Performing Salaah in one's underpants

I visited a senior sheikh in Cape Town who qualified in Al Azhar Egypt. The sheikh asked me to stay the night at his house. We made fajr salaah at his house in his study. I gave the iqamah and the sheikh walked into the study and led the salaah as the imaam. Only the two of us were present. The room was dark and after we had completed the salaah the light was switched on and I then only realised that the respected sheik led the fajr salaah in his underpants and a pyjama top. I was taken aback and asked the sheikh if its correct to lead salaah whilst only wearing an underpants and no long pants. The sheikh answered abruptly by saying " are you greater than Imaam Shafee and do you know better than Imaam shafee" I want to know if this was correct to make salaah in an underpants and do I perform my fajr over again as he was the imaam.