Closing Statement of Sir William Jaffray
Jaffray v Llloyd's, Monday 10th July 2000
The following is a sworn statement, placed in evidence on Monday, the 10th of July 2000 in Lord Justice Cresswell’s Commercial Court in London England. (Jaffray vs Lloyd’s), in which Lloyd’s stands accused of fraud against their individual investors, known as "Names". At no time did Justice Cresswell correct or question the facts Sir William placed into the court record. Lloyd’s leading council, Mr. Charles Aldous, listened in glum silence and made no attempt to interfere.
SIR WILLIAM JAFFRAY: May I hand up a set of accounts on each side, and one for your Lordship?
MR JUSTICE CRESSWELL: Thank you very much. So far as I’m concerned, Litigants in Person should either stand or sit, whichever is the most convenient. If you are happy standing, so be it, but if you would prefer to sit, I’m equally content. Yes, Sir William?
SIR WILLIAM JAFFRAY: My Lord, as a sort of brief program if I may suggest, my speech has, as you will see, appendices attached which includes evidence which I want to be formally adduced into the record. I’d like to swear in the speech and additional evidence formally. I would then like to read the speech and refer briefly to the appendices.
MR JUSTICE CRESSWELL: I think the best course, Sir William, is if we take the closing speech first, and then see what is left.
SIR WILLIAM JAFFRAY: Then, at the end of that, I’ll deal with the status of the evidence in the appendix.
MR JUSTICE CRESSWELL: We’ll take those in turn and see what’s there.
SIR WILLIAM JAFFRAY: Very well.
This trial to end all trials has turned this Court into a crucible of fire, the last shot in a decade of legal warfare which saw its genesis in the deliberate concealment of asbestos liability. It was Lloyd’s choice to run the gauntlet with the Names. Their choice, to conceal the avalanche of asbestos claims flooding in to the London Market since the 1970s. Their choice, to construct a false prospectus to promote the illusion of profitability and a rosy future. Their choice, to recruit new Names to absorb past losses and postpone a day of reckoning. And in the wake of 20 years of larceny and deceit, how could Lloyd’s presume to hold its former hegemony unimpaired?
Let us go back in time, to a mild May morning in 1980, when a thick manila envelope thudded on to the desk at Lloyd’s central. It was a familiar package, a report from US Attorneys, a grim analysis of the unfolding horror story about which we are now so well acquainted. It referred to Joseph Califano’s statement released two years earlier, when, as US Secretary for Health, he stated that an estimated 13 million workers had been afflicted, of which four and a half million had suffered heavy exposure in naval shipyards. Predicting a third of those shipyard workers had died or were likely to die of asbestosis, one primary US insurer informally indicated that it expected to receive 7,000 claims by the year end.
Subsequently, the Secretary expanded on that awful statistic by predicting 67,000 people would die of asbestosis each year over the next 30 years. Taking their cue, the attorneys strongly recommended Lloyd’s to ensure their underwriters took account of these factors when determining loss reserves to be posted on these claims. A few months later, the Attorneys’ lawyer, Mr. Dempsey, noted that "it is widely accepted that asbestos liability will be the most significant legal and loss cost issue in the history of the insurance industry."
It was not a rosy future for Lloyd’s, and a major crisis beckoned. Of course, the floodgates for claims to pour into London were already well and truly open. The decisions in Borel and Forty-Eight Insulations had already indicated future developments, and Lloyd’s awaited the Assured 23 decision with some trepidation. Certainly, the deep pocket approach by US jurists was unmistakable, and we have seen how those implications struck fear into the hearts at Lloyd’s central.
So on 5th August 1980, and with the blessing of Sir Peter Green, Lloyd’s leading underwriters duly announced the formation of an Asbestos Working Party to closely monitor the incipient crisis. Ted Nelson chaired the new committee, which included Messrs. Rokeby-Johnson, Jackson, Skey and Tayler. It is worthwhile to note that apart from Mr Tayler, who was detained elsewhere, only one of these individuals bothered to attend court to testify.
No less remarkable was the coincidence that both Mr Nelson and Mr Skey also served on Lloyd’s ruling committee. That cozy proximity to the ruling hierarchy would prove invaluable to Lloyd’s. It is true to say that the establishment of the AWP was a reaction by Lloyd’s to a crisis which threatened to bankrupt the Market. AWP’s liaison and its monitoring role with US Attorneys ensured Lloyd’s central had all the information they needed at their fingertips if they wanted it.
