£14m deal means Franklin Mint has say in Diana fund spending

Trustees of The Diana, Princess of Wales, Memorial Fund have settled a £14m legal battle with a wealthy American couple that had threatened to end its international charity work.

Trustees of The Diana, Princess of Wales, Memorial Fund have settled a £14m legal battle with a wealthy American couple that had threatened to end its international charity work.

Under the terms of the settlement, the American-based Franklin Mint, which began the legal action in 2002, will have a say in how £14m of the fund's money will be spent over a five-year period.

A statement issued by the Mint and the fund yesterday said they had agreed the "energy and resources" needed for a court battle would be better spent on a "mutually agreed international programme of humanitarian work" in honour of the princess.

The settlement has also saved the trustees from a costly and embarrassing public trial in which the princess's sister, Lady Sarah McCorquodale, was expected to give evidence. Legal fees have already cost the fund £2m.

News of the settlement came as a jury was about to be selected in Los Angeles Superior Court to hear evidence to support the claim that the fund had acted maliciously when it launched a multi- million claim against the Mint for marketing a Diana doll. That claim was thrown out by a US court at a cost of £4m to the fund.

The Mint's owners, Stewart and Lynda Resnick, were incensed that they were accused in the British media of being "vultures feeding on the dead" and that they were "stealing" the Princess's name and likeness. In its claim, Franklin Mint said that royal souvenirs had been openly sold around the world for centuries without permission, and that those of Diana, Princess of Wales, were no exception.

Lady Sarah and Anthony Julius, the lawyers who advised the princess on her £17m divorce from Prince Charles, had already given written evidence to the Los Angeles court and were expected to be called as witnesses in the next few days.

In court documents seen by The Independent, the trustees defended themselves against the "malicious" allegation by saying that they acted properly. They named the individual lawyers who had advised the fund on ways to protect the princess's image and the licensing rights that it had been granted by the princess's estate.

Under the terms of yesterday's settlement the Mint has withdrawn its claim that the fund and its trustees acted with malice in initiating the trademark action suit in the US. The statement said the Resnicks withdrew the claim "in recognition of the fact that the fund's trustees acted in good faith" and "on advice received from their former American attorneys".

The statement added: "While the precise terms of the agreement are confidential, the goal is to release funds to excellent charitable causes which resonate with the memory of the princess, and all monies to be expended will be dedicated exclusively to such purposes."

Among the charities to benefit are those working on HIV/Aids, landmines, the terminally ill and their families, and other disadvantaged groups. Neither the Mint nor the Resnicks personally will receive any money from the settlement.

Organisers of The Diana, Princess of Wales Memorial Fund said they would immediately resume awarding grants to good causes. The decision to freeze cash awards, made when the Resnick's suit began, was described by the Charity Commission as a "massive blow" to voluntary organisations.

The charity will release £525,000 for a number of UK and international projects this year and begin offering new grants in 2005.

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