The article in the Sunday Times was not a publication which should in the public interest be protected by privilege in the absence of proof of actual malice, the appeal judges ruled.
The judges commented on several points in relation to the nature, status and source of the material in the article.
One point was: "The defendants (Sunday Times) failed to resolve whether Mr Reynolds was a victim of circumstance as conveyed to Irish readers in the `House of Cards' article (in the Irish edition), or a devious liar as conveyed to readers on the mainland of Britain (in the English edition).
"It should have been obvious that he could not be both."
On the issue of qualified privilege, the judges said there were certain tests that had to be put forward and questions needed to be answered in relation to them.
First, was the publisher under a legal, moral or social duty to those to whom the material was published, which in appropriate cases may be the general public, to publish the material in question? They called this the duty test.
Second, did those to whom the material was published have an interest to receive the material? This was the interest test.
Third, were the nature, status and source of the material, and the circumstances of the publication, such that the publication should in the public interest be protected in the absence of proof of express malice? They called this the circumstantial test.
The judgment stated that the circumstances in which Mr Reynolds's government fell from power were matters of undoubted interest to the people of Great Britain. They thought it clear the newspaper had a duty to inform the public of these matters and the public had a corresponding interest to receive that information.
"So the duty and interest tests were, in general, satisfied. We cannot, however, regard the circumstantial test as satisfied," the judges said.
"Given the nature, status and source of the defendants' information, and all the circumstances of the publication, this was not in our judgment a publication which should in the public interest be protected by privilege in the absence of proof of actual malice."
The allegation that Mr Reynolds had lied was attributed in the article to an unidentified colleague of Mr Dick Spring (then Labour leader). This source was later identified as a Mr Finlay, who was not a deputy but was described in the Dail as "Mr Spring's programme manager."
There was no evidence before the jury that Mr Spring authorised Mr Finlay to accuse Mr Reynolds of lying, and Mr Finlay, although present in court for part of the trial, was never called as a witness.
"In the bitter aftermath of these events, a member of the staff of one of Mr Reynolds's leading political opponents could scarcely be judged an authoritative source for so serious a factual allegation," the judgment said.
Mr Spring did not in terms accuse Mr Reynolds of lying to the Dail. He did, in his speech on Wednesday, November 16th, strongly criticise Mr Reynolds for failing to disclose what he had known on Tuesday, November 15th, about the Duggan case; but his criticism was consistent with an honest but mistaken omission on Mr Reynolds's part.
The defendants wholly failed to record Mr Reynolds's own account of his conduct, as described by him when addressing the Dail in the Wednesday debate.
The judgment also stated that the defendants did not, between the debate on Wednesday and publication on Sunday, alert Mr Reynolds to their highly damaging conclusion that he had lied to his coalition colleagues and knowingly misled the Dail, so as to obtain his observations on it.
The Lord Chief Justice said that this last point would be made more explicit in the finalised judgment.