Currie v Thornley & Anor

A contractual indemnity covering liabilities to a taxation authority may extend to accelerated payment notices, even where the statutory regime was introduced after the contract was made, if the contractual language is sufficiently broad. A demand must identify, expressly or by necessary information, the liability and amount claimed, but minor errors do not invalidate it where a reasonable recipient would understand its intended effect. Contractual terms cannot be added through construction or implication merely because they would be commercially reasonable. Implication requires necessity, obviousness, clear expression and consistency with the express contract.

The applicant liquidator of Moorcourt Holdings Limited sought payment from the respondent former directors and shareholders under a 2012 deed of indemnity. The claim concerned the company’s liabilities under accelerated payment notices issued by HMRC in respect of PAYE and National Insurance contributions arising from employee benefits trusts.

The respondents disputed whether those liabilities fell within the deed, whether the applicant’s demands complied with the contractual notice provisions, and whether additional terms should be implied requiring proven or finally established tax claims. The court also considered the effect of later demands served after trial.

1. Contractual scope. The 2012 Deed superseded and extinguished the 2010 Deed. Its definitions of “Liability for Taxation” and “Tax” were deliberately wide. Payments under accelerated payment notices were liabilities within clause 2.1, whether characterised as payments of tax, payments on account or statutory liabilities. The fact that the statutory regime was not contemplated when the deed was made did not restrict the language used. The court therefore gave judgment under clause 2.1.
2. Alternative warranty and indemnity. The accelerated payment notices constituted sums which had become due and owing for the purposes of clause 3.1, giving rise at least prima facie to breaches of warranty. However, clause 3.2 indemnified losses and liabilities suffered or incurred by the liquidators personally. No such personal loss had yet been proved, so the alternative indemnity claim was not presently established.
3. Demands. Applying the reasonable-recipient approach in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, the July 2017 and May 2018 letters did not demand payment under the accelerated payment notices and did not fix the contractual due date. The December 2018 letters did so. The first valid letter fixed the due date, and the error in the amount stated did not invalidate the demand because the respondents could identify the revised amount from information already available to them.
4. Putative implied terms. The deed did not require demands to relate only to proven claims or claims remaining after challenges had been pursued. Such terms could not be inserted by construction. Nor were they necessary or obvious under the strict test for implication in Marks and Spencer plc v BNP Paribas Security Services [2016] AC 742 and Hallman Holdings Limited v Webster [2016] UKPC 3. The respondents therefore had no defence based on repudiatory breach or termination.
5. Disposition. Judgment was entered for the applicant in the reduced sum of £1,365,335.24. Consequential directions and costs were reserved for further submissions.