During a visit to Castle Glenye in the Scottish Highlands, a tense sequence sets the tone: Major Matthews of the army's counter-intelligence department is pushed over a cliff by a hooded figure, and his replacement, Captain Fairfax, soon disappears. Captain Neale is sent by the War Office to investigate, and he quickly finds the castle a maze of loyalties and old grudges.
In a revealing flashback, Mr. McWerter explains the prewar balance at Glenye. The aging Marquess of Glenye left behind his wife, his first son Michael Glenye by a previous marriage, and the present Lady Glenye's own son, Nigel Glenye. Gabrielle, Marchioness of Glenye is jealous of Michael's standing as laird, while Nigel volunteers as a private in the army despite Michael being a conscientious objector. Nigel is also drawn to the local minister's daughter, Jean Hamilton, and the castle carries a rumor of a ghost—the Phantom—that haunts the halls and the surrounding woods.
As the war unfolds, Nigel Glenye returns on leave as a captain, sustains a broken leg in a riding accident, and is cared for by Jean. Six months later he still cannot rejoin active duty. The castle is shrouded in mystery when Lord Glenye's rifle disappears, and the missing Captain Fairfax is found shot on the Glenye estate. White birds and whispers of the Phantom circulate as the Phantom is spotted by searchers, and even the cook and the local constable glimpse it in the shadows.
Michael announces he is leaving the castle on business; Maj. Martin Selwyn arrives—unwelcome to Lady Glenye, who recognizes him instantly. Captain Neale comes to inquire about Matthews, but Selwyn dismisses him as impolite and orders him to depart. Lady Glenye discovers the telephone line is cut and grows wary, gripping a revolver as tension tightens like a drawn bow.
The Phantom attacks the chauffeur and binds the housekeeper, and Lady Glenye confronts the intruder—only to be captured. It is revealed that the Phantom is Nigel, who has been working with Selwyn, who is, in fact, Baron Karl von Reiten, Lady Glenye's former husband and Nigel's father. The cowardly Nigel has been pretending his leg remains injured to avoid going back to war, while secretly aiding Selwyn in obtaining secret plans of Britain's defences.
Jean, who has been watching from the margins, goes for help. Selwyn signals the arrival of a German aircraft. Nigel rebels and throws the plans into the fire, but Selwyn shoots him; Michael and McWerter arrive to give chase. Mortally wounded, Nigel shoots Selwyn, who tumbles from the cliff to his death. The grieving yet principled Nigel dies in Michael Glenye’s arms, and Michael struggles to shield Nigel's name from Captain Neale. He finally confesses that he works for British Intelligence. To protect the Glenye family's honour, he lies that Nigel merely posed as a Nazi sympathiser and wore the Phantom costume to spy on Selwyn. In the end, Captain Neale is urged to tell Lady Glenye to be proud of both her sons, who have faced danger and deceit with quiet resolve.
