Revenue and Customs v Yousef & Ors

A Part 20 claimant cannot obtain contribution under the Civil Liability (Contribution) Act 1978 where the underlying liabilities are statutory debts rather than compensation for the same damage. Nor do the words “jointly and severally liable” in section 217 of the Insolvency Act 1986 themselves create rights of contribution or indemnity between persons made liable under that section. Those rights are impliedly excluded in relation to liabilities created by section 217, which is directed to protecting creditors. Reliance on the parties’ own criminal breaches of section 216 also provides an independent reason to bar contribution. The Part 20 claim was therefore dismissed with costs.

HMRC brought proceedings against Mr Yousef for revenue debts incurred by LSC after Logic, a company of which he had been a director, entered insolvent liquidation. The claim relied on sections 216 and 217 of the Insolvency Act 1986. Mr Yousef joined former co-directors and investors as Part 20 defendants, seeking contribution or indemnity.

Mr Yousef later compromised HMRC’s claim without admitting liability or making payment. The Part 20 defendants applied to dismiss the contribution claim, arguing that the compromise meant Mr Yousef had no liability from which their liability could arise. The central issues were whether contribution was available under the Civil Liability (Contribution) Act 1978 or the equitable doctrine in Dering v Earl of Winchelsea, and what costs order should follow.

1. Costs discretion. The normal order is that an unsuccessful Part 20 claimant pays the Part 20 defendants’ costs. Under the CPR regime the court may depart from that order, including where the Part 20 defendants had no answer to a contribution or indemnity claim. That discretion did not assist Mr Yousef because his claim had no legal foundation.
2. Statutory contribution. Sections 1(1) and 6(1) of the Civil Liability (Contribution) Act 1978 require liability for the same damage, with a right to recover compensation. The HMRC claims were claims for statutory debts. The only remedy was recovery of unpaid tax, not compensation for recoverable damage. Hampton v Minns was followed in treating debt claims as outside the 1978 Act. The observations in Howkins and Harrison v Tyler did not assist because they concerned a possible contractual debt and did not apply to this statutory liability.
3. Equitable contribution and indemnity. The doctrine in Dering v Earl of Winchelsea concerns equality between persons subject to a common demand. It does not itself confer a right of indemnity. Section 217(2) makes the relevant persons jointly and severally liable so that creditors may recover the debt from any of them, without double recovery. Those words do not create rights of contribution. Sections 216 and 217 are directed to creditor protection, and rights of contribution or indemnity in respect of liabilities created by section 217 are impliedly excluded. Existing rights relating to the same debts arising otherwise than under section 217 remain unaffected.
4. There was also an independent illegality objection. Mr Yousef needed to rely on his own and the other directors’ criminal breaches of section 216 to establish contribution. That necessary reliance was a further reason to bar the claim, by analogy with Tinsley v Milligan. The court did not depart from K v P (J, third party), which concerned a different question under the 1978 Act.
5. The Part 20 claim was dismissed with costs. The Part 20 defendants were not shown to have acted unreasonably in refusing to compromise without payment of their costs.

First-instance decision. No prior appellate decision is stated in the judgment.