By May l98l their worst fears were realized, in the advent of the Assured 23 decision. It was academic whether the MacAvoy prediction of a $38.billion hit for the industry or the Commercial Union estimate of $l70 billion proved the more accurate. In the long run, either way Lloyd’s was facing extinction and they knew it. By the end of 1981 Lloyd’s and the AWP held details of 15,000 known claims on their Alexander Grant database, the figure escalating at the rate of 400 per month. Although this data would be made available to Lloyd’s and their underwriters from the month of February 1982, the financial implications were so horrendous that Lloyd’s chose not to give the AWP authority to provide projections. Far from abating, the crisis now threatened meltdown for Lloyd’s.
So it was not without reason that the deputy Chairman, Mr Murray Lawrence warned his colleagues of the dangers lying ahead, at a meeting of Panel Auditors which took place on 10th November 1981. "It cannot be over-emphasized how serious the losses would be as a result of asbestosis" he said, "and where syndicates had reinsurance protection, the scale of the losses may be sufficient to bankrupt the reinsurers." Those words hit home with a vengeance, words which showed how well Mr Lawrence understood the seriousness of the situation.
What was done with that knowledge? With Murray Lawrence’s blessing, Mr Kiln was given instant authority to issue a directive that there must be no mention of asbestos in the Audit Instructions. The sense of urgency is almost tangible: Within four weeks this novel directive found its way into the formal Audit instructions.
Asbestos had now become the taboo word at Lloyd’s, and throughout all his time on Lloyd’s Council, Colin Murray attested to a complete absence of specific Audit guidance on this most important subject. This strategy for nondisclosure was a seminal point. A key decision had been taken. The crisis must be hushed up. And nothing must be done to upset the recruitment drive, which was still at a tender stage despite being in operation since the mid1970s. So in furtherance of a policy of silence, Lloyd’s hierarchy authorized the dispatch of another instruction to Rota officials, warning them to make no mention of asbestos in their meetings with the raw recruits.
Although Lloyd’s had engineered an explosive surge in membership from 7,710 members in 1975 to 19,137 by 1981, many more would be needed to absorb the asbestos losses, rather like so much financial blotting paper. The unindexed means requirement of £100,000 throughout the highly inflationary l970s had proved a powerful magnet, as well as the introduction of the mini-Name. In due course, the introduction of guarantees backed by a rising property market would provide a powerful escalator in its own right.
This was a most vulnerable moment in Lloyd’s checkered history. The momentum for "recruit to dilute" had to be sustained at all costs. On the other hand, an exodus would be an unmitigated disaster. Consequently, Lloyd’s set its membership department an annual target level for bringing in new members. If, my Lord, I may refer briefly to Appendix A, you will find on the second page a rather splendid color chart prepared by Mr Bradley, who is here in Court. If I may take you to the green line, which is net premiums, and the dark blue line, which goes up like a mountain, which shows Names recruited. It’s the gap between the green and blue that, in diagram form, proves recruitment, but otherwise you would expect those two lines to run in close proximity.
It was at this critical juncture the secret policy at Lloyd’s central had now crystallized: "Tell the Names nothing, and for God’s sake, close the 1979 year of account." The immensity of the problem came up on the agenda at the Panel Auditors Meeting with Lloyd’s UAAD on 15th January 1982, when Ted Nelson told the auditors about the 15,000 claims sitting on Lloyd’s database at Alexander Grant. Lloyd’s wanted the Accounts signed off, but the Auditors protested that that could not be done unless very large provisions were made.
This impasse triggered the letter sent on 24th February by Neville Russell, on behalf of six leading firms of Panel Auditors to the Manager of Lloyd’s Audit Department. By explaining how impossible it was to determine the extent of asbestosis claims, and looking to Lloyd’s centrally for instructions, Neville Russell was clearly responding under pressure. This unusual event clearly demanded very specific action from Lloyd’s ruling committee.
That action translated into a letter from Ken Russell, sent in reply on the 18th March to the Auditors. It was evidently approved by the highest echelons in Lloyd’s. It firmly indicated that Lloyd’s would stay silent on syndicate reserving for asbestosis and decline to make any recommendation for the setting of a minimum IBNR, a methodical decision taken by Lloyd’s ruling committee. It was a faithful image of how Lloyd’s intended to turn a blind eye. In hoping the future might pay for the past, an ostrich-like mentality emerged, and the duties which Lloyd’s owed as a Regulator were thrust aside.
