Carey, 62, was a director at Berkeley for 17 years alongside Tony Pidgley, the chairman and founder, before being ousted as head of the St George London house building division.

In a statement, Berkeley said that the litigation brought by Carey against The Berkeley Group, St George and other parties for age discrimination and unfair dismissal has been settled for £5m shortly before the commencement of a three week hearing in the Employment Tribunal.

The firm said: “The board’s decision to settle was unanimous having regard to legal advice, the size of the claim and the inevitable diversion of resources to run the action.

“The cost of the settlement was fully allowed for in the balance sheet as at 30 April 2011. Following the settlement, option rights over 1,388,390 shares have been cancelled.”