By AUDREY YOUNG political reporter

The cabinet approved using taxpayers' money to pay Helen Clark's secret $55,000 legal settlement with John Yelash because it accepted that she called him a murderer in her capacity as Prime Minister.

But National leader Jenny Shipley said that Helen Clark made the comment "defending a backbench member of her party who had been asked to dig dirt on a minister."

Mr Yelash, of West Auckland, sued the Prime Minister after she referred to him during the Dover Samuels controversy last year as a convicted murderer when he had, in fact, been convicted of manslaughter in 1979.


He lodged a defamation suit for $250,000 damages and settled out-of-court for an apology and $55,000, One News said.

He will forfeit $35,000 if he breaks the confidentiality agreement.

The cabinet manual allows the Crown to pay the costs of ministers who are involved in legal action related to their exercise of ministerial power.

Yesterday, Attorney-General Margaret Wilson said she had raised the issue of the Prime Minister's indemnity with the cabinet.

"In this case I was able to assure cabinet that I was satisfied that the matter arose as part of the Prime Minister's ministerial duties, in particular, given her responsibilities with respect to the conduct of ministers and the allocation of ministerial portfolios.

"I based this advice on the clear facts. It was clear to me that the Prime Minister made her comments about Mr Yelash in her capacity as Prime Minister."

Helen Clark referred to a Crown payout involving Mrs Shipley. The Crown had paid the legal cost of hepatitis researcher Sandor Milne over comments made when Mrs Shipley was Health Minister.

Mr Yelash's statement of claim said Labour whip Chris Carter approached him last year to obtain information about Mr Samuels, who was later sacked as Maori Affairs Minister.

A dispute arose as to who phoned whom first. When the matter was raised with the Prime Minister, she said she preferred Mr Carter's word to that of a convicted murderer.

Helen Clark said, through a spokesman yesterday, that National should be careful about what it said, citing what she alleged were several personal grievance payments to staff who had left former minister Murray McCully.

Mr McCully said three or four staff contracts were terminated early in his eight years as a minister.

Payments to the notice period were made but there were no personal grievance payments and he would consider seeking legal advice.

Professor Matthew Palmer, dean of law at Victoria University, tended towards the view that Helen Clark's comments were made during her prime ministerial duty.

"It is arguable but I think the better view is she was."

National deputy Bill English attacked Helen Clark's agreement at a regional conference in Wellington.

"This is such daring hypocrisy that no one can quite believe it's happening," he said.

"Here is a person who campaigned for two years against confidential payouts of taxpayers' dollars.

"The Prime Minister's moral leadership is crumbling because she won't do what people now expect of her - talk straight and meet the standards of political behaviour she herself set.

It is understood that Hugh Rennie, QC, acted for Helen Clark in the Yelash affair.

He also acted for Education Minister Trevor Mallard, who apologised for comments he made about Rosemary Bradford, the wife of National MP Max Bradford. Mr Mallard had indemnity and the Crown met both parties' legal costs.