This policy of postponement was clutched by Sir Peter Miller with both hands. He said, "They (the Society) have to carry on trading while the old years claims on asbestos and pollution are dealt with, yes. Much more difficult to do it if you have stopped trading." Although Mr Randall’s letter to the auditors enclosed the now infamous Murray Lawrence missive on the importance of asbestos reserving, it must be patently clear by now that this enclosure was not properly circulated, but to all intents and effects suppressed. Sir David Rowland’s self-contradictory statements that the letter was sent to all managing and members’ agents failed to rebut the testimony given by Mr Robin Kingsley that the letter was suppressed. Mr Kingsley’s evidence was corroborated by another Members' Agent, Mr Cavenagh-Mainwaring and an eminent Lloyd’s underwriter, Mr MacKinnon. And lest we forget, there is additional evidence before the Court from many other Agents who did not receive the letter.
Fatally for Lloyd’s defense, they omitted to carry out a full investigative survey of all managing and members’ agents prior to coming into Court. But perhaps Lloyd’s sensed it would be futile to debate the issue further by bringing in other members’ agents to testify to a contrary view. The final nail in Lloyd’s coffin was the evidence given by their own Council members, Mr Dennis Fredjohn and Sir Eddie Kulukundis, both of whom confirmed they had never seen either the Neville Russell letter or the enclosure from Murray Lawrence. Even the notorious Mr Posgate would say in testimony for the case of Hong Kong Bank and Hendrie in 1994 that "It was a protective letter that had to be written, even if no-one was going to honour it."
Thus can we now contend that the Murray Lawrence letter was written to keep Lloyd’s record bright and the Names in the dark. Such policies of concealment were necessarily accompanied by a pretence of regulation whilst discarding any attempt to apply it. We have been afforded a glimpse of that secret knowledge from an official committee minute written on the 9th December 1982, which recorded that "The average cost (of asbestos) was still within the original estimate of $l25,000 plus $10,000 expenses."
This reference in the minutes shows firstly that they had received and commented upon earlier developments and secondly, that there were earlier deliberations which are no longer recorded. Dennis Fredjohn had not seen this minute but said he would have been worried about the level of reserves carried by syndicates if he had known about it. Sir Eddie concurred and both councilors considered that the disclosure of the asbestos scenario to external Names would have been an integral part in the performance of their duties on Lloyd’s Council. The councilors and Sir Kenneth Berrill averred that the subject never arose on the agenda throughout their entire tenure of office, presumably because, along with other serious matters of policy, the subject would have been dealt with by that inner circle known as the "0" Group. The omission of any satisfactory explanation for the absence of proper records of meetings is suspicious and at least suggestive of the practice of shredding incriminating evidence.
Let us now turn to the Brochure for Applicants for underwriting membership. This is essentially a document which aimed to present Lloyd’s as an upright institution offering participation in a market based firmly on principles of probity, excellence, reliability and overall profitability, over a period when it was known by those in control to be in danger of collapse. It was a lie promoted by Lloyd’s to willfully deceive both existing and prospective members.
It was in this context that recruitment became the partner to concealment within the Council under the tenure of Sir Peter Miller. In a letter to a Name written in September 1984 he stated that the brochure "describes Lloyd’s very fully" and as "information (which) should form a useful basis on which a prospective Name and or his professional advisers can frame questions..." and, as he confirmed to Neill, " to make sure that the prospective Name has an informed choice...." Thus in justification of his philosophy on recruitment, Miller told Neill: "There was a need for capacity. Lloyd’s was perceived a good place, a profitable place in which to trade in the business of insurance, or if you will, to invest."
The truth is rather different. If there was a need for capacity, its purpose was to answer the prognosis expressed by Mr Bryan Kellett to the Inland Revenue, that "We are under-reserved, what concerns us is how the industry can survive its under-reserving." Miller’s answer was more capital from more Names to pay for the accumulating claim burden. And we can be sure that Miller and his colleagues on the Council knew the extent of the perils facing Lloyd’s because they averred through their Brochure that they monitored legislative, regulatory and judicial developments overseas. That implied full knowledge of Borel, Forty-Eight Insulations and the Assured 23 decisions.
But how were prospective Names meant to understand how to arrive at their "informed choices" in Miller’s "profitable place"? After all, the Lloyd’s syndicate accounts were not audited. As Charles Sturge observed, "Nothing was published by way of quantifiable data either by syndicates or Lloyd’s", merely anodyne reassurances that "reserves had been strengthened, or claims had peaked." "The Market as a whole continued when reporting in 1989 and 1990 to be fairly complacent about the problem of APH", Sturge said, before adding, "I can state as a fact that MPRs did not cater to asbestosis losses.... (and) I am not persuaded that the reserves extended to all known claims for asbestos, let alone IBNR for ultimate liability." Colin Murray did not disagree, confirming that business would go elsewhere if MPRs were set at too high a level.
