LONDON--Lloyd's of London was handed a major victory last week when it won the Jaffray vs. Lloyd's fraud case, but some names may seek an appeal, citing a recent U.K. human rights law.

Before a packed courtroom at the Royal Courts of Justice in London, Mr. Justice Cresswell ruled that Lloyd's was not guilty of making fraudulent misrepresentations to names and potential names over the period from 1978 to 1988.

The judge added that he hoped this ruling would mark an end to litigation against Lloyd's on the matter of asbestos-related losses. "It is high time that Lloyd's and related litigation here and overseas comes to an end," he said.

"This is a landmark decision that closes a distant and troubled chapter in Lloyd's history," said Lloyd's Chairman Max Taylor. "For five months during the trial, the names were given every opportunity to air their grievances in court. It has been a thorough, lengthy and exhaustive process, culminating in the judgment we were always confident we would receive," Mr. Taylor said.

The suit, which involved 216 names-individual investors at Lloyd's-was originally filed by property developer Sir William Jaffray, who launched the case as a countersuit to Lloyd's debt-recovery proceedings related to asbestos losses (BI, July 24; June 19). The names charged that senior figures at Lloyd's had made false representations in bro-chures, global reports and accounts and had concealed from names the true extent of the asbestos-related losses about to hit the market in the 1980s.

The names contended they had been persuaded to invest in Lloyd's as part of a so-called "recruit-to-dilute" policy. That policy, names charged, sought to bolster Lloyd's capital to prepare for asbestos-related claims that executives knew would cripple the market. Asbestos claims, along with a series of natural disasters, resulted in Lloyd's sustaining losses of L8.1 billion ($11.71 billion at the current exchange rate) over the years 1988 to 1992, prompting Lloyd's to develop its reconstruction and renewal plan in 1996. That plan, among other things, created Equitas Ltd., the runoff reinsurer for Lloyd's pre-1993 long-tail liabilities.

The names in the case had rejected the 1996 R&R settlement offer by Lloyd's and refused to pay premiums into Equitas. Lloyd's, which had to pay those premiums itself, can now seek to recover those debts from the names.

While the judge acknowledged that there may have been negligence on the part of certain members' agents in their syndicate and portfolio selection advice to names, he rejected names' allegation that the Committee of Lloyd's had deliberately conspired to conceal information from them. The names had accused 33 senior figures at Lloyd's, including former Chairmen Sir David Rowland and Sir Peter Miller, of concealing from them the true extent of Lloyd's exposure to asbestos-related claims and fraudulently painting a healthy picture of Lloyd's financial status in the global reports and accounts. Mr. Justice Cresswell ruled that at all times during the period in question, the Committee of Lloyd's had acted honestly.

But, the judge said, "The catalog of failure by underwriters throughout the 1980s is staggering and brought disgrace on one of the city's great markets." Names, regardless of whether they had accepted the 1996 R&R plan, were "innocent victims" of this failure, he said.

In handing down his verdict, Mr. Justice Cresswell suggested that an independent panel, set up by Lloyd's but staffed by independent legal advisers, should be created to settle matters of debt collection and the treatment of the so-called refusenik names. He said that while it was not within his jurisdiction to order the establishment of such a panel, he would strongly recommend that the Council of Lloyd's meet within the next two weeks to discuss the matter.

Caroline Wagstaff, head of marketing at Lloyd's, said that the door had always been open to names to discuss with Lloyd's the settlement of their debts. "Obviously, we will take the judge's suggestion on board," she said.

The Jaffray case is the last that can be brought against Lloyd's in U.K. courts over allegations of fraud with regard to asbestos-related losses from the period 1978 to 1988. However, Lloyd's hopes that the verdict would bring an end to asbestos-related litigation were dealt a blow with the news that some of the names will seek to appeal the decision under the European Convention on Human Rights, which was signed into U.K. law in early October.

The names claim that Article 14 of the 1982 Lloyd's Act-in which Parliament granted Lloyd's immunity from suits charging gross negligence, permitting only fraud-related litigation-contravenes their rights under the U.K. Human Rights Act.

One name present in court addressed the judge and said: "I contend that this is unlawful under the European Convention on Human Rights. Lloyd's remains immune from lawsuits apart from fraud. This is unlawful. We should have been allowed the simpler option of bringing a case of negligence." He contended that while the Jaffray names had been unable to prove fraud, they had presented a case that there had been negligence at Lloyd's.

Ms. Wagstaff said that Lloyd's believes that any attempt to contest the verdict invoking the Human Rights Act would be unfounded. "This judge has ruled that there was no misrepresentation and, therefore, there was no negligence," she said.

"Allegations that have been made on and off for a decade by disgruntled names have been utterly disproved. The judge made it very clear from the beginning this would be the last opportunity for names to raise these allegations," said Mr. Taylor. "The terms of this judgment mean the Human Rights Act issues being raised by names are completely irrelevant to this case," he said.

Mr. Justice Cresswell granted the names and their lawyer, Simon Goldblatt, 12 days to provide the court and Lloyd's counsel, Charles Aldous, with a demonstration of how they will rely on the Human Rights Act in any appeal proceedings. The court will reconvene Nov. 23 to discuss the matter, as well as other issues arising from the judgment, such as costs.