A SENIOR judge has raised questions about aspects of the retail deal agreed between Mike Ashley's Sports Direct and Rangers - while dismissing a bid to have Rangers chairman Dave King punished for an alleged breach of a gagging order.
Mr Justice Peter Smith questioned the length of seven year notice period in terminating the controversial retail deal, and then expressed surprise at the terms of the confidentiality agreement covering the deal, revealing that it meant only Rangers were bound by it.
Mr Ashley, who is also Newcastle United owner, became the "ultimate controlling party" of Rangers Retail, which handles the club's merchandising and stores in the wake of a subsequent £5 million loan to the club, which has now been paid off.
When the Rangers Retail joint venture, which handles all the club's merchandising, was confirmed by the club under then chief executive Charles Green in August 2012, it was promoted as enabling Rangers "to once again control its retail operation and give supporters the chance to buy direct from the club and in doing so, continue to invest in its future".
But it has been a long-lasting area of controversy, with the Rangers Supporters Trust saying the club gets as little as 50p from every ten pounds spent.
The full judgement reveals the extent of what the judge described as "intimidatory, muscular tactics" used by Mr Ashley to have Mr King punished while questioning aspects of the deals.
It's the latest episode in a bitter and costly dispute that has embroiled the Ibrox club, lawyers acting for Mr Ashley and his company sitting in the High Court, London, to find Mr King guilty of contempt of court.
They accused Mr King of breaching a confidentiality undertaking contained in an order made by a judge in June 2015.
The breach was alleged to have occurred when Mr King gave an interview to Sky Sports News in July 2015 and revealed the existence of a meeting and discussions relating to commercial contracts between Sports Direct and Rangers.
Dismissing the contempt application as an abuse of process, the judge said the "whole proceedings from first to last were designed to intimidate rather than to seek proper sanctions for an alleged breach".
A trial on the validity of a confidentiality clause in the commercial contract between the two firms is due to call in London on February 8.
The judge in talking about the joint marketing deal said: "In that agreement the most significant provision is clause 2 which provides that the agreement shall continue 'until terminated by either party given to the other party no less than 7 years notice in writing….' That is a very long period of notice in a commercial agreement."
He also questioned the associated confidentiality agreement, saying there were a "number of features... which are unusual" including the fact that Rangers were bound by it but the Sports Direct group were not.
"During the course of argument I asked Mr Quest QC (for Sports Direct ) what would be the position if the SD (Sports Direct) Group gave statements to the press about matters the subject matter of the confidentiality undertaking which were misleading," the judge says.
"I asked whether or not Rangers could reply and correct such misleading statements and he submitted that if they did they would break the confidentiality undertaking."
The judge said another "surprising feature" of the confidentiality agreement was that it was unlimited in time.
He added: "I merely observe the above matters as being potential issues but say no more. I do not say at this stage bearing in mind the trial in February whether or not any of those points is arguable or is unarguable; that is for the trial when all the evidence is in. I merely make the observation that those factors may appear at first blush at this stage to be surprising."
The judge said that there "is clearly some animosity between Mr Ashley and Mr King.
"I refer for example to...Mr King’s first affidavit where he makes this point and expresses the view that Mr Ashley was driving the committal without any good faith motive."
The judgement reveals that Mr King was believed he was “lured” into coming to the UK for a meeting with Mr Ashley which he cancelled and then used that to serve him with the court committal application.
The document highlights an article which suggested Sports Direct were arranging for the lawyers to pounce upon Mr King in the hours following his visit to Mr Ashley’s office. This involved paying to have teams of Sheriff’s Officers across Glasgow waiting for Mr King to return on a train from Chesterfield.
The judge added: "I have referred to Mr King’s evidence which is unchallenged that Mr Ashley is pursuing a vendetta against him. Further, I questioned what damage was being sustained by SDI (Sports Direct International) even if it established the breaches.
"I cannot see what disadvantage sustained by reason of the revelation that meetings had taken place and would take place in the future to discuss the continuing relationship when it is clear that it is at least arguable that the existence of that passed meeting and future meeting was in the public domain or was being leaked to the press by SDI."
In conclusion, the judge said: “It is therefore in my view undoubtedly the case that [Sports Direct’s] whole procedure is an abuse and it should be dismissed for that reason in addition to the various failings that I have identified above. That is not to say that Mr King may not be found to have made the disclosures upon which [Sports Direct] relies when this matter is tried, but even assuming that he did breach the June [court] order as alleged it is inappropriate to police those breaches with the heavy hand of committal proceedings."
The timeline.
The judgment reveals the history of the commercial dealings of Rangers and Mike Ashley, saying that in or around 2012, Sports Direct "was approached by The Rangers Football Club Ltd (“the Club”) which is now a wholly owned subsidiary of Rangers to explore potential commercial opportunities."
Rangers Retail was created on July 31, 2012. An Intellectual Property Licence Agreement was then agreed, allowing Rangers Retail Limited "certain rights to exploit the club's brand."
On October 31, 2012, a sponsorship agreement was created between Sports Direct and Rangers "relating to certain sponsorship and marketing rights for the Sports Direct brand at the Rangers Football Stadium".
In the autumn of 2014, discussions were held "concerning the potential extension of finance by the SDI Group and the renegotiation of its agreements with the club".
A marketing agreement was subsequently created and a finance agreement was then reached in January 2015 which saw Sports Direct agree to provide an interest-free loan of up to £10m to the club.
Som £5m of that facility was drawn down by Rangers.
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