similar approach; fraud excluded |
Commonwealth | ACL s 236 (sch 2 CCA) | Claimant may recover full loss from any misleading or deceptive party |
Note: Fraud, contractual indemnities and some statutory causes of action sit outside proportionate liability regimes, preserving joint and several exposure.
Partnerships and Professional Firms
Under the Partnership Act 1895 (WA) and similar laws in other States:
Partners are jointly liable for debts of the firm
Deceased partners’ estates are severally liable during administration
Partners are jointly and severally liable for wrongful acts of other partners carried out in the ordinary course of business
Tips for Businesses
Managing risk
Here’s how to limit your exposure:
- Use precise liability wording in all contracts
- Obtain adequate insurance that responds to joint and several exposure
- Seek contractual indemnities where proportionate liability might otherwise limit recovery
- For group companies, use separate special-purpose vehicles to ring-fence liabilities
- Conduct due diligence on the solvency of co-obligors
Drafting Contracts: Make it Explicit
Unless clearly stated, courts may assume obligations are joint by default when multiple parties sign the same contract. To avoid unintended exposure:
- Use clear phrases like: “The Parties are jointly and severally liable for the obligations under this Agreement.” or “Each Party is liable only for its proportionate share and is not jointly liable with any other Party.”
- Allocate specific liability percentages where appropriate
- Include indemnity and contribution clauses
- Ensure partnership or shareholder agreements align with commercial intent
Real-World Scenarios
Lending
If two borrowers sign a loan agreement jointly and severally, the lender may sue either borrower for the full balance even if one paid nothing.
Professional services
Architect A (60 % at fault) and Engineer B (40 %) negligently design a building. If the claim is economic loss, proportionate liability applies; each pays only its share. If the claim includes a personal injury component, both may still face joint and several exposure.
Family law property settlements
HECS-HELP debts illustrate how courts treat unclear liabilities:
- Berry v Berry (2010) – HECS debt treated as joint because husband agreed to studies and benefited from income
- Zimin v Nickson (2014) – HECS debt personal because wife still studying and sole beneficiary
Frequently asked questions
Can I contract out of joint and several liability?
Generally yes for contractual claims, provided the clause is clear and not prohibited by statute (for example, consumer guarantees under the ACL cannot be excluded)
If one defendant is bankrupt, do the others carry the shortfall?
Yes under joint and several liability the solvent defendants remain liable for the unpaid portion but may have contribution rights against the bankrupt estate
Does proportionate liability apply to misleading or deceptive conduct?
Under ACL s 236, a claimant may sue any misleading party for the full amount; proportionate liability regimes in State Acts do not apply
Are partners in a professional partnership always jointly and severally liable?
Partners are jointly liable for debts and jointly and severally liable for wrongful acts committed in the ordinary course of the partnership business
How do I ensure several liability only?
Insert an express clause such as “Each Party is liable only for its proportionate share and is not jointly liable with any other Party” and align indemnities and insurance accordingly
