Rathbone Brothers has agreed to pay £15m as part of a conditional settlement of a legal battle involving an employee of a former subsidiary.
The wealth management house says it has decided to settle to end any “uncertainty” that would be created by continued legal wrangling over the past management of a Jersey trust. The case has already cost Rathbones around £5m in legal costs.
At the start of 2012, claims were filed against three trustees because the assets owned by Rathbone Trust Company Jersey did not perform as well as expected.
Although Rathbones did not chose or manage any of the investments itself, one of the claims was against the former director of Rathbone Trust Company Jersey Limited, which the firm owned between March 2000 and October 2008.
In November 2013, a judge ruled in favour of Rathbones and its former director, saying the employee was covered by professional indemnity insurance “in respect of liability for the wrongful acts alleged” to have occurred at RTCJ.
But it was also ruled that the insurers could take over any rights of action the employee might have against Rathbones after paying their claim, under a “right to subrogation”.
This aspect was appealed against by Rathbones and the former director. Meanwhile, the insurers launched a cross-appeal over the coverage aspect of the ruling.
A statement from Rathbones says it has since opted to settle the case rather than see it run on for any longer.
Rathbones chief executive Philip Howell says: “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 £5m.
“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 terms of settlement are confidential and conditional upon “various matters”, including receipt of court approval in Jersey.
The settlement is expected to become unconditional before the end of October 2014.