In his summing up in the High Court yesterday of the case brought by former Tory MP Neil Hamilton, Mr Justice Morland said: "You may have come to the conclusion that Mr Al Fayed's evidence in detail is inconsistent and unreliable; that he has made many wild and unsubstantiated allegations about all manner of people and that at times he is vindictive towards those who he thinks have let him down or double-crossed him.
"You may have come to the conclusion that Mr Al Fayed's obsessional attitude and beliefs have distorted his perception of the truth and that he is suffering from a great sense of grievance for what he considers to be the unfair way he was treated in the DTI inquiry and application for British citizenship."
The judge went on: "By his own admission his recollection for detail and his memory of events is defective. His versions of events and occasions when he alleges payments were received from him by Mr Hamilton have varied and been markedly inconsistent, one with another.
"All these matters mean, you may think, that Mr Al Fayed's appreciation of what is fact and what is fiction and what is truth and what is fantasy is warped.
"Therefore, I strongly advise you that it would be very dangerous to accept even those parts of Mr Al Fayed's evidence that you find credible - and indeed would be unwise to do so - unless you are satisfied on evidence independent of Mr Al Fayed's evidence which you find highly convincing and find confirms Mr Al Fayed's evidence in a material way."
Mr Justice Morland also told the jury that if it decided in favour of Mr Hamilton, an award of more than pounds 150,000 damages would be excessive.
He said that the jury should remember that any award must be proportionate to the injury done.
Media reports of pounds 1m-plus awards for personal injury were misleading, he added, in that 90 per cent or more of such sums were to pay for a lifetime's worth of nursing or lost earnings. The element of compensation for physical injuries was often only 10 per cent of such an award.
Mr Hamilton, his wife Christine and Mr Fayed listened as the judge said that even the most grievously injured person - who was blind, deaf, paralysed, brain damaged and unable to communicate - was most unlikely to be awarded as much as pounds 150,000 for pain, suffering, disability and loss of enjoyment of life.
The former MP for Tatton is suing Mr Fayed over allegations on a January 1997 Channel 4 Dispatches programme that he had corruptly demanded and accepted cash payments, gift vouchers and a free holiday at the Paris Ritz in return for asking parliamentary questions on behalf of Harrods. Mr Fayed denies libel and pleads justification.
Mr Justice Morland said: "If you find that main thrust of Mr Al Fayed's evidence credible, my strong advice to you is that you only act upon it if you are satisfied by highly convincing evidence, independent of Mr Al Fayed's evidence which confirms that evidence of Mr Al Fayed."
The courtroom erupted in laughter before the lunchtime adjournment when the judge told the jury that as it was difficult at this time of year for their allowances to reach them by post, "they are going to be paid in cash".