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losing 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 Cresswells Commercial Court in London England.
(Jaffray vs Lloyds), in which Lloyds 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.
Lloyds 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 Im 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, Im 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. Id 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, Ill deal with the status of
the evidence in the appendix.
MR JUSTICE CRESSWELL: Well take those in turn and see whats 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 Lloyds 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 Lloyds 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 Lloyds 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
Califanos 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 Lloyds 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 Lloyds, 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 Lloyds 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 Lloyds central.
So on 5th August 1980, and with the blessing of Sir Peter Green, Lloyds
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 Lloyds ruling committee. That cozy proximity to the ruling
hierarchy would prove invaluable to Lloyds. It is true to say that the
establishment of the AWP was a reaction by Lloyds to a crisis which
threatened to bankrupt the Market. AWPs liaison and its monitoring role
with US Attorneys ensured Lloyds 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 Lloyds was facing extinction
and they knew it. By the end of 1981 Lloyds 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
Lloyds and their underwriters from the month of February 1982, the
financial implications were so horrendous that Lloyds chose not to give the
AWP authority to provide projections. Far from abating, the crisis now
threatened meltdown for Lloyds.
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 Lawrences 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 Lloyds, and throughout all his
time on Lloyds 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, Lloyds 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 Lloyds had engineered an explosive surge in membership from 7,710
members in 1975 to 19,137 by 1981, many more would be
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