Rangers to make new £1m damages claim over Sports Direct trademark breach

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Rangers are expected to make a fresh £1m damages claim amid allegations the Mike Ashley-controlled merchandising arm has breached an agreement over the use of its trademarks.

 

Auditors Grant Thornton have now raised questions over the future of the Rangers Retail, after the new legal row was revealed.

 

It is understood the claim revolves around the way Rangers Retail was being operated before the club stepped in in February this year to regain legal ownership of its precious trademarks.

 

The joint venture between Rangers and Mike Ashley's Sports Direct, confirmed by then chief executive Charles Green in August 2012, 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 the Rangers board and hardcore supporters have been unhappy with what the return the club gets out of the venture which held an exclusive licence to exploit the club's name and trademarks.

 

Rangers are also known to be unhappy with the way the joint venture was set up and its operation and has already activated a seven year notice period in terminating the deal.

 

Details of the new damages claims has come in the new Rangers Retail annual report which states that damages of up to £1m may be payable to the club's operating company The Rangers Football Club Limited over a breach of the terms of the intellectual property and rights agreement made in January, last year.

 

But Sports Direct, which has effective control over Rangers Retail, has said it has seen "no credible basis" to suggest the IP agreement was breached or that there was a liability for damages.

 

Sports Direct considers that Rangers Retail should "fully defend itself against any allegations of breach of the IP agreement asserted by TRFC".

 

Rangers has already withdrawn its intellectual property rights from Rangers Retail which had the licences to exploit club-related trademarks and logos including the club name, Ibrox and The Gers, Intellectual property experts said that the move looked destined for a courtroom battle.

 

The new claim pre-dates the row over Puma and Sports Direct putting on sale new Rangers kit two weeks ago despite opposition from the club which and supporters. It was previously understood that new Rangers strips could not be sold because of Rangers' move to terminate the merchandising contracts.

 

Auditors have now refused to provide a going concern audit opinion on the financial statements.

 

They said the audit evidence over the purported breaches was "limited" as Rangers Retail has not taken legal advice on the situation due to "inherent conflicts of interest between the company, the appointed directors of TRFCL and the appointed directors of [sports Direct]".

 

"As a result of this we have been unable to obtain sufficient appropriate audit evidence concerning the quantum of any provision which may be required in respect of the purported breaches and the impact on the going concern basis of preparation of these financial statements should damages be awarded and the IP License and Rights Agreement be terminated, "said the Marc Summers, a statutory senior auditor with Grant Thornton.

 

"Because of the significance of the matter described.... we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly we do not express an opinion on the financial statements."

 

Mr Summers, in his 'disclaimer opinion' added that the auditors had not obtained all the information and explanations that "we considered necessary" for the purpose of the audit and were "unable to determine" whether adequate accounting records have been kept.

 

During the latest financial year to April, 2015, it was identified that there were 200 shares in Rangers Retail, not the 100 stated in 2014 and in previous records. The account report says 100 shares were allotted in error, and that steps will be taken to cancel them.

 

The accounts show that while there was a boycott of merchandise in protest over Ashley and Sports Direct's involvement, turnover had dipped by 11.8 per cent to £4.26 million.

 

But post-tax profits more than doubled from £877,66 in 2014 to £2.17 million as costs were cut from £4.32 million to £3.45 million.

 

It is understood most of that money has gone to Sports Direct as Rangers Retail is buying Rangers merchandise, including replica kits, gifts, polo shirts and track suits from the Ashley-controlled firm for use in club outlets.

 

Rangers Retail has provided over £3.8m to Sports Direct in both 2013/14 and 2014/15 through such sales.

 

The accounts also reveal that £554,280 was put aside as of April 28, 2014 to fulfil Rangers Retail's "obligation" to buy stock at a cost higher than its value for the 2014/15 season.

 

The obligation, is described as an "onerous contract", which is a deal where costs to fulfill its terms are higher than the financial and economic benefit that is received.

 

The new dispute is separate from Rangers' £4 million legal claim against former Rangers directors and exeuctives Charles Green, Imran Ahmad, Brian Stockbridge and Derek Llambias. The claim alleges that they negotiated commercial deals with Sports Direct below market value.

 

http://www.eveningtimes.co.uk/news/14686892.Rangers_to_make_new___1m_damages_claim_over_Mike_Ashley_s_Sports_Direct_trademark_breach/