'FT' and Smith set to settle Collins Stewart libel action

A bitter two-year, £37m legal battle between the money broker Collins Stewart Tullett and the Financial Times was thought to be close to a settlement last night. Lawyers for both the newspaper and the broker asked yesterday for a High Court hearing to be adjourned for peace talks to take place.

Richard Spearman QC, for Collins Stewart, said: "It is hoped, indeed expected, that these may bear fruit."

Details of a settlement of the high-profile libel action may come as early as this morning, although sources close to the discussions warned that they may yet break down.

The broker claimed it was damaged by the FT's coverage in 2003 of a series of allegations about working practices by a former employee, James Middleweek.

Terry Smith, the combative chief executive of Collins Stewart, initially sought £230.5m damages for the decline in his firm's share price and lost business. That figure, which would have been a record for a British libel trial, was thrown out of court last year.

Thus far, the FT has stuck to its guns. Hopes of a settlement were raised in November when Andrew Gowers was ousted as editor of the paper. The dispute was widely regarded as a personal battle between Mr Gowers and Mr Smith.

Both are slated to give evidence in court 13 of the Royal Courts of Justice, which will be remembered by libel lawyers as the venue for Lord Archer's victory over the Daily Star almost two decades ago.

Pearson, the owner of the FT, cited "strategic differences" for Mr Gowers' abrupt departure and insisted his uncompromising stance towards the case had played no part. He was replaced by another FT veteran, Lionel Barber, who is believed to regard the case as someone else's fight.

The battle stemmed from an employment dispute between Mr Middleweek, who has since emigrated to Australia, and Collins Stewart. Mr Middleweek's solicitor, Dale Langley & Co, was forced to issue an apology and pay damages to the broker over allegations made by its client that were reported in the press. Collins Stewart also won "substantial" damages from Jeremy Benjamin, a fund manager and friend of Mr Middleweek, who posted false allegations on a financial website.

Should the case continue, it is expected to run for about four weeks and may have major repercussions for what financial journalists may report.

Central to the case is the issue of privilege, often cited by newspapers to claim the right to report matters in the public interest.

At a pre-trial hearing last week, Mr Spearman accused the FT of "thoroughly irresponsible" journalism in four articles covering Mr Middleweek's allegations.

The FT has robustly defended its journalism throughout and contends that it was entitled to report the allegations because they were contained in a public document, and that its coverage was fair.

The paper is also putting forward a Reynolds, or public interest, defence, named after the suit brought by the former Irish taoiseach Albert Reynolds against The Sunday Times in 1999. The FT is arguing that its coverage represented reportage of a City employment row that was already being aired in the national media and in which issues of considerable importance to the financial community were being aired.

The Reynolds defence was recently tested in a case brought by the MP George Galloway against The Daily Telegraph. That resulted in Mr Justice Eady, the judge who is hearing the FT case, awarding the politician £150,000.

Collins Stewart shares advanced 4 to 645p yesterday, while Pearson edged 2p lower to 670.5p.