A multimillion-pound lawsuit brought by advertising company WPP against its former Italian director Marco Benatti was settled on undisclosed terms in the High Court today.

Mr Benatti, who was accused in a libel action last year of describing WPP chief executive Sir Martin Sorrell as a “mad dwarf”, was alleged to have secretly pocketed millions of pounds from a deal he helped to broker.

The Italian businessman was sacked as the Italian director of WPP in January 2006.

WPP’s lawyers, claiming up to £12.5 million for breach of “fiduciary duty”, alleged at a court hearing in London that Mr Benatti was the “secret beneficiary” of most of the proceeds from a £17 million takeover of Media Club, an Italian advertising company.

Mr Benatti launched a counterclaim for unfair dismissal, insisting that the real reason he was sacked was because he had fallen out with Daniela Weber, WPP’s chief operating officer in Italy, with whom he alleged Sir Martin was having a relationship.

After a five-day hearing, Mr Justice Walker was told the parties had reached a confidential settlement which would become effective on completion of the obligations it contained.

The judge congratulated both sides on resolving a case which involved “complex issues of law and fact”.

In last year’s libel action, Sir Martin accused Mr Benatti of circulating a computer-generated image showing him with Ms Weber labelled “the mad dwarf and the nympho schizo”.

Sir Martin eventually accepted £120,000 damages without Mr Benatti accepting liability.

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