News that a “covert recording” device had allegedly been set up inside London’s luxurious, five-star Ritz hotel came as a nasty shock to some of the guests at one of the world’s most iconic hotels.

“I don’t like people listening in,” says Jennifer Maw as she waited in the lobby for her daughter and a friend, who were treating her to lunch.

On Monday it emerged that Sir Frederick Barclay, one half of the billionaire twin brothers who co-own the hotel and The Telegraph newspaper, had been bugged by his nephew as part of a bitter family dispute, a court heard.

A high court judge was told that an “elaborate system of covert recording” had been used to record conversations between Barclay and his daughter Amanda since last September. Last month, Barclay’s nephew Alistair was filmed “handling the bug placed in the conservatory at the Ritz”, the court heard.

Another guest, who declined to give his name but was enjoying an £8 cup of tea in the foyer, said: “If I’d known about the bugging I might not have come.”

Isabel Tubbs hadn’t heard about the secret listening device either, but said: “Bugging people genuinely freaks me out. It’s terrifying how much you can find out from people through technology.”

Tubbs said she and her family used to holiday on the island of Sark until it was bought by the Barclay brothers. “They ruined it so I’m no fan of the Barclays.”[See footnote]

For decades the Barclay brothers, David and Frederick, who also own the delivery firm Yodel and loss-making Very and Littlewoods shopping websites, have been famously reclusive and intensely private when it comes to family and business affairs.

But that came to a dramatic end on Monday when the high court action laid bare, in the most public fashion, the scale of several years of internal disagreement over the future of their empire. There was no mention of the story in the Daily Telegraph, which comes complimentary to those staying at the Ritz.

The legal action pits the once inseparable identical twins and their respective families against each other, as the octogenarians navigate a potential break-up of their vast but faltering empire in the twilight of their business career.

“They were always this double act,” said one source familiar with the family. “I would never have dreamt there would be a public spat. They have always conducted all their business under the radar. I’m shocked.”

The scale of the divisions began to emerge last October when The Daily and Sunday Telegraph were put up for sale, as part of a review of the Barclays’ business interests. Sources suggested that Sir David’s side of the family was not in agreement with the plans.

The family was already facing a wider internal upheaval after the 85-year-old Frederick and his wife, Hiroko, whom he married more than 40 years ago, started divorce proceedings in October last year.

The day-to-day running of the empire has long been handled by Sir David’s sons Aidan, 64, and Howard, 60, but there have been changes in the corporate structure of key family assets over the last two months.

On 24 January, Aidan and Howard were appointed as directors at the Ritz, as was Philip Peters, who holds a number of board positions at Barclays-owned companies and is also a target of the legal action. On the same day, 41-year-old Amanda, who works at the Ritz, resigned, having only been appointed a director in June.

In addition, in December, Aidan and Howard were made “persons with significant control” of Ellerman Holdings, the holding company for the Barclays’ UK assets. Each was given “more than 25% but not more than 50% of the share ownership and voting rights”. A spokesman for the Barclays declined to comment on the restructuring.

Of the family silver up for sale, the Ritz – which made a profit of £7m in 2018, down from £13m a year earlier – looks to be the closest to a deal. The Barclays want £750m for the 114-year-old hotel, which they bought for £75m in 1995, and are reported to be in talks with a Saudi Arabian private investment firm.

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The Barclay brothers boast a combined wealth of £8bn, putting them 17th on the annual Sunday Times Rich List, but the recent financial performance of their sprawling network of businesses has been patchy.

Encouraged by the £844m Nikkei paid for the Financial Times in 2015, the Barclays aimed to recoup the £665m they paid for the Telegraph in 2004.

However, in the intervening years Telegraph Media Group, like most newspaper publishers, has been hit by falling sales, declining revenue from print adverts and the challenge of digital media. Profits slumped to just £900,000 last year, having regularly been above £50m until the last few years. A serious buyer has yet to emerge.

The brothers’ biggest business by revenue is the online retailer The Very Group – known as Shop Direct until last month – which includes the Very and Littlewoods shopping websites. They are the bones of the Littlewoods retail empire that the Barclays paid £750m for back in 2002. Last year it slumped to a £186m annual loss . Their parcels and courier business Yodel is also loss-making. Its most recent financial results showed it had slumped £116m into the red, as customers deserted a business that has struggled with a reputation as one of the UK’s most complained-about companies.

As the Barclay brothers seek to put their business interests on a firmer footing the intergenerational infighting threatens to spell the end of their empire.

• This footnote was added on 26 February 2020. To clarify: In 1993 the Barclay brothers bought the tenement of Sark’s neighbouring island of Brecqhou.