The BBC will pay a ‘substantial’ payout to Princess Diana‘s former chauffeur over slander made against him by disgraced journalist Martin Bashir.

Stephen Davies has settled a High Court slander case with the BBC over claims he fed information to the corporation before her famous Panorama interview.

Mr Davies served as Diana’s chauffeur at the time of her interview with Martin Bashir in November 1995 but was sacked without explanation in March 1996.

 He took legal action against the BBC after an investigation into the interview in 2021 revealed a document from a meeting in September 1995 where Panorama sought to procure the interview.

The document stated that Diana and Earl Spencer were told by Mr Bashir that Mr Davies ‘feeds Today newspaper… change your chauffeur’.

Mr Davies’ solicitors, Carter-Ruck, said a hearing on Tuesday was told that after he took legal action, the BBC accepted that the ‘serious and unfounded allegation’ was ‘fabricated’ and that it had agreed to pay a ‘sum of compensation’ and his legal costs.

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Princess Diana and her chauffeur Stephen Davies (pictured) returning from Heathrow Airport after a trip to New York

In a statement issued by the legal firm, Mr Davies said: ‘I am relieved that I have been able to clear my name, and my professional reputation as a chauffeur, through this legal process.

‘I was shocked to hear that these false allegations had been made about me almost 30 years ago and were very likely to be the cause of my sudden termination.’

Carter-Ruck said that Persephone Bridgman Baker, representing Mr Davies, told the hearing before Mrs Justice Steyn that the implication that he had leaked confidential information was a ‘serious blot on his character’.

She said: ‘The allegation was fabricated. In March 1996, the Claimant’s employment was terminated without explanation.

‘The suggestion that the Claimant violated the Princess’s trust in this way created a serious blot on his character.

‘The claimant was devastated by the termination of his employment with the Princess; he had maintained a close professional relationship with the Princess throughout the many years he had worked for her and he was given no reason for the termination.

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Diana, Princess of Wales, during her famous interview with Martin Bashir for the BBC

‘The Claimant was tormented by speculation about what possible reason there could be for the termination of his employment and was acutely embarrassed about his dismissal.

‘It is a matter of profound regret to him that, as he now knows, the Princess believed that he had betrayed her, and he was unable to correct the position before her tragic death.’

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The BBC Panorama sit-down interview with Diana and Mr Bashir was broadcast on November 20 1995, and featured her saying: ‘Well, there were three of us in this marriage, so it was a bit crowded’.

A subsequent inquiry by Lord Dyson found in 2021 that the BBC had covered up Mr Bashir’s ‘deceitful behaviour’ and the journalist was in ‘serious breach’ of the BBC’s producer guidelines when he faked bank statements and showed them to the earl to gain access to Diana.

Her sons, William and Harry, condemned the broadcaster for its treatment of their mother and the corporation has since vowed never to air the interview again.

Ms Bridgman Baker added that the allegations against Mr Davies, who still works as a chauffeur, had since been repeated in the Netflix series, The Crown.

Carter-Ruck added that Samuel Rowe, appearing for the BBC on Tuesday, said: ‘The BBC wishes to publicly apologise to the claimant for the publication of the allegation and the distress it has caused.

‘The BBC accepts that the allegation made about the claimant was and is wholly false and should never have been made and that it constitutes an attack on the claimant’s reputation both personally and professionally.

‘The BBC accepts that the allegation was likely to have caused Her Royal Highness The Princess of Wales to doubt the Claimant’s loyalty and professionalism and may well have contributed to the claimant’s redundancy six months later.

‘The BBC is sorry for the distress and harm suffered by the claimant. It is pleased that the parties have been able to resolve these issues.’