An Oxford college’s three and a half year battle to oust its dean amid claims of scandalous behaviour, unsound judgment, avarice and sexual harassment has ended in a settlement involving a substantial payoff.

Martyn Percy, the dean of Christ Church, will step down voluntarily from his position after a mediation process, the college said in a statement. An allegation of sexual harassment has been settled, and an employment tribunal scheduled for next year will not go ahead.

The college will pay a “substantial” sum in compensation to Percy and reimburse his legal costs, the dean’s supporters said. The college has also agreed to an independent review of its governance.

The dispute, which began with Percy’s suspension in 2018, has cost millions of pounds and caused serious reputational damage to the 476-year-old college, which has produced 13 British prime ministers, 10 chancellors of the exchequer and 17 archbishops.

In December, Lord Patten, a former cabinet minister who is now chancellor of Oxford university, said the “protracted and ongoing dispute” was damaging the university’s reputation. In 2020, the Charity Commission also said the dispute was “damaging to the reputation of [the college], and affecting its ability to govern itself”.

The statement from Christ Church, issued on Friday, said “a resolution has been reached that is acceptable to all parties” after mediation “to resolve a number of outstanding issues” between the dean and the college’s governing body.

It added: “The individual who made the allegation of sexual harassment against the dean has agreed to settle her claim in terms which on her request are confidential.”

It was alleged that the dean briefly stroked and commented on the hair of an unidentified woman, an allegation that Percy denied.

In a separate statement, the woman said: “I am pleased that the dean has agreed to step down … and, in return, I have agreed to settle my outstanding claims against him.” She thanked Christ Church for supporting her right to make a complaint.

In a statement, Percy said: “While the past four years have often been harrowing, I have drawn great comfort from the unwavering support from colleagues, alumni and friends … Christ Church has been around for nearly 500 years and I sincerely hope it flourishes for many centuries to come. I hope the independent review overseen by the Charity Commission will succeed.

“I sincerely hope that the same standards in public life we have come to expect of our most cherished national institutions – including integrity, transparency and accountability – will flourish and bear fruit here.”

One of Percy’s supporters accused the college of conducting a “witch hunt” against Percy. Another said the dispute had “riven the college, cost millions of pounds and caused untold distress, unhappiness and harm to those caught up in it”.

At the heart of the dispute was Percy’s pay and his efforts to reform the college’s governance. He was originally suspended after being accused of behaviour of an “immoral, scandalous or disgraceful nature”, the wording of the college’s statutes under which a dean can be removed.

The college hired Sir Andrew Smith, a retired high court judge, to chair a tribunal on the dispute. After a hearing behind closed doors on June 2019, Smith dismissed all 27 complaints against Percy and ordered his reinstatement. However, efforts by the governing body to remove Percy from his post continued.

As well as enormous legal fees, the dispute is believed to have cost the college millions in cancelled bequests and donations.

Percy, who was appointed in 2014, will step down in April.