There is surely an obvious corollary here, for if the MPRs had been set at a level sufficient to ensure responsible reserving, then syndicates would have reported losses instead of profits. Such a development would have reversed the all-important recruitment drive, which, as we will see, was given an extra fillip in the late 1980s. If Names had been told that Lloyd’s was dishonest and untrustworthy, that the market was riven with insider trading, preferential underwriting, and numerous malpractices like LMX—would we have joined Lloyd’ s? No; never.
There was no proper explanatory booklet describing the intricacies of facultative insurance, treaty insurance, the LMX market, the practice of underwriters to step outside their chosen categories of business, the effect of liability business on the annual venture and so forth. In the absence of such vital information, what meaningful discourse could there be between an Agent and his Name? What steps had Lloyd’s taken to assist Names in appraising the advice given by their Agents, who, it is now claimed, were solely responsible for the profitability of a Name’s unlimited commitment? No explanation has been offered by Lloyd’s.
Instead, the trial has revealed how much knowledge Lloyd’s insiders possessed, how they used it to line their own pockets by dumping liabilities through insider reinsurance and how they were motivated to keep the information to themselves. This inner clique knew it would be disastrous to Lloyd’s and jeopardize its survival if the Names were told the truth. Why? Because the Names would have walked.
The link or motive between non-disclosure and recruitment is like the link in a chain. Break one and you break the other. Along with other Names, I accepted Lloyd’s claims that they were worthy recipients of our trust. To paraphrase Hiram Johnson, trust became the first casualty at Lloyd’s. It is a self-evident truth that good faith goes to the heart of good insurance, and Lloyd’s had built its bygone prosperity on the moral standards of Fidentia and Uberrimae Fides. Those standards were discarded when the insider runoff contracts were placed at Outhwaite, Merrett, and Meacock in 1981 and 1982. If the fraudsters participated on these syndicates, it would be a small price to pay in exchange for unlimited reinsurance protection of their massive Long Tail liabilities.
Little did the Names realize they were being invited to join Lloyd’s on the basis of caveat emptor, a switch in philosophy neatly summed up by Murray Lawrence, who was overheard to exclaim in exasperation when he became Chairman "Oh we haven’t believed in that rubbish for a long time!" He was, after all, a man of his time, quite content to see Market malpractices, such as rollovers, baby syndicates, LMX and other spirals flourish, provided of course it put money in their pockets. The Names, the capital providers, were regarded contemptuously as "sheep to be sheared", as Robert Hiscox observed.
If Names had been told that Lloyd’s was improperly reserved, and that the rigorous audit was a fiction, would we have joined Lloyd’s? No, never. Lloyd’s have made much play of the reinsurance to close. They have sought to convince the Court that when we joined Lloyd’s we accepted the principle of inheritance of past losses without any definition or limitation. Only Lloyd’s would have the impertinence, audacity and temerity to suggest the device enables them to plunder a Name’s stores! In their view of the matter, the RITC is a self-justifying mechanism which Lloyd’s wishes to operate as a license to steal money, a gateway through which they can foist undisclosed asbestos losses from antique policies upon unsuspecting Names.
It was not a view shared by Lloyd’s own Chief Executive, Alan Lord, who said "The system demands absolute equity between Names and that means that the reinsurance to close must be right." Significantly, Lloyd’s own long-serving Council Member Sir Eddie Kulukundis also repudiated our opponent’s extraordinary assertion, regarding RITC as a normal risk area, less risky than the late reporting of catastrophe claims. A Lloyd’s-approved Members’ Agent, Mr Robin Kingsley concurred. The honourable thing to do," he said "was to leave the 1979 year of account open" in recognition of vast and unquantifiable asbestos claims, claims which could not be carried forward through the purchase of an equitable RITC. Lloyd’s councilor Mr Colin Murray agreed, and I quote: "It was impossible to know exactly what, how many claimants there would be and what they would cost. It was impossible to know. . . the huge number of claims were not recognised by anybody. It wasn’t recognised within Lloyd’s. . . claims were incurred, yes, but not reported. . .absolutely—by definition."
