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Tycoon Mike Ashley accused Morgan Stanley of snobbery on the first day of a £40million High Court legal battle.
Frasers Group, controlled by Ashley and owner of brands such as Sports Direct and House of Fraser, has taken the US investment bank to court over its involvement in fashion brand Hugo Boss.
Frasers accused Morgan Stanley of taking a “capricious” and inappropriate move to remove his business from the bank’s books in May 2021, having expressed a “personal dislike” towards Ashley based on “class”.
Adrian Beltrami KC, a lawyer for the retail giant, accused the bank of viewing Ashley as an “upstart.”
He said Morgan Stanley only acted after discovering Frasers was behind the operations.
Showdown: Mike Ashley outside the High Court yesterday on the first day of his £40m legal battle with Morgan Stanley
The two-week trial between the billionaire and the investment bank centers on Morgan Stanley imposing an £800m ‘adjustment margin’ on Frasers’ trading position in Hugo Boss in May 2021.
Frasers had built up its stake since 2019 through broker Saxo Bank, which then used Morgan Stanley to execute and settle the trades.
In a sudden move, the bank imposed a “margin buy” on May 25, 2021 (collateral to cover possible losses on a trade) on the stock.
This caused Saxo Bank to demand around £713 million from Frasers.
Ashley told the court this demand was “completely unbelievable”, adding: “He might as well have said a nuclear bomb had fallen on Slough.”
The tycoon and his team were ‘exhausted’ by the debacle.
Beltrami claimed that this action cost Frasers around £40 million, although the bank disputes that it lost out.
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According to Beltrami, Morgan Stanley treated Ashley’s attempt to become a client with disdain and this was “class-driven, no doubt.”
The lawyer claimed bank staff had “a personal dislike” for Ashley and claimed they said he would have “no respect for the rules of the way we do business”.
Morgan Stanley lawyer Camilla Bingham KC said Frasers’ claims were “not based on any form of recognizable factual or legal reality.”
He said Frasers did not suffer any loss in the value of its positions in Hugo Boss. The bank argues that it did not know who was behind the operations and that it had no contractual relationship with Frasers, only with Saxo.
He argues that the staff had no problem with Ashley, but was concerned about the size of Boss’s position and acted to protect him from exposure to stock market bets.
“Frasers has embarked on lawfare against Morgan Stanley on an extraordinary scale,” the bank said.
“Frasers presents wild accusations of bad faith and irrationality and asks the court to boldly go where it has never gone before,” he added.
Ashley’s shares in Hugo Boss are owned by Frasers and held through a complex series of contracts, meaning Ashley has overall control.
Ashley, who is worth £4.1bn according to Forbes, has built quite a reputation since opening the first Sports Direct store in Maidenhead in 1982.
Several controversies include accusations that he vomited into a pub fireplace during a drunken work meeting and scandals over working conditions in his shops and warehouses.
Although he handed the reins of the business to his son-in-law, Michael Murray, a couple of years ago, Ashley is the majority shareholder.
Frasers owns a list of well-known chains including House of Fraser, Flannels, Gieves & Hawkes and I Saw It First.