Tomkins settles with sacked chief Hutchings for £7m

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Tomkins, the engineering conglomerate, is to pay a settlement worth £6.92m to its former chief executive, Greg Hutchings, after dropping claims that he abused company perks.

Mr Hutchings left the group in October last year after it emerged that his wife and housekeeper were on the payroll and amid allegations that he had used the company's jet and flats in a personal capacity. He has maintained that he acted within both corporate governance rules and the law.

A settlement reached between Mr Hutchings and the company will see both sides drop all existing and potential claims against each other relating to his departure.

Tomkins will release 2.9 million shares purchased by Mr Hutchings but kept from him pending the outcome of any legal action. It has also agreed to contribute £500,000 to his pension and pay £300,000 towards his legal costs.

Mr Hutchings, who earned £1.4m last year, had been considering suing Tomkins for £8m in a wrongful dismissal claim, although he had not instigated formal proceedings.

The claim would have comprised £3m in pension contributions, £1.5m in a pay and bonus and the value of the 2.9m shares released yesterday.

Tomkins, which had been aiming to settle the matter before the announcement of its half-year results in the middle of January, is thought to have incurred a legal bill of at least £500,000.

A spokesman for Mr Hutchings said: "He is very pleased that this is settled. He can now draw a line under the affair and move on to other things."

Tomkins also voiced pleasure at having brought the episode to a close. "If you go to court the only people who win are the lawyers. What's important is that we both move on, and that's what this reflects," a spokesman said.

Ernst & Young produced a lengthy report on Mr Hutchings's alleged corporate excesses, although whether they were authorised by the company looks unlikely ever to be tested in court. Tomkins' properties include flats in Belgravia and Peninsula heights overlooking the Thames.

The company has yet to replace Mr Hutchings, who headed the group for 17 years. It said yesterday that two preferred candidates had been identified.