By GREG ANSLEY

CANBERRA - Tasmania is today looking for a new Governor following the dramatic resignation of Richard Butler, the outspoken former diplomat and republican who stood on too many toes in the island state.

Butler's resignation was tendered, and accepted, at a crisis meeting late on Monday night with Premier John Lennon following a long series of rumours and reports of unseemly behaviour, which Butler had earlier attributed to a conspiracy against him.

But he will leave Government House by September 3 with a golden handshake of A$650,000 ($720,221) provided by Lennon in view of the fact that Butler would have earned about A$1.5 million over a normal four-year appointment, even though there is no provision for severance pay.

Although Butler represented the Queen in Australia's smallest state - population, about 470,000 - he was the highest paid of all the monarch's men, with his A$370,000-a-year ($409,972) salary topping even that of the Governor-General.

His position will be taken for the time being by Tasmanian Chief Justice William Cox, who has been lieutenant-Governor since 1996 and who is considered a possible choice to replace Butler permanently.

But the furore surrounding Butler and his wife, Jennifer, since their surprise appointment 10 months ago by Jim Bacon, the Labor Premier who died this year of lung cancer, has also given new heart to the republican movement.

"The resignation of Mr Butler as the Tasmanian Governor, following on from the resignation of Archbishop Peter Hollingworth as Governor-General last year, highlights the difficulties that arise from an antiquated constitutional system," Australian Republican Movement chairman Professor John Warhurst said. "How many Governors and Governors-General do we need to go through before we recognise there is a fundamental flaw in the existing system?"

Hollingworth was forced from office by public outrage over his handling of child abuse within the church while Anglican Archbishop of Brisbane.

The details of the chain of events that led to Butler's sudden resignation are obscure, but centre on allegations of arrogance, egotism and pomposity, his alleged failure to fully carry out vice-regal duties, and unseemly public behaviour.

These included breaches of protocol at the wedding of Tasmanian Mary Donaldson to Crown Prince Frederik of Denmark and an attempt to use his status to gain an upgrade to first class on international flights.

Last week the three most senior members of his staff quit, precipitating Monday's crisis.

Lennon yesterday refused to discuss any of the claims against Butler, insisting that his resignation was a courageous decision made in the best interests of Tasmania.

"I didn't go [to Monday night's meeting] to discuss any of the detail of the allegations that have been made against him," Lennon said.

He said Tasmania was experiencing unparalleled economic development, optimism and confidence, and there was a risk the controversy surrounding Butler could damage both the good name of Tasmania and business confidence.

"I think he's been a victim here and I doubt very much if the stories about Richard Butler would have found their way [on to the front pages of newspapers] if he had not been the Governor of Tasmania," Lennon said.

The brief statement announcing the resignation, read in pouring rain by Government House official secretary Michael Stevens, repeated Butler's earlier claims of a conspiracy against him.

"[Butler] tonight announced that he would resign his post, effective immediately, because of what he said was a malicious campaign against him which, he judged, would continue and would damage the good name of Tasmania," the statement said.

Even without a whispering campaign, Butler was a controversial Governor, appointed to the post despite his strong republican beliefs from a background in diplomacy that included a controversial ambassadorship to the United Nations and a spell as UN weapons inspector in Iraq.

A strong critic of Australia's participation in the war in Iraq, Butler was muzzled by Lennon after attacking the Administration of President George W. Bush as aggressive, self-centred and reserving the right to "beat the living daylights" out of any country it considered a threat.