Prime Minister Helen Clark may face legal action from former police commissioner Peter Doone after he abandoned a defamation case against the Sunday Star-Times today.

Mr Doone withdrew proceedings against the newspaper in the High Court in Wellington, saying he had seen evidence in the past two weeks which identified a prominent New Zealander as the apparent source of alleged defamatory statements run by the newspaper.

Mr Doone would not identify the source, but Sunday Star-Times counsel Peter McKnight told NZPA outside the court today that it was a matter of public record that the prominent New Zealander was Helen Clark.

The case against the Sunday Star-Times and its owner Fairfax followed a story that contained statements allegedly made by the then commissioner when a car in which he was a passenger was stopped by a patrol car in November 1999.

Mr Doone resigned as commissioner in January 2000.

"This new evidence has identified a prominent third party, not a defendant in these proceedings, as the person who was the apparent source of the alleged defamatory statements," Mr Doone said in a statement today.

"We now intend to legally pursue this person as soon as possible for redress."

Mr McKnight said the newspaper was pleased the case was over and that Fairfax would file for costs for proceedings, which have lasted five years.

However, he said Helen Clark was not the source of the story but rather someone the paper approached in the verification process.

The main source was from within police, he said.

The Sunday Star-Times printed an apology four months after the story first ran, some time after Mr Doone had resigned as commissioner.

Minutes of a High Court hearing on Friday last week, in which Mr Doone's counsel requested an adjournment to the defamation case, said briefs of evidence served by the defendant the previous week included one from Helen Clark.

Justice Forrest Miller said he understood Helen Clark's brief confirmed the Sunday Star-Times editor and reporter involved checked with her before including the allegedly defamatory remarks in its article, and that she confirmed she understood Mr Doone had made the remarks.

A spokesman for Helen Clark today told NZPA the Prime Minister had no comment to make.

She was currently asleep in Turkey, which was 10 hours behind New Zealand. Staff would brief her on today's developments once she awoke.

It is understood Helen Clark was aware of the details of the case before today.