Like thousands of others, Lord Sterling was faced with a long queue for tickets when his train to Haslemere was due to leave Waterloo Station.
Instead of missing the train, Lord Sterling jumped aboard and was sitting in a first class carriage when he was confronted by a ticket inspector, who told him that he would have to pay a penalty for failing to obtain a ticket.
Lord Sterling's address appears on the inspector's penalty fare notice as Pall Mall, London SW1, the headquarters of P&O Ferries.
A senior Conservative peer, who is a close friend of the Prime Minister, Lord Sterling paid the fare and the penalty but senior management at South West Trains, which runs the service, became involved after he appealed.
Peter Field, the managing director of SWT, wrote to the area penalty fares office in Portsmouth saying the penalty fare notice was issued "quite properly and correctly".
"But on reflection," Mr Field said, "I have decided that it is probably not appropriate for South West trains to require the payment of this fare, or to impose a penalty, in this instance, and so I would be obliged if you could delete on your computer and records all references to this notice."
Mr Field added in handwriting: "PS, you may have guessed from the above that the person concerned would find the matter extremely embarrassing."
Brian Wilson, the Labour transport spokesman, protested at the behaviour of SWT, which is one of the first franchises to be offered today under the Government's privatisation plans.
Mr Field is heading a management buy-out bid with a French water company for the SWT service. Mr Wilson said: "This is the kind of two-tier railway the Tories dream of."
Lord Sterling said: "I told the ticket inspector that I would like to pay on board. He then said he had no alternative but to issue a penalty fine ticket. The first thing next morning I rang Mr Field and explained what had happened and said I should not be in this embarrassing position."
n Bidders for the first three railway lines to be sold under privatisation include organisations headed by Virginia Bottomley's brother-in-law, an active member of John Major's constituency association, and a former British Rail manager who advocated separating track from services.Reuse content