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Mike Ashley Case – Blue is not the colour


This piece was first published on Keep Calm Talk Law in September 2017

Virtually everyone has had occasions where good judgement has been clouded through excessive alcohol consumption. This impairment of judgement can take many forms, from our choice of sexual partner to making bad financial decisions. Indeed historical commercial deals in the City were (and maybe still are) thrashed out informally, fuelled by alcohol away from the boardroom, where the old school attitude of a gentleman’s word being his bond was considered sacred.


English law still recognises this principle and has the capacity to enforce verbal agreements. Rarely have they been asked to adjudicate on a contractual dispute worth millions of pounds where there is no written record to back up the verbal agreement. This was exactly the issue in the recent High Court case involving Mike Ashley, the billionaire owner of Sports Direct, and Jeffrey Blue, a former consultant to Sports Direct.

Blue v Ashley


Blue v Ashley [2017] centred on a meeting in January 2013 in the Horse and Groom pub in Great Portland Street, London, between Mike Ashley, Jeffrey Blue and representatives from Espirito Santo Investment Bank (ESIB). The meeting occurred just after Sports Direct’s listing on the FTSE following the resignation of Merrill Lynch, Sports Direct’s corporate brokers, in response to some well-publicised corporate governance issues.


Its purpose, therefore, was clear. Sports Direct were seeking a corporate broker to manage the company’s relationship with the financial markets. ESIB were approached by Mr Blue to see if they were willing to step into the void left behind, and they agreed. An informal meeting at the Horse and Groom was suggested by Peter Tracey, Head of Corporate Broking at ESIB, with Sports Direct as a form of ‘bonding’ with their new clients.


According to accounts of the evening put before the court, the meeting was a success with drinks flowing for several hours. As the evening progressed, talk turned to Sports Direct’s share price – which at the time was around £4 – and what level it might reach should the company continue to perform well. During this conversation, it was suggested by the ESIB representatives that Mr Blue should be incentivised with some form of payment to help increase the share price up to £8. It was eventually agreed by the parties that Blue would recieve a figure of £15 million from Ashley if he could ‘get’ the share price up to the £8 target. Blue alleged that he was given a three year period in which to do this.

On 25 February 2014, the Sports Direct share price reached the £8 target price, and the basis for the disputed ‘contract’ had been formed. Blue therefore claimed he was entitled to the £15 million incentive from Ashely, a claim which Ashely rejected by arguing that no legally enforceable contract had been created. In support of this argument, Ashley pointed out that, following the meeting, none of the terms allegedly agreed where ever documented in writing. This meant the only evidence of it were the recollections of those present, most of whom had been drinking large amounts of alcohol.


The Basics of Contract Law – Creating a Contract


There are four essential elements of a contract which must exist before a legally enforceable contract will be created: an offer, which is then accepted, consideration and an intention to create legal relations.


An Offer


An offer is defined as an indication of the offeror’s willingness to enter into a contract with the party to the offeree upon the acceptance of terms. It is a verbal, written or behavioural statement that communicates the terms that the offeror (the person making the offer), is willing to contract upon. Since Smith v Hughes (1871), the courts have taken an objective approach to deciding whether a reasonable person would consider that an offer has been made.


An important distinction must be made between an offer and what is known as an ‘invitation to treat’:  an invitation to make an offer or commence negotiations. This concept is well-illustrated by the classic case of Harvey v Facey (1893), where a telegram sent expressing interest in a Jamaican property was considered:


‘Will you sell us Bumper Hall Pen (a property in Jamaica)? Telegram lowest cash price….’

‘Lowest cash price for Bumper Hall Pen £900’,

‘We agree to buy Bumper Hall Pen for £900 asked by you.’


The court decided that initial telegram constituted an expression of interest with no specific terms attached to it.


The distinction between an offer and invitation to treat is an important one as it affects every day commercial transactions: for example, goods on display in a shop are invitations to treat because if they were classed as offers, there would be a legal obligation to buy an item every time a shopper put it in their basket, the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1953) is a classic example of this, where a dispute over when the sale of over the counter medicinal products was decided by Court of Appeal in exactly this way.


An Acceptance


An acceptance a final and unqualified expression of assent to the terms of the offer. This means that the person accepting the offer must agree to it in its entirety, and a ‘meeting of minds’ must be formed. As was held in Hyde v Wrench (1840), generally, any acceptance which attempts to differentiate the offer in any form is seen as a counter-offer, and destroys the previous offer which is no longer available to be accepted.


Acceptance can be made verbally, in writing, or by conduct. It must clearly communicate that the offer has been accepted to the offeror, as per the decision in Entores v Miles Far East Corp (1955). This encourages certainty in any contractual arrangement so that both parties will know exactly what the bargain is. In Blue v Ashley, at the time of the ‘agreement’, Blue and Ashley shook hands to signal their agreement although Blue only began to actively start working towards the target some 11 months later. The lack of formalities also led to a situation where there was some confusion in the witness statements amongst those present about the exact nature of the agreement. This as we go onto see also played a role in the decision.




Consideration – about which Jamil Mustafa has written in more detail for Keep Calm Talk Law – refers to the need for an exchange of promises, or an exchange of items to each parties’ mutual benefit. It must be only adequate and sufficient for the purpose of the contract, such that does not have to reflect the real value of the promises or items involved. This is often demonstrated by when companies in financial trouble are purchased for £1 – the company cannot be given away for nothing, but the court will refuse to get involved in setting a market rate or price for a good or service.


