Mr Key has been at pains to distance himself from the affair, denying any links with Ms Pullar's campaign to secure a $14 million settlement from private insurer Sovereign.
Yesterday, on TVNZ's Q+A, he continued to back Ms Collins and indicated that the Cabinet would consider approving Crown funding for her legal costs because, "at the end of the day, she's acting in her capacity as a minister of the Crown".
"She would be within her rights at least to ask for support. The Cabinet Manual makes that quite clear."
Ms Collins had not yet made that request, Mr Key told Newstalk ZB this morning.
A spokeswoman for Ms Collins was unable to say whether the minister had asked for Crown funding but did say the matter would cost the taxpayer nothing if Mr Mallard apologised or backed up his remarks with evidence.
Wellington lawyer Graeme Edgeler said that while there were instances of the Crown paying legal costs for ministers who were the target of defamation proceedings, he could not recall ministers receiving taxpayer funding when they were the plaintiffs.
Furthermore, "this doesn't really seem government-related at all".
"This is an offence to Judith Collins' personal reputation."
Even though any damages and costs awarded if the suit was successful would go back to the Crown, the case was "really for her personal benefit".
"It seems odd that the government would fund something like that, particularly when it is itself - with Radio NZ - one of the defendants."
Mr Edgeler pointed out defamation proceedings were generally expensive whether the plaintiff won or lost.
He cited cricketer Chris Cairns' win in a libel action against former Indian Premier League commissioner Lalit Modi. Cairns was awarded about $950,000 in damages and costs, but his legal bills amounted to $1.16 million.
However, that was in the UK, where the winners in such cases tended to receive most of their costs.
"In New Zealand, you get about 40 per cent. Even if you win, you lose."
Mr Mallard was unapologetic yesterday and said that while he wouldn't encourage Ms Collins to sue him, the case could work in Labour's favour as the party sought to uncover further improper political or ministerial influence or behaviour around Ms Pullar's ACC and insurance claims.
By the book
* The Cabinet Manual sets out how a minister can ask for Crown funding when "taking a suit as a plaintiff in a personal capacity to uphold his or her integrity as a Minister, for example, in a defamation suit".
* The request must first be discussed with the PM and Attorney-General.
* Cabinet must then agree for either the Solicitor-General or private lawyers to decide whether pursuing the matter at the Crown's expense is in the public interest.
* Any decision to proceed further must again receive the Cabinet's authorisation.
