In the opening scene of Dean Spanley, Henslowe Fisk (Jeremy Northam, full of understated goodness) is paying his regular Thursday visit out of filial duty to his morose and distant father Horatio (Peter O'Toole). He glances at the newspaper that the housekeeper Mrs Grimley (Judy Parfit) is ironing for Fisk senior and notices an advertisement for a talk by an Indian guru.

"Do you believe in the transmigration of souls, Mrs Grimley?" asks Henslowe Fisk.

"I don't believe in letting foreigners in, if that's what you mean," Mrs Grimley replies. That's not what Henslowe means, of course. He means reincarnation, the typically Edwardian paranormal preoccupation. The movie is based on a tale by the early 20th-century writer of fantasies Lord Dunsany.

Horatio Fisk is a pinched old man who now travels, when he bothers to go outside his house, in a "chair vehicle". A double bereavement - losing a son in the Boer War and then losing his wife as well from grief - has turned his heart to stone. He stares out of a mask-like face, his eyes grey pools of incomprehension.

O'Toole, who was so effective in Venus last year, is a powerful presence in this modest picture: surely he will win awards. Horatio Fisk wears down his faithful son with coldness and cynicism. He denies his loss. A servant in Horatio's club, which the old man visits on one of his rare excursions, has also lost a son in the war and he offers condolences (it's a first-rate cameo, by the way, from the veteran Dudley Sutton, who played Tinker in Lovejoy). The old man only growls: "Wasn't my loss. He's the one got killed."

In an effort to cheer up his father, Henslowe Fisk wheels him to a lecture on reincarnation - the one he saw advertised in the newspaper - by a smooth swami (Art Malik) in an unlikely outfit of suit and bowler hat. At the lecture they meet a lively colonial "conveyancer", a sort of import/export merchant, called Wrather (Bryan Brown). They also notice with surprise that in the audience is a Christian minister, Dean Spanley (Sam Neill). Strangely, they keep bumping into Spanley. At Horatio's club they see him reclining asleep in an armchair, each hand clutching a lapel of his frock coat. Beside him in a dainty glass is a syrupy brown liquid.

This is the magic potion, as it were, of the drama. The servant explains that it's the sticky Hungarian wine, Tokay, the dean's private stock. "Only the closed mind is certain," Spanley says solemnly, when Horatio tells the dean that he was surprised to see a Christian minister at a lecture on reincarnation.

"Really then, tell me this then, why don't they get in touch - souls I mean? Never a word from beyond the grave. You'd think one of them would have given a shout?"

"I imagine if the swami is correct, they are all too busy being whoever they've become," Spanley replies, with a knowing smile.

Henslowe, the younger Fisk, finds himself drawn to the dean's open-mindedness in contrast to his father's rigidity. Having discovered that Dean Spanley has a weakness for Tokay, Henslowe procures a rare vintage bottle of imperial quality and uses it to persuade the churchman to join him for a drink.

At this point we edge into the paranormal realm that Victorians and Edwardians were so keen on. The Tokay has a more than ordinarily intoxicating effect on the dean. Slobbering over the liqueur glass with his bristly jowls, Spanley sniffs and slurps the viscous brown liquid - though, he insists, two glasses is his limit.

A transformation takes place that at first leaves everybody confused as to what they have seen, including us. Spanley seems to fall into a trance. Then he starts babbling about a dog and the dog's relationship with his master and it is almost as if he is identifying himself with the dog.

In this and subsequent meetings over glasses of Tokay, Neill brings to life Spanley's surface of parsonical propriety ruffled with otherworldly forces that he cannot control. It's often funny.

With each meeting Spanley reveals more of his unusual history. The colonial fixer, Wrather, takes on the position of supplier of best Tokay to Henslowe and the dean. Soon Wrather is drawn into the evening meetings.

The dean's consumption seems to increase. He's never exactly drunk: a kind of ecstasy or delirium seizes him while he remains perfectly lucid. His storytelling reveals further surprises, some involving his listeners.

Finally, the elder Fisk joins the group. It is enough to say that Dean Spanley's memories provoke a personal conversion in the old man.

It may remind you of A Christmas Carol but it's unencumbered by sentimentality - no starving children - or Christmas trimmings. The New Zealand-born director Toa Fraser photographs the locations - East Anglia and New Zealand by the looks of it - stunningly and allows the wonderful cast to carry the story without fuss, alighting unobtrusively on such questions as the relationship of father and son and the nature of grieving.

Dean Spanley is delightful escapism and one can enjoy it without having to believe in the transmigration of souls, or, as Horatio calls it, "all that mumble jumble".