An Intention to Create Legal Relations


The requirement that can often lead to the court deciding the non-existence of a contract is the need for both parties to possess an intention to create legal relations. This meant that both contracting parties must have intended their agreement to be legally enforceable, such that it creates legal rights for the parties which they could enforce in a court of law.


There are two rebuttable presumptions in operation here, which apply to agreements made in a domestic or social context, and in a commercial context. With domestic or social agreements, it was held in Balfour v Balfour [1919] that it will be presumed that the parties do not intend to be legally bound. This can be rebutted if the parties act in a ‘non-domestic’ way, just like the creation of a written agreement that occurred in Merritt v Merritt [1970].


In commercial arrangements, the opposite is presumed, in that the parties do intend to be legally bound by the agreement, this presumption is rebuttable, but Esso Petroleum Ltd. V Commissioners of Customs & Excise (1976) demonstrates the reluctance of the courts to overturn this presumption. To successfully do so, both parties need to expressly state there is no intention to create legal relations, as was the case in Rose & Frank Co. v Cromption Bros (1923) where the parties included an honourable pledge clause which stated the parties were not to sue upon the agreement.


In Blue v Ashley, the lack of certainty regarding the precise nature of the agreement amongst those present demonstrated that there was no objective standard which can help identify a time limit which Blue had in which to get the share price up to the magic £8 price, and it is impossible for the court to imply a term which could would be objectively fair to achieve such a thing owing to the fluid and often chaotic nature of the financial markets, which would further underline the difficulty in Blue proving that it was his work that propelled the share price up over £8 per share. The omission of such a fundamental term in the ‘agreement’ can be seen as an indication that the agreement was not meant to be taken seriously.


Jeffrey left feeling Blue…..


Looking at the overall substance of the recollected conversation, Leggatt J found in Blue v Ashley [2017] that the substance of the supposed agreement between Ashley and Blue was that Ashley would pay Blue £15 million if he could get the Sport Direct share price up to £8 within an unspecified time frame. In spite of this, Leggatt decided that there was no legally binding contract for eight main reasons.


Firstly, the setting, which was “five guys and a barman in a pub.”, where considerable amounts of alcohol had been consumed. MacInnes v Gross (2017) found that this in itself does not prevent a contract being made, but an evening in the pub drinking is an unlikely setting for agreeing on a high-value bonus arrangement with a consultant. Even though the evidence was brought my Blue showing that copious amounts of alcohol were regularly drunk Sports Direct’s weekly senior management meetings, this was not indicative of the type of setting which Ashley ever concluded a contract.


Leggatt goes on to outline further reasons such as the purpose of the occasion (to engage ESIB as Sports Direct’s new corporate broker), the nature and tone of conversation that evening which was generally jovial and high-spirited. Other factors include the lack of commercial sense behind the proposed arrangement and the way such big numbers were casually tossed around; and also the lack of evidence that Blue’s work actively influenced the rise in the share price. The vagueness of the offer was another critical factor, evidenced by the lack of consensus in the witness testimony about the arrangement, as each of the parties present found it difficult to agree of the sums offered, whether there was a time limit, and how long the share price should stay above the £8 target for. This demonstrates perfectly the issues with evidence based solely on witness memory, especially when affected by alcohol which we all know can adversely affect our memory.


Further reasons for the lack of agreement include the perceptions of both the ESIB witnesses, and Blue himself. All three of the ESIB witnesses perceived the conversations about the agreement as being no more than banter, and added that it took around 11 months after the meeting for Blue to even discuss the proposed agreement with Ashley making it highly improbable that Blue seriously considered that a valid oral agreement was made that night in Horse and Groom pub.


These factors, combined with the fact that there is no documentary record or reference, contemporaneous or otherwise (except for one note in Blue’s notebook), and no independent witness to any later conversations on the topic, meaning that the only evidence of the alleged conversations consists of Blue’s recollections of those conversations. A basis which is difficult to make sound factual findings. All of these factors led to Leggatt J concluding that there was no serious intention to create legal relations as a result of the agreement, and this was the major stumbling block of Blue’s case.



This is a highly unusual case: it presents an insight into the corporate world which resembles the plot of The Wolf of Wall Street, where alcohol, greed and vast sums of money were regular bedfellows.


Ultimately, it is unsurprising that Blue failed in his claim; the lack of documentary evidence would make it impossible for any right-minded member of the judiciary to award such huge sums of money on the back of such flimsy evidence. Even though English law may still recognise a verbal contract, no reasonable person who looks at the evidence offered could conclude that Ashley was serious when he made the offer to pay Blue £15 million. After all, the evening was a jovial and jocular one, and the fact that all parties laughed when the ‘agreement’ was made further goes to show that offer could not be seen to serious. In Leggatt’s own concluding words in his judgment, which appears to demonstrate a thinly veiled contempt for the merits of Blue’s claim:


“The fact that Mr Blue has since convinced himself that the offer was a serious one, and that a legally binding agreement was made, shows only that the human capacity for wishful thinking knows few bounds.”


This goes to show that your word is still your bond, but only when you remember to write it down.

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