However the honorable thing never happened, and the 1979 year of account was closed fraudulently and with great deliberation. "Members’ agents should have been alerted to a "holocaust situation developing" contended Mr Kingsley, "and that if we don’t take steps now, what are we going to be doing, it’s going to be fraud and everybody is going to go bust." But Lloyd’s possessed rather different priorities.
Ignoring the mandate to achieve equity, Lloyd’s saw closure of the 1979 year as essential in order to keep the recruitment program on track and to avoid upsetting passage of the 1982 Lloyd’s Bill. Lloyd’s roseate maxim of "trading through" must be inalienable from all assault. No matter that the asbestos losses weren’t possible to quantify; no matter that an equitable RITC could not be purchased; no matter that the RITC was incompatible with the annual venture; no matter that existing and prospective Names would be willfully deceived and drawn unwittingly into this scurrilous compact. The end justified the means.
In seeking acquittal of the charge of fraud, Lloyd’s now invites the Court to make their plunder lawful. If Names had been told that Lloyd’s was bust, not profitable, throughout the relevant period—would we have joined Lloyd’s? No, never. It was, however, essential for Lloyd’s to keep their new recruits sweet. Hence the global reports and accounts were the natural means for promoting the myth of a healthy and profitable image to the world at large.
A variety of Lloyd’s chairmen and senior officials put their names and reputations behind the aggregated results, through publication of their annual statements, statements which held the same status and importance as those attaching to a chairman’s report to shareholders in a public company. As Murray Lawrence affirmed, a Name joining Lloyd’s was being invited to put his trust in Lloyd’s and in the regulatory system. Sir Peter Miller appreciated that the aggregated results must be authoritative and reliable, informing the Court that "no underwriter can close a syndicate believing he is under- reserved; he is not permitted to do that."
Similarly, Ian Hay Davidson’s successor as chief executive, Mr Alan Lord confirmed that Names could safely rely upon the "Globals", stating in evidence that: "These are our figures, these are the Market’s profits, these are the Market’s reserves," adding for good measure, that "no external Name could have known a section of the market was seriously under-reserved. It goes without saying that the global results would be inevitably distorted wherever under-reserving may occur"—an opinion which Sir David Rowland did not attempt to dispute.
In reality, all the profits which Lloyd’s declared throughout what is now termed the relevant period (1978-88) simply did not exist. The requirement for rigorous audit, as ordained by Statute under the Insurance Companies Acts of 1974 and 1982, and which found its way into the Brochure for Applicants, had never been honored in the observance. Thus Lloyd’s failure to adhere to this published promise became a fraudulent misrepresentation. I refer briefly, my Lord, to appendix B: there are five sheets of paper, sections 82 through 86.
Mr. Justice Cresswell: Thank you very much.
Sir William Jaffray:
Let us now see how the events of 1985 demonstrate in stark relief the hypocrisy, deceitfulness and double standards prevalent at Lloyd’s. The dichotomy between what Lloyd’s confides to an audience of cognoscenti, and to external Names in public statements, is profound. Miller, of course, was content for his spokesman Robin Jackson to inform Senator Nickles, in testimony given on the 19th March 1985, that underwriters would need, "virtual clairvoyance and a near reckless courage to fix meaningful reserves for asbestos claims." Why did Miller fail to warn prospective Names that they would need to possess similar attributes if they wished to join Lloyd’s?
Perhaps Miller’s rank hypocrisy and deceit reached its apogee on Wednesday, 26th June 1985. To the members who attended morning assembly at the Underwriting Room for Lloyd’s Annual General Meeting, their Chairman confided that: " The International Insurance Market has been going through a severe crisis indeed… we face a storm rising to a whirlwind which has destroyed, particularly in America, more than a few insurance institutions. . . the problem lies in the utterly disastrous results of the American casualty book"—before pulling the ratchet back a little to adopt his more familiar refrain: "The area of greatest immediate potential profit is clearly in the Non-Marine Market and particularly the liability section."—words uttered in the context of a boast to his investors that there had been a 30% jump in capacity over the preceding year. Miller’s speech is a masterpiece of equivocal evasion, bearing in mind his evidence in trial that the General Liability Account was "a stinker".
Having done their best to advertise the alluring charms of his rosy scenario, Miller and his acolytes hoped they had stoked the fires of recruitment sufficiently to survive. Extra capacity was still desperately needed though, to soak up the asbestos related "horrors in the pipeline". It would be a close call if Miller’s prophecy of a market "bleeding to death" was to be forestalled. Still, as he saw it, Council had performed their "general duty to the membership at large, to manage the Society and… to maintain an orderly market." And, when giving evidence, that, "the Regulators had a duty to be certain insofar as humanly possible that there was a system in force to protect the interests of the Names in respect of any claim asbestosis or anything else." Some order! Some duty! Shortly afterwards, on 24th July 1985, his finance Director, Mr Moir was encouraged to put the screws on the Auditors to sign off unqualified accounts.
