Jones also highlights the insurance implications of a proportionate liability regime; complicating as it does insurers' estimations of commercial parties' exposure to risk and, potentially, increasing the cost of premiums.
He therefore asks whether it is economically and legally sensible to maintain a regime of proportionate liability which is uncertain in its application, varying across Australia's states and territories; and in concept inimical to the effective financing and delivery of construction projects across the board.
A consistent solution
In practice, however, proportionate liability is usually considered attractive commercially for a JV, with the parties often effectively implementing their own version of such a scheme by way of cross indemnities in the JV agreement.
The joint and several liability approach, while offering certainty to project owners, is less attractive to JV members – particularly those of lesser financial strength but whose contribution is becoming increasingly important to the success of major infrastructure, such as technology providers.
Perhaps the solution could be to adopt a consistent law applicable to such arrangements to ensure that the extent of an individual party's contribution reflects the extent of its culpability. This could, of course, still be contracted out of depending on the demands of a particular project, preserving the parties' freedom of contract.
Care would have to be taken to avoid any unintended consequences of such legislation. There is a risk that, without careful drafting, this could be seen as a 'divide and rule' charter for unscrupulous claimants, causing parties to turn on each other instead of putting forward a unified position and ultimately a common defence in the case of an unjustified claim for breach of contract.
As identified in Pinsent Masons' guide "Joint Ventures: Delivering Mega Infrastructure Projects" and its current campaign "Restructure, Reset, Reinvent", JVs are set to play a significant role in the global recovery, but their members need certainty about the extent to which they must individually bear risk.
For this reason alone, the debate should be held now, and urgently.