Eren Muduroglu v Reddish LLP and Another
| Jurisdiction | England & Wales |
| Judge | H.H. Judge Keyser |
| Judgment Date | 17 April 2015 |
| Neutral Citation | [2015] EWHC 1044 (Ch) |
| Docket Number | Claim No: HC 2013 000105 |
| Court | Chancery Division |
| Date | 17 April 2015 |
[2015] EWHC 1044 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice, Rolls Building,
Fetter Lane, London, EC4 1NL
His Honour Judge Keyser QC
sitting as a Judge of the High Court
Claim No: HC 2013 000105
The Claimant appeared in person
The First Defendant was represented by Samuel Beilin, a member
James Aldridge QC (instructed by Farrer & Co) for the Second Defendant
Hearing dates: 16, 17, 18, 19 & 20 February 2015
H.H. Judge Keyser Q.C.:
Introduction
On 9 April 2010 the claimant, Mr Eren Muduroglu ("Mr Muduroglu"), transferred to the first defendant, Reddish LLP ("Reddish"), 1000 shares in Memorial Holdings Limited ("MHL"), a company incorporated in Jersey. He says that the price for the shares, as agreed orally between him and Mr Derek Lucie-Smith ("Mr Lucie-Smith"), the second defendant and a member and the beneficial owner of Reddish, was £1,300,000 and that Reddish has failed to make the payment. Accordingly his primary claim in these proceedings is for payment of the price with interest; in the alternative he claims transfer of the shares back to him.
Mr Muduroglu also contends that Reddish and Mr Lucie-Smith conspired together by unlawful means to defraud him of the price to which he was entitled, by knowingly causing a false consideration of £200,000 to be entered onto the stock transfer form in respect of the shares. He claims damages for conspiracy from both defendants.
The defendants deny the claims in their entirety. They say that all of the discussions and agreements concerning the shares were with the claimant's brother, Mr Sami Muduroglu ("Sami"), who was the beneficial owner of the shares. It was agreed that the shares, representing ten per cent of the issued share capital of MHL, would be transferred to Mr Lucie-Smith for his services in introducing private equity and loan investment into MHL. At Mr Lucie-Smith's request the shares were transferred directly into the name of Reddish, of which he was the ultimate beneficial owner. The stock transfer form was initially completed without showing any consideration, and subsequently the figure of £200,000 was entered as the result of a mistake, because it represented the notional consideration passing to Mr Lucie-Smith from Reddish, not any consideration due from him to the claimant. The defendants contend that Mr Muduroglu has brought this claim on a basis that he knows to be false and because he is in financial straits.
Sami disappeared in 2012 after committing a large fraud and being made bankrupt; no-one will own to knowing his whereabouts.
At the trial, Mr Muduroglu represented himself, though he had been represented by solicitors until shortly before the trial. Mr Lucie-Smith, who had represented himself during most of the proceedings, instructed solicitors shortly before the trial, at which he was represented by Mr James Aldridge QC. Reddish was represented by Mr Samuel Beilin, one of its designated members, though he played only a modest role in the hearing, as the interests of the defendants were largely identical.
A number of witnesses gave evidence at the trial. The most important witnesses were Mr Muduroglu and Mr Lucie-Smith. I shall say much about their evidence in the course of this judgment. At this stage I need only remark that in the light of the documents the evidence that each of them gave presents significant difficulties. I shall spend a substantial part of this judgment setting out what the documents say.
In the remainder of this judgment I shall proceed as follows. First, I shall set out a fairly lengthy narrative of the relevant facts, though leaving some of the main findings on disputed issues until later. Some of the information in the narrative is relevant only as providing background or for the light it sheds, or does not shed, on the central issue concerning the terms on which it was agreed that the shares in MHL would be transferred to Reddish. Finally, I shall set out and explain my conclusions on the case.
