Joint and several liability

How BC law treats it

Three forms of liability need to be kept apart. Joint liability means the obligors share one obligation and are liable together. Several liability means each is liable only for its own share. Joint and several liability means each is liable for the whole, although the creditor can recover the total only once. In contracts, the wording decides: a guarantee, lease or loan with several borrowers or guarantors usually states that their obligations are joint and several, and a guarantee must also meet the writing rule in Law and Equity Act s. 59(6). For negligence, the Negligence Act provides that where two or more persons are at fault, they are jointly and severally liable to the injured person, with contribution between them according to their degrees of fault (s. 4). BC has an important twist. Where the plaintiff is also at fault, liability is apportioned under s. 1 and each defendant is liable only severally for its own share (Cempel v Harrison Hot Springs Hotel Ltd, BCCA 1997). A contributorily negligent plaintiff therefore bears the risk that one defendant cannot pay. For partnerships, Partnership Act s. 11 makes partners liable jointly, not jointly and severally, for the firm's debts and obligations. For wrongful acts and misapplication of money by a partner, the partners' liability is joint and several. Limited partners and partners of a limited liability partnership have different, narrower exposure. Claims for contribution or indemnity between wrongdoers have their own limitation rule under the Limitation Act.

What it means for your business

Joint and several clauses are everywhere in BC business documents: personal guarantees of commercial leases, shareholder guarantees of company loans, and co-tenant and co-borrower obligations. Signing one means you may be pursued for the entire amount even if your partner or co-signer caused the problem or has more money. In a lawsuit, it decides whether you can collect the whole judgment from the defendant that can pay. Understanding the rule shapes who you sue, what you sign and what indemnities you negotiate among co-obligors. Example: Two founders personally guarantee their company's commercial lease on a joint and several basis. When the company defaults, the landlord sues only the founder with significant assets for the full arrears, leaving that founder to claim contribution from the other.

Risks and common mistakes

Assuming a co-guarantor's liability is limited to a proportionate share when the guarantee says joint and several. Releasing or settling with one obligor without checking whether the release wording also releases the others. Assuming a defendant in a BC negligence case pays the whole loss when the plaintiff was also partly at fault. Signing a partnership or joint venture agreement without an indemnity and contribution clause among the parties. Missing the limitation period for a contribution claim against another wrongdoer.