Bank rebuked by judge in battle with Mike Ashley

A HIGH Court judge has rebuked Morgan Stanley after it failed to promptly hand over evidence in a $1bn (£790m) legal battle with Mike Ashley’s Frasers Group.

Mr Justice Pelling said the Wall Street bank’s pre-trial approach to disclosing evidence “undermines confidence”.

It comes after the bank took weeks to hand over a new document relating to its $995m trading dispute with Frasers Group, owned by the retail billionaire tycoon Mr Ashley.

Mr Justice Pelling said: “None of this is acceptable in commercial action of this sort.”

The judge’s criticism comes just days before Morgan Stanley and Frasers are expected to begin their High Court trial next week.

Frasers Group, of which Mr Ashley is the majority owner, is suing Morgan Stanley in a row over trades in Hugo Boss stock worth hundreds of millions.

Frasers Group alleges Morgan Stanley forced Frasers to abandon its bets on the stock, costing the retail empire millions of pounds as a result.

Frasers argued the move was “arbitrary” and “capricious”. Morgan Stanley denies the allegations and maintains it was simply protecting itself from adverse share price movements.

Morgan Stanley did not deal directly with Frasers but the stock bets were closed out using a process known as a margin call, where parties are asked to deposit extra cash to backstop their investment positions.

The Wall Street bank passed a margin call to Saxo Bank, which in turn dealt with Frasers.

Central to the legal wrangle is an internal Morgan Stanley policy relating to margin calls, which the US investment bank for years claimed did not exist.

Morgan Stanley’s lawyers, Clifford Chance, first discovered the risk management policy in December.

However, Frasers was not told about the document’s existence for another six weeks and only received a redacted version just hours before a pre-trial review last month.

Frasers has now accused Morgan Stanley of breaching court rules by taking too long to announce its discovery and taking an overly narrow view when searching for evidence.

Adrian Beltrami KC, acting on behalf of Frasers, said: “This isn’t a case that could be described as a mere error or unfortunate oversight, it was a case of non compliance.”

Morgan Stanley apologised for the delay, but said the document is “not a game changer”. The bank claimed it needed time to properly assess the document’s commercial sensitivity before handing it over.