Guardian journalist Nick Davies said on Newsnight that there was a 'very significant" error in his first 5 July story about the hacking of Milly Dowler's phone by the News of the World.
But he said it was a 'distortion of the truth'to suggest, as former News of the World features editor Jules Stenson did on the same programme, that The Guardian was guilty of 'shoddy journalism".
Davies was appearing in the wake of new evidence from the Metropolitan Police this week that the News of the World was probably not responsible for the voicemail deletions which gave the Dowler family false hope their daughter was alive.
Sun managing editor Richard Caseby attacked The Guardian at the Leveson Inqury on Tuesday for 'sexing up'its phone-hacking coverage and reporting unproven allegations as fact.
It emerged last night that Davies refused to appear on the same panel as Caseby on Newsnight.
Introducing the programme host Jeremy Paxman said: 'Richard Caseby, who is a News International executive, was prepared to appear on Newsnight tonight if he could face Nick Davies on a panel, but because Mr Davies doesn't want to appear on the same panel as him Mr Caseby felt he was unable to join us. He also declined our offer of a one to one interview."
'You're not answering'... You've asked the wrong questions'
Here is an edited transcript of the exchange between Paxman and Davies which opened the debate:
Paxman: 'This central allegation, the most scandalous perhaps of the lot, that a murdered girl's voicemails were deleted by the News of the World which you claimed to be a fact wasn't a fact was it?"
Davies: 'No you're getting it all wrong here. The story that we published in July was squarely based on all of the evidence available and was correct in saying that her voicemail had been deleted and it remains the case that NI are not denying that News of the World journalists may have been responsible for those deletions."
Paxman: 'You say in the copy that the messages were deleted by journalists in the first few days after Milly's disappearance. You don't know that."
Davies: 'You're getting the problem slightly wrong, you've misunderstood it. The problem is whether or not they were responsible for deleting the particular messages which caused the friends and family to have false hope. That is now in doubt."
Paxman: 'Do you know for a fact what you state as fact in this article?"
Davies: 'Everybody who was involved in this story accepted that it was true."
Paxman: 'You're not answering."
Davies: 'You've asked the wrong questions."
Paxman: 'Oh, I am so sorry."
Davies: 'You've misunderstood the problem"
Paxman: 'This is the key question. Was it true?"
Davies: "Everybody involved in that story believed it was true. The day after I published that story I sat down for two hours with Glenn Mulcare, the private investigator at the centre of this thing, and subsequently he issued an apology and he didn't disagree with a single wordâ€¦"
Paxman: 'But you state it as a fact, you don't say it was a police belief."
Davies: 'Everybody involved in that story accepted that that story was true and continued to accept until four months later evidence that was not available, to everybody's surprise, showed that one element of that story was now in doubtâ€¦"
Paxman: 'You don't report it as a belief you report it as fact."
Davies: 'And everyone accepted that it was true, the police accepted it in London and Surrey, the private investigator, News International – nobody disputed a word of that storyâ€¦Nobody dissented from it. In retrospect it was in doubt."
'This was the most important story in The Guardian's history'
Responding to this former News of the World journalist Stenson then said: 'This wasn't any old story, this was story that was the most important story in the Guardian's history. It was vital that every single element of it should be rightâ€¦.
'He says it was accepted by everyone that it happenedâ€¦News International at that time was a rabbit caught in headlightsâ€¦They weren't confirming anything to anyone.
'Just a week later after this sensational claim he claimed in a front page story again that the Sun hacked into Gordon Brown's medical records to reveal his son's cystic fibrosisâ€¦That story could have had exactly the same effect on The Sun that Milly had on the News of the World."
Responding to this Davies said: 'We've published more than a 100 stories revealing immoral criminal behaviour at the newspaper where you worked. Gordon Brown's wife Sarah gave birth to a child, the doctors said this child appears to have a very serious illness, we need to do more testsâ€¦
'During that period The Sun discovered this confidential medical information about this sick boy. Any decent newspaper would say we can't publish this but that newspaper chose to. That put enormous stress on those parentsâ€¦
'We did not say The Sun had obtained that by hacking, you've just made that up, The Sun gained access to confidential medical information. At one point in the story I used a different turn of words, I said gained access to confidential medical records – and I couldn't prove they got the file.
'This is the difference, The Guardian corrected and apologised [for] that. When did The Sun apologise for doing that cruel and inhumane thing?"
Speaking later on in the debate, Davies said to Stenson: 'We published more than 100 stories which are confirmed in evidence gathered by police and in parliamentary inquiries and at the Leveson Inquiry and in civil actions and you pick on two errors, one of them very significant in the Milly Dowler story one of them really minor in the Gordon Brown story, and you distort the truth and say we are guilty of shoddy journalism."