Wealth manager Rathbone Brothers has agreed to pay £15m as part of a conditional settlement to end a two-year dispute involving a former director which has already cost it £5m in legal fees.
The case began after a claim was filed in 2012 against a former director of Rathbone Trust Company Jersey Ltd, owned by Rathbones between March 2000 and October 2008.
It was centred on the management of a Jersey trust which saw the assets underperform expectations.
Rathbones did not choose or manage the investments. Rather, the claim was filed against trustees including the former Rathbones employee because an underlying investment performed poorly.
In November the judge ruled in favour of Rathbones and its former employee, confirming he was covered by the insurance policy for any alleged wrongdoing in the Jersey proceedings.
However, the insurers were also given a ‘right to subrogation', whereby they could, after paying off the employee's insurance claim, take over any rights of action the employee might have against Rathbones.
Rathbones and its former employee subsequently appealed against the subrogation aspect of the judgement, while the insurers cross-appealed the coverage aspects.
Today, Rathbones said rather than continue the legal battle, it had removed the "uncertainty" of any further court case after agreeing a settlement.
The terms of the settlement are confidential, but it confirmed it expects to pay a sum of £15m before the end of this year. Rathbones said it expects to report this amount as an exceptional cost in its full year results for 2014.
Rathbones chief executive Philip Howell said: ""We are pleased to have closed off this long-running matter and to have removed this uncertainty from our business.
"Whilst we believe that the underlying Jersey claim would eventually prove unsuccessful and that effective insurance cover would be confirmed following the recent Appeal Court hearing, we have been mindful that litigation is never without risk and that we could face several more years of very substantial legal expense, having already incurred legal costs of approximately £5 million.
"We have therefore concluded that joining a settlement would be in the best commercial interests of the company, allowing our senior management team to apply its full focus to executing our strategic plans."
The news comes as Rathbones boosted profits by a third, to £30.9m for the six months ending 30 June, compared to £23.2m in the same time last year.
It reported 8.6% growth in funds under management at the end of June compared to the previous half-year. FUM now stand at £23.9bn.
The growth was driven in part by the acquisition of Deutsche Asset and Wealth Management's London-based private client business. The transfer of funds from another acquisition, Jupiter's wealth arm, will be reported in the third quarter. Profit before tax was £30.9m for the six months ending 30 June 2014.
