Muduroglu v Reddish LLP & Anor

The claimant sold 1000 shares in Memorial Holdings Limited and asserted an oral agreement that the first defendant Reddish LLP would pay £1,300,000, which Reddish had not paid. The court found on the balance of probabilities that a price of £1,300,000 had been agreed and that the claimant was entitled to payment. The defendants had entered £200,000 as the consideration on the stock transfer form; the judge found that the entry and later explanations did not displace the primary finding of an agreed price and that the defendant Lucie-Smith was not a reliable witness on material points.

The claimant also alleged an unlawful means conspiracy by the defendants to defraud him by causing a false consideration to be entered on the stock transfer form. The court held that no actionable loss resulted from the entry on the form and, in any event, the evidence did not establish an unlawful means conspiracy.

The court therefore awarded judgment for the claimant against Reddish for the unpaid purchase price and dismissed the conspiracy claim against Mr Lucie-Smith.

The claimant, Mr Eren Muduroglu, transferred 1000 shares in Memorial Holdings Limited to Reddish LLP on 9 April 2010 and claimed that the agreed purchase price was £1,300,000. He sought payment of that price and, in the alternative, rescission and return of the shares. He also alleged that Reddish and Mr Derek Lucie-Smith conspired by unlawful means to defraud him by causing a false consideration of £200,000 to be entered on the stock transfer form, claiming damages for conspiracy.

Background and procedural posture:

• This was a first-instance trial in the Chancery Division; the claimant represented himself at trial.
• Important factual issues concerned the arrangements among the claimant and his brother Sami, the role of Mr Lucie-Smith in securing finance and investors, the contemporaneous documentation, and who knew or authorised entries on the stock transfer form.

Issues for decision:

• Whether there was an enforceable agreement that Reddish would pay £1,300,000 for the shares.
• Whether the insertion of £200,000 on the stock transfer form was part of a conspiratorial scheme amounting to unlawful means conspiracy and whether the claimant had suffered loss thereby.
• Credibility and weight of competing oral evidence and contemporaneous documents.

Court’s reasoning and conclusions:

• The judge conducted a detailed evaluation of documentary and oral evidence and found considerable weaknesses in Mr Lucie-Smith’s testimony and corroborating documents. The relationship among the claimant, his brother Sami, and third parties was complex and informally structured, but contemporaneous tax and solicitor material treated the claimant as legal owner of the shares.
• On the balance of probabilities the court accepted that the claimant and the defendants (via discussions involving Sami) had agreed a deferred price of £1,300,000 for the 10% holding and that Mr Lucie-Smith knew that a price was to be agreed with the claimant and approved Sami’s discussions with him.
• The court found that the £200,000 entry on the stock transfer form had been produced later and that explanations for it varied; the judge treated the entry and later attempts to justify it as insufficient to displace the claimant’s case on the agreed price.
• As to conspiracy, the judge applied the legal test for unlawful means conspiracy (citing Total Network) and concluded that the claimant had not established actionable loss caused by the entry on the stock transfer form and that, in any event, the evidence did not support a finding of an unlawful means conspiracy.

Result: judgment was given in favour of the claimant against Reddish for the unpaid purchase price; the claim in conspiracy against Mr Lucie-Smith was dismissed. The court reserved consideration of costs, interest and any application for permission to appeal.

This was a first-instance judgment. The court entered judgment for the claimant against Reddish LLP for the unpaid price of the shares, having found on the balance of probabilities that a price of £1,300,000 had been agreed and that the defendants had not paid it. The claim in unlawful means conspiracy against Mr Lucie-Smith was dismissed: the claimant did not establish actionable loss from the stock transfer form entry, and the evidence did not support an unlawful means conspiracy. The judge’s reasoning rested on a thorough assessment of contemporaneous documents, witness credibility (in particular adverse findings about Mr Lucie-Smith’s reliability), and the legal test for conspiracy as explained in Total Network.