Nurses accused of sex abuse awarded £400,000 for libel

A council that published a report accusing two former nursery nurses of sexually abusing children was facing a £4m legal bill last night after a libel trial judge ruled that the allegations were untrue.

Mr Justice Eady awarded Dawn Reed, 31, and Christopher Lillie, 37, £200,000 each against a team of social-work professionals commissioned by Newcastle City Council to investigate their conduct.

The team's report was "a shambles" and contained untrue allegations of the utmost gravity, Mr Justice Eady said. Ms Reed and Mr Lillie had earned their damages "several times over" because of the "scale, gravity and persistence" of the claims. "What matters primarily is that they are entitled to be vindicated and recognised as innocent citizens who should be free to exist for what remains of their lives untouched by the stigma of child abuse," he said.

The judge rejected the applicants' claim for libel against the council, ruling that it had a defence of qualified privilege.

But the council will still pay damages and legal costs – a £4m bill according to its chief executive – awarded against the review team it employed. Dr Richard Barker, a social worker in an academic post at Northumbria University, Newcastle; Roy Wardell, a former director of social services for Barnsley Metropolitan Borough Council; Jacqui Saradjian, a clinical psychologist; and Judith Jones, a senior social worker.

The council engaged the team in 1995, the year after the nurses were acquitted of 11 child abuse charges. The council allowed the team to ignore the court's ruling and revisit the criminal charges, to satisfy a public desire for "procedures compliant with the principles of natural justice", Mr Justice Eady found. The result was the inquiry report Abuse in Early Years, which was delivered in November 1998. It found that Mr Lillie and Ms Reed were guilty of dozens of instances of abuse.

Newcastle's daily newspapers, The Journal and the Evening Chronicle, were sued for every story that referred, directly or indirectly, to the report's findings. Their qualified privilege was weakened by the publication of material beyond the bounds of the report. The papers had also argued that the allegations were true – a defence of justification – but settled out of court in February.

Tony Flynn, leader of Newcastle City Council, and the review panel insisted last night that they had worked in a spirit of public duty. "In our desire to address the parents' concerns and to show our commitment to protecting and supporting all children in our care, the council, acting in unity, did what we genuinely believed to be the best at that time," Mr Flynn said.

The review team said it was shocked and upset by the judge's finding that it acted with malice, saying it had "worked long and hard in difficult circumstances''.

Families seeking compensation from the council for their children may now find the judge's dismissal of the allegations working against them. "This decision has shattered us," one mother said yesterday.