THE 16 year old dispute involving the collapse of Merchant Banking Ltd came to an end in the High Court yesterday. Mr Justice Shanley received the terms of a settlement of proceedings brought by the bank's liquidator against two former directors.

The directors were former property developer, Mr Patrick Gallagher, and Mr John Cousins. Last week the court was told Mr Gallagher would have to pay a sum of money.

The terms of the settlement were not announced in court. Mr Gallagher had formerly owned the Gallagher Group and, in previous court hearings, Mr Cousins was described as a Dublin chartered accountant.

Merchant Banking Ltd collapsed in 1982 with losses of £3 million. In 1992 the liquidator, Mr Peter Fitzpatrick, called on the two directors to admit liability. The liquidator alleged fraudulent trading against Mr Gallagher.

High Court proceedings which had been listed to start this week would have sought to make the two directors personally liable for debts.

In September, 1991, after the High Court ordered the liquidator's report be sent to the DPP, the DPP decided not to take proceedings against Mr Gallagher. He had served 12 months of a two year sentence in Magilligan prison, Co Derry, after being convicted of a series of fraud charges following the £3.5 million collapse of Belfast Merchant Banking.

Yesterday, Mr Ian Finlay SC, for the liquidator, asked the court to receive the agreement. He asked that the proceedings against Mr Cousins be struck oiit and proceedings against Mr Gallagher be stayed with liberty to re-enter the matter in circumstances outlined in the agreement.

Mr Finlay said that under the agreement, Mr Gallagher and Mr Cousins would undertake to the court not to become directors of any Irish company for a period of five years from yesterday.

Mr Hugh O'Neill SC, for Mr Gallagher, and Mr Lyndon MacCann, counsel for Mr Cousins, gave the undertakings to the court.