THE lives of two former nursery workers were ruined by a report which accused them of being members of a paedophile ring, a High Court judge was told yesterday.

Adrienne Page QC, for Christopher Lillie and Dawn Reed, said the report was published more than four years after they were acquitted of indecently assaulting young children at a nursery in Newcastle.

Mr Lillie, 37, and Ms Reed, 31, claim they were libelled by Newcastle City Council; and authors of the report Abuse In The Early Years, Richard Barker, Judith Jones, Jacqui Saradjian and Roy Wardell.

The pair are also suing the Newcastle Chronicle and Journal Limited for libel over 84 articles and letters published between November 1998 and September 1999.

Miss Page told Justice Eady that Mr Lillie and Ms Reed were employed by the council as qualified nursery officers and from March 1992 were jointly responsible for the care of children aged two and three in the "red room" at the nursery.

"On Easter Day 1993, an event took place which was to change their lives forever," she said.

"The mother of a little boy of two, who was cared for by them in the red room, went to her local police station and lodged a complaint that the child had been hurt by Christopher Lillie."

In July 1994, Mr Lillie and Ms Reed appeared at Newcastle Crown Court charged with 11 counts of indecently assaulting six boys and girls from the nursery. Mr Lillie also was charged with raping one girl.

But, after viewing video testimony from a child, the judge ruled there could not be a fair trial and directed the pair be acquitted.

Miss Page said: "After the acquittals were entered, a riot broke out in the courtroom. The dock was stormed and screams of 'hang them' filled the court as Dawn and Christopher were whistled out of the dock and driven away to their freedom in a police van with a screaming mob in chase."

Miss Page said that outside the Crown Court the acting leader of Newcastle council, Tony Flynn, said: "We do believe that abuse has taken place and on balance that the former employees were involved in this abuse".

By 1998, Ms Reed was a married woman living in Stanley and working in the office of a mini-cab firm. Mr Lillie was living in Gateshead with his girlfriend, training in a hotel to be a chef.

"They were both of them, in their separate ways, on the road to rebuilding and restoring their lives and putting the nightmare of the recent past behind them," she said.

But in November 1998, they found themselves again in the headlines after the council released the Abuse In Early Years report - forcing both to flee the North-East.

The report, by a review team of four, concluded, said Miss Page, that Mr Lillie and Ms Reed had "sexually, physically and emotionally abused a large number of young children whose care had been entrusted to them".

Further, it accused them of being members of a paedophile ring who used their positions to procure young children for rape and abuse by themselves and other members of the ring.

This was said to have included handing over children to be raped and assaulted and used in sexual acts and in the making of pornographic films.

The council and report authors and the Newcastle Chronicle and Journal say that the allegations contained in the report were covered by qualified privilege and subsequent articles were justified.

The hearing continues