Witnesses called by Lloyd’s in this action have been at pains to maintain that the statutory requirement for self-regulation in the Lloyd’s market was limited to an obligation to provide a regulatory framework of sorts. However the Council was generally averse to interfering in the affairs of the individual syndicates except in the cases of the persistent failure to conform or in the cases of scandal (Sasse and PCW) or major disputes (Outhwaite). From a Name’s viewpoint, that notion could never be a satisfactory interpretation of Lloyd’s overall responsibility to manage the market effectively to an acceptable standard of honesty and integrity. In these instances and in evidence before the court it has become clear that Lloyd’s philosophy on this subject is merely the product of market traders anxious to avoid interference in their own business affairs.
In consequence there has been a tolerance, not only of under-reserving but also of numerous other malpractices about which we now know, including the LMX reinsurance spirals. It goes without saying that we would have avoided the devastating consequences of all these failures if, when applying to Lloyd’s, we had only been advised of the true position in terms of the asbestosis claims and the incompatibility of the RITC to function in Long Tail liability business.
The next event in the hall of infamy occurred in 1986. Lloyd’s advocates have constantly reminded us in Court that 1986 was a vintage year They seem to have forgotten that this result was achieved by arranging for pure year revenues to be whacked into the profit column instead of the reserve account. In truth, the profits were a mirage—but illusions are powerful things. The Global Report and Accounts for 1986 would serve its own purpose-- to draft in the final clutch of new Names.
They did not stand a chance. Once recruited, Lloyd’s thrust their shovels into their stores, as the "stair-stepping" exercise—of providing for asbestosis losses gently—was replaced with a massive catch-up of extra provisions. By the early 1990s virtually every syndicate contaminated with APH was forced to leave its year of account open. The trap which had been sprung on unsuspecting Names in the pivotal period of 1981 to 1982 was now closed; and we were henceforth denied an exit route. It’s my submission that this was known and expected to occur by those running Lloyd’s.
That a very substantial number of Lloyd’s syndicates were under-reserved has been established as common ground in trial. The responsibility for that under-reserving of latent claims can now be laid at the door of Lloyd’s Central. Lloyd’s councilor, Colin Murray, admitted it was not his policy to make provisions for asbestos unless he saw the horrors coming round the corner. "I under-reserved, no question" he said, before confessing that nobody at Kiln did any analysis other than for notified claims. If that approach was typical among underwriters, as he suggested, and known to other senior members of the Council, in my submission the case against Lloyd’s is proven on that ground alone.
How therefore, he expected the members’ agents to explain the downside of going into Long Tail syndicates, remains an enigma. Yet perhaps Mr Murray’s opinion in evidence, that the annual venture simply became unworkable except for Short Tail catastrophe business, provided a key admission—that it was impossible to achieve an equitable RITC in Long Tail insurance business within the structure of the annual venture. Apparently the "pay as you go" philosophy of reserving only to the end of each calendar year had now taken root, for if Lloyd’s had reserved to the ultimate, the game would be up. They decided to keep a square peg in a round hole. What had happened was that the essential safeguard of a fire-break in the contract between a new Name entering the Market, or switching to another syndicate, had been quietly and covertly abandoned, and with it, the effectiveness and legitimacy of Lloyd’s as its own regulator.
When the catastrophe losses hit Lloyd’s in the late 1980s, those events exposed the massive under-reserving of asbestos liability, an exposure which might otherwise have remained hidden. Without that grand conjunction of a cash-flow crisis, reserves for asbestosis losses might have been set aside gently for another 30 years or more. To reassure the Names that The Titanic would not sink, David Coleridge and others articulated Lloyd’s strategy of "trading through" to Names in an insidious appeal to their British phlegm.
When giving evidence, I was criticized for chasing losses down to the last extreme. It is rather ironic that Lloyd’s encouraged Names to do precisely that—to double their stakes in a rigged Market, a market-place which bore more semblance to a shady casino than a prudent place in which to invest. And what are we to make of some of Lloyd’s principal witnesses who cut so sorry a spectacle as they trooped through Court? Their evasive answers showed contempt for truthfulness.
