He acknowledged that when he joined the company in 2001, less than four months before it went into administration, he was aware of the government's statement that it stood behind the railway system but not behind individual companies and shareholders.

However, he told the high court in London yesterday: "I took soundings of many people about their perception of government support for Railtrack. No one ever gave any undertakings but I would not have taken the position if there had been any doubt about that [support]. I started from the premise that the government was supporting Railtrack. I got no indication from anyone that that was not true.

"It was a fundamental assumption that had been true since privatisation. If you took that assumption away, which is what happened in October [2001], everything became very different."

Mr Robinson was giving evidence on the eighth day of the action brought by Railtrack shareholders, who accuse the former transport secretary Stephen Byers of "misfeasance in public office".

They are seeking up to £160m in compensation from the Department for Transport for the damage they claim they suffered when Mr Byers successfully applied for Railtrack to be put into administration. Mr Byers argues that he acted in the public interest.

Cross-examined by Jonathan Sumption QC, for the Department for Transport, Mr Robinson accepted there was a huge, unplugged gap in Railtrack's finances. "In any business, if costs exceed income and it carries on for long enough, you go bust. That's not a necessary scenario. These are issues you have to manage. That's what myself, Steve Marshall [chief executive] and David Harding [finance director] were there for."

Earlier, Mr Sumption had told the court the company's equity was being eaten up by its rising debt. Even on Railtrack's most optimistic assessments, it would still have needed an extra £2.2bn by the end of 2006. Railtrack's advisers' assessments showed that without the extra cash the company's debts would have eaten up shareholder value.

"This is what the government was being told. We can scarcely be blamed, certainly not called malicious, for believing it," said Mr Sumption.

He said that in its negotiations with the government over financing, Railtrack's stance was: "We are bust. We need an extra £2.2bn from you. Unless you give it to us we will die at your gates and our corpse will set up the most embarrassing stink."

The Treasury was adamant that no more money was available and Mr Byers, backed by Tony Blair and the chancellor, Gordon Brown, took Railtrack into administration.

Mr Sumption told Mr Justice Lindsay that there was "virtually no management control at Railtrack over its finances". If the prime minister, the chancellor and Mr Byers' advisers believed it was in the public interest for Railtrack to go into administration, how could it be said, he asked, that Mr Byers was acting maliciously for taking the same view?

The case continues.