Former Police Ombudsman Nuala O’Loan was not prosecuted over breach of confidentiality allegations because it was not in the public interest, it emerged last night.

The Public Prosecution Service took the decision despite finding that an evidential test regarding Dame Nuala had been met.

An investigation file was submitted to the PPS by police following the publication of a report by the former Ombudsman which identified retired Resident Magistrate Tom Travers as the source of information.

Mr Travers’ 23-year-old daughter Mary was shot dead by the IRA in an attack on the family as they left Mass in south Belfast in 1984. He was also badly injured.

He had gone to the watchdog with allegations that the RUC colluded with an informer to ensure he escaped prosecution for his part in the murder.

Mrs O’Loan rejected his claims in a report published just days before leaving office in November 2007.

Although Mr Travers withdrew his complaint nearly 18 months before her findings were published, Mrs O’Loan decided it would be in the public interest to complete her investigation. But the former magistrate, now seriously ill, launched legal proceedings on the grounds that his right to confidentiality had been breached through being identified in the report.

He claimed other serious failings included inaccuracies over the forensic evidence, the age of his daughter, and the decision to carry on with the inquiry.

During a judicial review hearing at the High Court on Thursday the current Police Ombudsman Al Hutchinson agreed to withdraw the report so that it no longer legally exists.

The Ombudsman issued an apology to Mr Travers and his family for the publication of his identity in the report and press.

Responding last night, Mrs O’Loan said: “I always acted in accordance with the legal advice given to me. It’s important that this issue has now been clarified.”

And Sam Pollock, the Chief Executive at the Police Ombudsman’s office, stressed that the matter related to a complex issue of law governing the watchdog’s work.

He added: “Legal advice has since clarified the issue and the office has amended its procedures accordingly.”