Who can forget the practiced perjury of Sir Peter Miller, forgetful of who paid his underwriting losses? His protestations of ignorance about the identity of Council members who also served on the Asbestos Working Party were hardly credible, as Lloyd’s centrally oversaw its birth. For we can confidently assume the AWP would never have come into existence without the approval of Lloyd’s hierarchy. And how could he honestly assert ignorance of Attorney reports and reserving for asbestos when on the Council, yet proffer such divergent statements on the 26th June 1985 with such sincerity? How could this stranger to the truth profess such ignorance despite the briefings he received from his predecessor? After all, the fishing-trip letter from Sir Peter Green, relating "horrors in the pipeline", would have post-dated many discussions face to face. Improbable, therefore, was his confident assertion that asbestos was "a nasty head of claim but well containable within the system."
Colin Murray took an opposing view, closer to the mark—that it was impossible in 1981 to put an accurate price on the final cost of asbestosis, and it would be impossible to do so even today. How would Miller, the Regulator, know about containability unless he first made diligent inquiry? When pressed, he eventually admitted that under-reserving would demand "the utmost attention by council", before seeking, through sleight of hand, to distance himself from all responsibility, claiming instead that he had no reason to believe action about asbestos was called for. Yet, what honest purpose can be achieved if a regulator who invites member’s trust blames managing agents and auditors for an EQUITAS solution? "For Council in Lloyd’s is a supreme authority", said Alan Lord, "which can supervise, it can regulate, it can encourage, it can legislate".
Murray Lawrence adopted a rather different pose whenever answering awkward questions. . . Who can forget his smug complacency, or the penchant for trifling with the truth? Certainly he made an abiding impression as a fine product of a lawyer’s coaching skills, quickly feigning surprise at the suggestion that he might have taken fright over asbestos figures emerging in 1980. As his opinions on asbestos are a matter of record, for Mr. Lawrence to deny Lloyd’s solvency was under threat before the late 1980’s is little short of insolence and contempt for due process. He chose instead to elide answers to questions about foreknowledge, by suggesting that only with the benefit of hindsight could it be seen that the asbestos losses were unquantifiable. But if that absurd contention had any searoom, why did he have such difficulty in telling the truth about his infamous letter, at one moment saying he did not believe anyone had interfered with its distribution, and then conceding that somebody would indeed have done precisely that?
Finally, let us see how that master of equivocation, Sir David Rowland, performed in the arena. He eventually corroborated what Colin Murray had said about the impossibility of achieving equity in the reinsurance to close for Long Tail business involving asbestosis claims, confirming that even today the "tail" had not worked itself out, lending support to our contention that the finality offered by EQUITAS was little more than a mirage for capitulating Names. The square peg remained firmly in the round hole. And in another surprise aside, which showed disdain for what passed for regulation in the 1980s, he informed the Court that Lloyd’s was a marketplace, and the job of the Committee was to see it conducted business properly.
In due course we shall see that additional evidence suffices to convict Sir Peter Miller and his acolytes, for Sir David seemed adamant that it was the responsibility of the Regulator to see that businesses took proper heed of the information available. For the concept clearly contemplates an obligation, not only to create a regulatory framework, but also to supervise the performance. Still, Sir David’s advocacy of the "trading through" strategy, which underpinned his Task force Report in 1992, followed by reluctant revelation of exposure of huge under-reserving in the run-up to EQUITAS, patently showed where his priorities lay. They lay in the survival of the Market, over and above the interests of the Names. It was another exposition of the paramountcy of the Marxist/Communist philosophy of the end justifying the means, even in the wake of massive fraud.
Towards the end of giving evidence, Sir David’s mask of equanimity began to slip. For someone who profited so greatly at the Lloyd’s enterprise, his comment that many Names’ stories were heartbreaking smacked of insincerity. Sufficiently irritated to utter dark oaths under his breath after the Court rose, this individual displayed no remorse or contrition for the suffering heaped needlessly upon the Names.
In passing, we should remember that Reconstruction and Renewal was first and foremost a salvage operation for the Market, to ease the entry for corporate capital. It would be a misnomer, therefore, to regard R&R as a rescue operation for Lloyd’s Names—who received further monetary demands for compulsory reinsurance into EQUITAS. Nor should we forget that it was Sir David who was responsible for turning a voluntary offer into a mandatory one, in clear breach of the written assurances provided by Mr Ron Sandler.
