BUCKINGHAM Palace last night angrily denied suggestions that the Queen had interfered with justice after royal butler Paul Burrell was sensationally cleared of stealing hundreds of belongings from Diana, Princess of Wales.

In an unprecedented development, the 12-day-old case at the Old Bailey collapsed when it was revealed the Queen had come forward at the weekend with crucial information.

As a stunned courtroom absorbed the news, Mr Burrell stepped from the dock and fell sobbing into his lawyer's arms as it dawned on him he was a free man.

The man Diana described as her "rock" later declared through tears: "The Queen came through for me."

"Regina versus Burrell" was effectively halted by Regina. It emerged that while following the progress of the trial, the Queen wondered about the relevance of Mr Burrell telling her, a few weeks after Diana died, that he had taken some of her papers for safekeeping. She confided in the Prince of Wales and he informed police.

The revelation fatally undermined the prosecution's case, which was based on the claim that Mr Burrell had removed Diana's belongings without telling anyone.

Yesterday, after three days of frantic behind-the-scenes activity while the trial was on hold, William Boyce, prosecuting, announced: "The prosecution has concluded that the current trial is no longer viable."

Judge Mrs Justice Rafferty directed that Mr Burrell was not guilty on all three counts of theft - from Diana, the Prince of Wales and Prince William - and told him he was free to go, nearly two years after he was arrested.

Amid emotional scenes outside the court building, Mr Burrell stood next to his solicitor, Andrew Shaw, who declared "an immense victory" and attacked police blunders and the stubborn refusal of detectives to believe that the former butler was "the Princess's most loyal and close confidante".

He said: "He has always maintained his total innocence."

It remained unclear what will happen to the property seized when police raided Mr Burrell's house in Farndon, Cheshire, in January last year, though much of it is likely to be handed to the Prince of Wales and Prince William at some point.

The jury, which was not in court to hear the judge throw out the case, was shown dozens of photographs of the items, which included Diana's dresses, shoes and hats, a pair of her pyjamas, and highly personal letters from her to Prince William.

The significance of the Queen's shock information was said to have struck her after she returned from Canada, where she was on a Golden Jubilee tour when the trial began.

She mentioned it to the Prince of Wales last Friday as they were driving to St Paul's Cathedral for a memorial service for the victims of the Bali bomb blast.

She told Charles she had met Mr Burrell, at his request, in the weeks after the death of Diana and the butler said he was keeping some papers for safe keeping.

Believing this might be relevant to the trial, the Prince alerted his private secretary, Sir Michael Peat, who in turn instructed royal lawyer Fiona Shackleton to inform police. The prosecution was given the news on Monday.

The 11th hour intervention came at a critical point in the trial, which was scheduled to last six weeks, as Mr Burrell was on the verge of giving evidence. He was expected to spend about two days in the witness box explaining why he had the 310 items in the loft, study, living room and stairs of his Cheshire house.

Last night, among a number of sceptics, Labour MP Paul Flynn described the reason given for the collapse of the trial as "unconvincing" and "not plausible".

He said: "The most likely reason is that when Paul Burrell came to give evidence, he was going to provide extremely damaging new information, which would be damaging to the Royal Family.

"This was the reason the trial was halted prematurely on this entirely unconvincing pretext."

But last night, Buckingham Palace said: "The decision to drop the case against Mr Burrell was entirely a decision for the prosecution. The Queen was not briefed on either Mr Burrell's defence case or the prosecution case against him. The prosecution did not ask the Queen, at any stage, for details about her meeting with Mr Burrell."

Asked whether the case had been halted at the Queen's request, the Palace said: "Absolutely not. There is no question of the Queen interfering in due legal process.

"The case was dropped because the prosecution realised their position was no longer viable."

Outside the Old Bailey, Mr Burrell's solicitor said the former royal servant had not even revealed to his own lawyers until this week the details of the private conversation with the Queen five years ago.

Mr Shaw said: "Mr Burrell remains deeply loyal to the late Diana, Princess of Wales, and to the Queen, whom he served in a personal capacity for ten years.

"It is to his utmost credit that it was only this week that he instructed his lawyers as to the full terms of the conversation. Those terms were confirmed by the Queen this morning."

The investigation and trial is estimated to have cost £1.5m.