A consultant plastic surgeon who complained about sexist and racist behaviour among senior hospital colleagues is believed to have accepted £500,000 to settle an employment tribunal claim.

Derriford hospital at Plymouth, Devon, admitted that serious personality clashes between colleagues "within and outside" the plastic surgery department made it impossible to bring back Judy Evans, 49, who was suspended on full pay nearly two years ago. The hospital said that strife between doctors in the department was affecting its ability to recruit new staff.

A 14-day tribunal hearing was due to have started on Monday, but a deal was agreed by the end of the day. The tribunal had been expected to hear claims that a macho culture existed in Derriford whereby women and ethnic minorities were discriminated against.

Hospital managers have conceded the plastic surgery department was beset by difficulties and that its immediate future was threatened. Another plastic surgeon, Krish Kumar, is preparing a tribunal case against the hospital alleging racial discrimination.

Dr Evans's MP said yesterday that a string of allegations had been made to him by staff. John Burnett, Liberal Democrat MP for Torridge and West Devon, said he would be calling for a debate in the Commons. "I've had a series of consultants and other employees of the hospital come to see me with serious complaints about personnel management. These are serious matters which should not be swept under the carpet."

The row between Dr Evans and the hospital began with an incident in February 1999 when she backed a trainee plastic surgeon who complained that a male consultant had made a racist remark.

The trainee, a British woman of Nigerian ancestry, was allegedly told: "You are not operating on bloody Nigerians now. These are my patients - they are normal human beings."

Soon after, two consultants, including the surgeon said to have made the remark, made complaints about Dr Evans's work and she was suspended.

Dr Evans believed she had been victimised with an attack on her competence because she had stepped in to defend the black trainee.

An independent investigation found no problems with the bulk of her work - which was in skin cancer - but a higher than expected rate of complications in breast surgery, and in head and neck cancer. She had wanted to return to Derriford to concentrate solely on skin cancer.

Plymouth Hospitals NHS trust, which runs Derriford, declined to confirm the size of the financial settlement yesterday. However legal sources unconnected with the case said it was likely to have been £500,000.

The money will come from the public purse, as the NHS does not use an insurer. It will either come from the trust's budget or in a loan from central government. There is no cap on tribunal payouts in sex discrimination cases.

The trust now hopes to recruit three new consultant surgeons to plastic surgery. The male surgeon who allegedly made the racist remark has left. He is understood to have denied being a racist.

Chief executive Paul Roberts said in a statement: "Like the rest of the NHS the trust takes equal opportunities very seriously. These events have inevitably raised questions around equal opportunities, and I would wish to confirm my commitment to ensuring that our arrangements at the trust are in line with national guidance and rigorously applied."

In the same statement Dr Evans said: "I welcome what Paul Roberts has said. I have no doubts about his personal commitment to equal opportunities issues. I regard this episode as closed and look forward to the challenge of developing my career outside of Derriford hospital."