In general, the Lloyd’s witnesses gave the impression of annoyance at having the smooth progress of their comfortable lives rudely interrupted by the inconvenience of attending Court on charge of fraud. A palpable arrogance was in the air. Unable to rebut the charges laid against them, they offered coached responses which invariably bore ample testimony to the efforts made by Freshfields. Their factory of 49 lawyers has been largely responsible for the manufacture of witness statements to build a monolithic edifice of blanket denial of responsibility, and we say, to seek to manipulate this trial and its result.
Strange as it may seem, it is still Lloyd’s case that the Members’ Agents held the ultimate responsibility for informing Names about the concealed asbestos liabilities. Yet the evidence in trial has pointed the finger of deliberate deceit by Lloyd’s towards its own mischievous motive and desire to suppress and conceal the information at their fingertips. Willfully and malevolently did they beguile the Names to join their "well administered and profitable" place, in the full knowledge of the horrific liabilities which lurked concealed beneath the surface. For how could the Members’ Agents be held responsible for a truth that they did not know? It is a question which Lloyd’s has signally failed to answer.
Thus, through a process of elimination, can we aver Lloyd’s centrally held the ultimate responsibility. It was a fraud perpetrated by the hierarchy, on the grandest scale. In this thumbnail sketch of what historians may call "Limegate", it should be noted that it is not necessary for the claimant Names to show conspiracy at all, simply a lack of honest belief in the representations made—representations which were made fraudulently with the specific intention to inveigle us into becoming members; and—once we had made what we were led to believe was a prudent investment—to steal our money by diverting our resources to meet the deeply concealed asbestos losses.
By 1982 Lloyd’s was bust, as Murray Lawrence explained vociferously to Brokers at a private dinner in 1986. The elected officials with whom we reposed our trust knew that to be undeniably true, but concealed that truth from us. They and the institution alone must bear the ultimate responsibility, for they are responsible for all the consequences that have been so wrongfully imposed upon the claimant Names. In our submission, Lloyd’s has been proved fraudulent in the manifest misrepresentations which they have made: a fraud most foul, intentionally perpetrated upon the Names to guarantee the Market’s survival. They brought us in by the thousand and broke us by the thousand.
To bring this case to Court has been a long, long struggle; made far more difficult by Lloyd’s deliberate tactic, expressed through the actions of those miscreants who inhabit Lloyd’s debt collection department, Messrs Coldbeck and Holden. Instructed at all material times by Lloyd’s Council, they have continued their attack on claimant Names, as if the judgment of this court can be gainsaid. There is, my Lord, just today a correspondence between Lloyd’s and Freeman Goldberg at Appendix C. However, all claimant Names now welcome the statement made by Lloyd’s through leading counsel, Mr Charles Aldous on Thursday 6th July 2000, that the enforcement of all Orders and judgments obtained against the Names who are party to this action be stayed generally pending judgment.
We welcome too the element of realism that has recently made itself apparent. Lloyd’s knows that there is little or no commercial advantage in taking any further legal action against the claimant Names, whichever way the judgment of this Court may fall. With these thoughts in mind, I hope it would not be considered churlish to propose that in respect of central fund writs, these too can be stayed generally until judgment of this court is known. In that respect, I propose to move for amendments to sections 6(a), 6(b), 7 and 9 of Lloyd’s Statement with assistance and support of leading counsel.
In this, my valedictory address, it seems only right to pay a little tribute. Throughout my three-year stint on the UNO Committee I had the privilege to make the acquaintance of nearly every claimant Name. Their courage, dignity and principled stand against a corrupt and over-weening Lloyd’s has been for me a humbling experience as well as a daily inspiration.
If judgment comes on All Saint’s Day, we aspire to having passed the threshold fraud point with flying colours. That, and that alone, would presage an end to this endless litigation with Lloyd’s, a collision which Lloyd’s actively sought and for which it seldom showed a waning appetite, despite the insincere assurances of Mr. Paul Archard to the Court. We seek and assert our lawful right to recompense for fraud by Lloyd’s—first-class compensation for the wreckage of our lives, so that we may depart the wasteland of destruction which has been so wantonly imposed upon us. We seek compensation that our purported debts be cancelled in perpetuity, not through some transient reinsurance into EQUITAS, but a clean break settlement which will stand the test of time.
We live in a country which has sadly lost its sense of certainty and confidence of purpose. So let the judgment of this honourable Court send out a message so uncompromising that no entity, however mighty, is above the Law! Let the verdict thunder out the dictum of Lord Justice Fuller: "Be ye ever so high, ye are not above the law!"