Rangers loses right to £2.8m of merchandise income due to Mike Ashley legal block

The Ibrox club launched a legal bid last year to get back more than £2.8m it says it is owed through its merchandise deal with sports firm Hummel in a row over replica shirt sales.

They served proceedings on the sports brand to get back £2,840,236, plus interest and expenses.

But a judge has previously stated the club had breached a legal agreement allowing Mr Ashley's company to make an offer over club merchandising, including the Scottish Premiership winners' replica kits.

Two years ago Judge Lionel Persey ruled Mr Ashley's company should have been given the chance to match the Rangers shirt deal struck with Hertfordshire-based football merchandising firm Elite and sportswear firm Hummel thought to be worth £10m.

It is known that the club were due £960,000 when Sports Direct slapped an injunction on them in the summer of 2019 racking up an additional £1.47m in sales from then to the start of last year.

But it has emerged that Court of Appeal's Civil Division has backed Sports Direct's bid to block the vital income stream saying the club cannot profit when there is an injunction and cannot pursue the claim.

Akhil Shah QC for Rangers said the consequence of Sports Direct's interpretation supported by judges would be that Elite would be able to make profits from using Rangers' "valuable brands" for two years without paying anything.

He said that that was "a startling conclusion and, furthermore, would simply penalise Rangers whilst providing no benefit to Sports Direct".

Under Rangers’ kit deal with Hummel, the club receives a base annual fee of £2m for the purchase of one to 100,000 units.

Two of the three judges in the appeal court agreed the Sports Direct action should be allowed.

Lord Justice Phillips said that allowing Rangers to sue Elite and Hummel over 'unpaid' money would allow the club "to rely upon and enforce the very contract it had entered... in unlawful breach of the agreement and was expressly required to repudiate".

He added: "What is more, it would be permitting the use of the court process to do so, entailing that the court would be enforcing an agreement which it had held should not have been made and had required, in so far as possible, not to be performed and to be terminated."

He said a previous judge has made a "flawed" interpretation that that injunction intended to preserve Rangers' revenues entitlement.

"I conclude that it would be contrary to the clear purpose and intent of the injunction that Rangers should be permitted, nonetheless, to take proceedings to enforce its terms, including suing for revenues payable by Elite," he said.

"In my judgment the prohibition on Rangers 'performing' that agreement must be interpreted as including the exercise of any of its rights."

Mr Ashley, once a controlling figure at the club with a hold over its trademarks and merchandise and Rangers have been embroiled in various High Court litigations, centred on the merchandise deal, in London for more than two years.

Sports Direct Group, SDI Retail (SDIR), has been pursuing damages over the alleged breach of obligations under merchandise deals through the Commercial Court in London.

The case revolves around Mr Ashley, who was a former Rangers shareholder and once seen as a club kinpin, striking a deal with a previous board that saw his company take in around 93p from every £1 made from the sale of strips and merchandise.

That deal led to some fans boycotting Sports Direct stores and their sale of Rangers kit.

At the end of 2014 the fans group, Rangers Supporters Trust launched an alternative shirt for fans as they took on Mr Ashley - and said all profits would be ploughed back into an increased shareholding in their club.

The Herald revealed that in early 2015, Mr Ashley was declared the "ultimate controlling party" of Rangers Retail, a joint venture with the club which controlled the club's merchandising and stores.

When the venture was first 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. 

A campaign was subsequently launched in early 2015 by the Sons of Struth fans group as South Africa-based businessman Dave King moved to try and shift Mr Ashley's influence at the club and one petition calling for a boycott of Sports direct attracted over 8000 signatures.

And in March, 2015, Mr King and his so-called Three Bears associates including Paul Murray achieved a landslide victory at an extraordinary general meeting to control the boardroom while evicting associates of Mr Ashley, Derek Llambias and Barry Leach. That came after David Somers, who was chairman, and James Easdale had already resigned.

At the centre of the latest argument was the terms of the injunction which stated that Rangers cannot "assist" Elite or Hummel to perform their merchandise agreement.

Mr Shah for Rangers said that suing for money could not be described as "assistance".

A court judgement said that it was "difficult to see why a party who is entitled to receive money should not be entitled to recover it".

Rangers retail partners Liverpool-based sportswear brand  Castore signed a  kitdeal with the club in May,  last year believed to be worth at least £25m – their first in football.

The agreement with Castore for a minimum of five years  was hailed as a ‘clean slate’ by Rangers commercial and marketing director James Bisgrove.

In addition to supplying Rangers with their training and matchday kit, Castore, was formed in 2015 by brothers Tom and Phil Beahon,  were to run all of the club’s retail operations. 

Mr Bisgrove said there will be a £250,000 revamp of the Ibrox Stadium megastore, while Castore planned  to open ten new Rangers stores across the UK and internationally.

In Judge Persey's July, 2019 judgment, he said: “I am satisfied that [Sports Direct] was not only entitled to match the rights offered to Hummel/Elite but would have done so.

“Those rights were not only not offered to them but Rangers... untruthfully asserted that Hummel had not been granted any Offered Rights and did not provide SDIR with a copy of the Elite/Hummel Agreement.

“The upshot of all this is that Rangers, Elite and Hummel have until now performed and enjoyed the benefit of the Elite/Hummel agreement.

At the end of June, 2018, Rangers had announced that Mr King's dispute with Mr Ashley was over while confirming a new one-year kit deal with Ashley's retail firm has been agreed.

Mr King then hoped the deal would encourage supporters to end their kit sale boycott and provide a major financial boost as Rangers aim to challenge for the Scottish Premiership title.