Yes hc's right (don't listen to Tora)
Here's a guide
http://www.tradingstandards.gov.uk/cgi-bin/glos/con1item.cgi?file=*ADV0003-1011.txt
Do bear in mind though, in your righteous anger that this car may very well have been patched up to sell to the dealer and he may have had no idea of the issue - he's now stuffed with a very expensive repair.
The nature of this repair is crucial here - a head gasket failure can simply be rectified by having the head off and replacing the gasket but in most cases it would be normal to skim the head in case it's been warped by the overheating.
It can trash an entire engine but that's not all that common.
If he is replacing the head gasket ask whether he's planning to skim the head - if not and it is warped it could fail again in short order in which case he might try and weasel out of it again.
Now he's asking for a contribution - I don't see why you should pay that unless it's 'betterment' - that is if he's intending to replace the entire engine with one of a significantly lower mileage. If he's just planning to replace the head gasket I don't see why you should be expected to contribute to that.
You're already paying to get the car to him!
The fact that it had an MOT and HPI check is completely irrelevant - head gasket checks are not part of an MOT - that's designed to verify the car is safe rather than in good condition and even then that's just on the day.