The Prince of Wales last night sensationally intervened in a media censorship row - naming himself as the senior Royal accused of involvement in an allegedly compromising incident witnessed by a servant.

The heir to the throne - who is on a visit to Oman - dismissed the allegation as untrue and said the incident did not even take place.

A forthright statement on his behalf from Clarence House said: "In recent days, there have been media reports concerning an allegation that a former Royal Household employee witnessed an incident some years ago involving a senior member of the Royal Family.

"The speculation needs to be brought to an end. The allegation was that the Prince of Wales was involved in the incident. This allegation is untrue."

Sir Michael Peat, the Prince's private secretary, said he knew the allegation was untrue for "three principle reasons".

"Firstly, the Prince of Wales has told me it is untrue and I believe him implicitly.

"Secondly, anyone who knows the Prince of Wales at all would appreciate that the allegation is totally ludicrous and, indeed, risible.

"And thirdly, the person who has made the allegation unfortunately has suffered from health problems and has made other, unrelated allegations which have been investigated by the police and found to be unsubstantiated."

Sir Michael continued: "I am absolutely and totally confident that the allegations are untrue.

"Anyone who is a prominent public figure like the Prince of Wales is subject to a fairly steady stream of outlandish allegations.

"Generally they are dismissed out of hand."

Sir Michael added that Charles's sons William and Harry had been kept informed about the situation.

He said: "The sons have been kept informed and are very supportive of their father.

"The Prince of Wales is subject to a lot of fairly ridiculous allegations most of which never see the light of day.

"I hope this will be treated on its merits and dismissed out of hand - it's totally untrue.

"Even allegations which are untrue can cause great distress."

The Prince's intervention came after a day of drama at the High Court in London.

Earlier, an injunction banning The Guardian from naming former royal aide Michael Fawcett was lifted by agreement after the newspaper said it had no intention of repeating allegations about him.

The agreement meant that The Guardian could only publish Mr Fawcett's name in relation to him obtaining an injunction against the Mail on Sunday.

That injunction remains in place although the Sunday paper later claimed success in "relaxing the constraints" of the gagging order.

Following a separate High Court hearing in private, a Mail on Sunday spokesman said: "Although parts of the order remain confidential, our application today to vary the terms of the injunction was successful.

"We are now satisfied that the constraints under which we were working have been relaxed in our favour."

It is understood, however, that the paper is unlikely to be able to publish its original story this coming Sunday.

Guardian editor Alan Rusbridger said last night: "We are extremely pleased with this outcome which has significant implications for freedom of expression.

"The identity of those seeking libel injunctions should be a matter for public record - even when there is a connection to the Royal Family.

"Today's outcome is reassuring in underlining the fact that those with links to the Royal Household are subject to the laws of this country in the same way as anyone else."

Mr Fawcett, 40, was the "indispensable" royal aide said to squeeze the Prince of Wales's toothpaste.

He resigned as the Prince's personal assistant despite being cleared of serious wrong-doing by a report into allegations of malpractice at St James's Palace.

Dubbed by newspapers as "Fawcett the Fence", he had been accused of selling unwanted gifts on behalf of the Prince and quit after being branded a bully.

No longer a royal employee, Mr Fawcett continues to enjoy the Prince's patronage as a freelance fixer and party planner, and picked up an undisclosed cash severance package as well as an agreement to work as the Prince's events manager.

Among his latest royal jobs was the organisation of Prince William's 21st birthday party at Windsor Castle and helping with the refurbishment and interior design at Clarence House, the Queen Mother's former residence which is now the Prince's London headquarters.

Mr Fawcett's royal service began as a relatively humble footman and he rose to become Charles's personal assistant.

Earlier this year, a report by Sir Michael Peat acknowledged Mr Fawcett was feared and envied by many of the 80 staff in the St James's Palace household.

The report into alleged malpractice within the Prince's household detailed how Mr Fawcett bent royal rules forbidding the acceptance of gifts from outsiders, but he was found "not guilty" of fiddling.