An acquittal appeared one step nearer for the sisters, Michelle and Lisa Taylor - who have spent nearly two years in jail - as John Nutting, counsel for the prosecution, conceded that non-disclosure of evidence amounted to a 'material irregularity' in their trial.
The three appeal judges were also told the sisters' 1992 trial was further blighted by 'unremitting, extensive, sensational, inaccurate and misleading' media coverage.
The two sisters, looking pale and drawn, listened from the dock at the Court of Appeal as Richard Ferguson QC, for Michelle, 22, said that neither the jury, trial judge, counsel for the prosecution nor defence lawyers, were told that a witness whose evidence 'went to the core' of the convictions had changed his story.
Nor was anyone alerted to the fact that the same witness had also sought a reward offered by Mrs Shaughnessy's employers, Barclay's Bank; that his fiancee had also changed her story; or that there was another witness in the basement below the murder flat on the day of the killing.
Some of the documents came to light only days before yesterday's appeal was to start - one was handed to the sisters' lawyers on the eve of the appeal.
Mr Ferguson QC, said of the non-disclosure: 'As I understand the position, that was an intentional decision - not by way of an oversight or an accident - but a view was taken as to what documents should be disclosed and what should not.
'The reality is that there was a failure on the part of the police to disclose information which was relevant and that was not an accidental failure.'
Mrs Shaughnessy, 21, died from 54 stab wounds after being attacked at her home in Vardens Road, Battersea, south London, in June 1991.
The prosecution alleged Michelle, who had once had an affair with Mrs Shaughnessy's husband, John, was motivated by jealousy and that her sister, Lisa, 19, had helped her.
The sisters were convicted in July last year, after the jury heard Dr Michael Unsworth-White's evidence that he saw two white girls - one of them with a blonde pony-tail - running from the murder house, carrying a laundry bag at around the time of the fatal attack.
What the jury was never told was that almost a year earlier he had told Detective Constable Angela Thomas that one of the girls might have been black.
Mr Ferguson said Dr Unsworth- White's identification evidence at the trial came from 'what appeared at the time to be a very credible witness'.
The court was told his account was crucial because it fitted what was otherwise a flimsy prosecution case.
'It is impossible to over-emphasise the evidence of this witness and the impact it would have on the jury,' Mr Ferguson said.
Yet the defence was denied a chance to challenge the credibility of his evidence, nor to ask him about seeking a reward.
Of the media coverage, Mr Ferguson said: 'The press, with I regret to say practically no exception, reported this trial in terms which were emotive, misleading, and which would have prejudiced the mind of any reader'.
During the trial a video of Mr and Mrs Shaughnessy's wedding, which was not part of the evidence, had been shown on national television. Further, a number of national newspapers froze one of the frames so that what was clearly - on the video - a peck on the cheek between Michelle and Mr Shaughnessy appeared - in the press - to be a mouth-to-mouth kiss.
And although the defence was that Michelle Taylor was not John Shaughnessy's mistress at the material time, virtually all the press referred to her as such, with such headlines as 'Love crazy mistress butchers wife'.
The appeal before Lord Justice McCowan and Mr Justices Douglas Brown and Tuckey resumes today. They were told other grounds of appeal include fresh evidence to 'suggest the murderer was someone other than the appellants'.Reuse content