The facts until April 2010
Mr Muduroglu is a businessman and property developer. So was Sami, before he disappeared. Sami had a business partner, one Kevin Wishart, with whom he engaged in a number of business ventures. One of Sami's businesses failed with substantial debts, which resulted in January 2005 in him being subject of a disqualification order that disqualified him from being a director of a company or in any way, whether directly or indirectly, being concerned in or taking part in the promotion, formation or management of a company for a period of five years. Meanwhile in March 2004 Mr Wishart was remanded in custody on serious criminal charges, and after a lengthy trial at Woolwich Crown Court in 2005 he was sentenced to a term of six-and-a-half years' imprisonment, from which he was released in June 2007. It was probably because Sami and Mr Wishart were tarnished or indisposed that in about 2004 Mr Muduroglu became involved in their joint ventures, for the purposes of which he was required as a person who could act as a company director and deal with potential business partners and sources of finance. Quite what the arrangement between the three of them was is unclear; it may not have been very precise. In these proceedings, Mr Muduroglu said, with respect to the period around 2009, that the apportionment was 30% to Sami, 30% to Mr Wishart and 10% to him, with the balance being applied to creditors. Although the point is put differently, this accords substantially with what Mr Wishart wrote in an email that he sent to Mr Lucie-Smith in July 2012 regarding his involvement at the outset of the project in which MHL was concerned and the extent of his interest when it began: "Sami told me at the time that we had around 35% of the project and I took 12% because our agreement was that I had a third of whatever our holdings were and two thirds were a third for Sami and a third for creditors including 4% for Eren"; this amounts, roughly, to a third of a third to Mr Muduroglu.
The relationship among the three men was considered by Mr Tim Kerr QC, sitting as a Deputy High Court Judge, in Credit & Mercantile Plc v (1) Kaymuu Ltd, (2) Wishart, (3) Defty (trustee in bankruptcy for Sami Muduroglu) [2014] EWHC 1746 (Ch). The evidence on the point was more detailed in that case than in this, but Mr Kerr's findings are consistent with the position as I am able to know it from the evidence adduced before me, and they also show what Mr Muduroglu's evidence as a witness was in those proceedings; I gratefully set out part of his judgment:
"5. … There were never any formal written contractual arrangements between Sami and Mr Wishart. Sami was the wealthier of the two, having profited from the trading of futures. He took the lead and Mr Wishart took a subordinate role.
6. I do not have any clear evidence of what the informal financial arrangements between them were in those early days. Mr Wishart's evidence was that their understanding was that it was '50–50'. I accept that such was their loose understanding, but I doubt whether Mr Wishart received anywhere near 50 per cent of any profits. Their financial arrangements were largely improvised and based on friendship and trust. Evidence of later payments by and to Sami, Mr Wishart and Eren (when he later became involved) is of payments of irregular ad hoc amounts, not always supported by any obvious logic, let alone formal contractual foundation or documentation.
…
9. Sami's disqualification and Mr Wishart's incarceration meant that of the trio, Eren was the only candidate to act as director of any company set up as a vehicle for their business ventures. He took over as director of various companies in which Sami had an interest. To raise finance for their business ventures, he was required to sign personal guarantees and give security for loans. He accepted these risks and, in return, expected to participate in any profits.
10. I accept Eren's evidence that there was a loose informal understanding between him and Sami that he, Eren, would receive 10% of the profits, if any, from the various business ventures, on the basis that he would 'walk away' afterwards, free of further risk and personal guarantees. However, this was subject to discussion of any more specific (but still informal) agreement about how to apportion profits, shares and risk at times when (after paying off creditors) profits were made or imminent."
This is the background against which in 2007 Mr Muduroglu, Sami and Mr Wishart became involved in a project to develop and thereafter operate a cemetery at a site in Chislehurst known as Kemnal Manor. Planning permission for the use of Kemnal Manor as a cemetery had been granted in November 2006.
In June 2007 Kemnal Manor Memorial Gardens UK LLP ("KMMG") was incorporated as a limited liability partnership in Northern Ireland, with the intention that it should be the vehicle for the acquisition and development of Kemnal Manor as a cemetery. KMMG was an equal partnership between Mr Muduroglu and Ravenblack Developments Limited, a limited company incorporated in Northern Ireland, and their Limited Liability Partnership Agreement dated 29 June 2007 provided that the profits and losses were to be shared equally between them. In the course of detailed transactions that are not relevant for present purposes, KMMG purchased the freehold estate in Kemnal Manor for £7,000,000. The money was put up by Ravenblack Developments Limited.
Until a late stage of these proceedings, Mr Muduroglu's case was expressed in a manner that gave the impression that his interest in KMMG and in the other corporate vehicles that succeeded it was beneficially his alone; in particular, that Sami had no interest in it. At trial, his evidence was to the...
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