INDIAN-BORN doctor Mohamed Haneef was in a secret safe house in Brisbane last night after the case against him dissolved into fiasco, with Australia's chief prosecutor admitting it had been bungled and there was no reasonable prospect of a conviction.

Dr Haneef was spirited out of prison hours after the charge against him was dropped and a clearly embarrassed Immigration Minister Kevin Andrews said he was seeking legal advice about whether the latest development meant he should reverse his decision to cancel the doctor's visa.

As yesterday's extraordinary events unravelled:

■The Commonwealth Director of Public Prosecutions, Damien Bugg, could not explain how a prosecutor falsely told a court that Dr Haneef's SIM card was found in a burnt Jeep Cherokee at Glasgow Airport.

■Australian Federal Police Commissioner Mick Keelty said police had done their job professionally and vowed that the investigation into any Australian connection with the British terror attacks would continue. He would not rule out further charges against Dr Haneef.

■Mr Andrews said Dr Haneef could leave prison and live in "residential detention" at his apartment on the Gold Coast or another place of his choosing.

■Mr Andrews said he would seek advice from the Commonwealth Solicitor-General on whether the decision to drop the charge against Dr Haneef had any bearing on his earlier decision to revoke his 457 work visa and deport him.

Dr Haneef's wife, Firdous Arshiya, said last night she had thanked God when she learned the charge against her husband had been dropped. "Now I want him to come home as quickly as possible," she said.

As immigration lawyers expressed fury about the way Dr Haneef's case had been handled and minor-party politicians demanded that Mr Andrews resign, the Labor Opposition, which until yesterday had supported the Commonwealth's stance, called for an independent inquiry into the affair.

Prime Minister John Howard last night sought to distance his Government from the debacle. "The detention of the man was undertaken by the police and not at the request or direction or encouragement of the Government," he said.

The latest twists in the saga came after Mr Bugg ordered that a charge of recklessly supplying a mobile SIM card to a terrorist organisation be withdrawn, and that no evidence be offered.

Mr Bugg admitted that his office had made a mistake in advising police to charge Dr Haneef and that one of his prosecutors had given a Brisbane court incorrect evidence, possibly because he had been pressed for time. "On my view of the matter, a mistake has been made," Mr Bugg said. "I will now take further steps to inquire as to how that mistake occurred."

But Mr Keelty refused to accept that police had made mistakes and vowed that the investigation would not wind down.

Dr Haneef's lawyer, Peter Russo, said his client was in limbo. It was absurd to suggest Dr Haneef could return to his own apartment — his lease had expired and the flat was uninhabitable because of the mess left by investigating police. "He's officially no longer a tenant here," the Gold Coast apartment manager, Steve Boscher, said.

Dr Haneef's legal team and immigration authorities arranged a "safe house" in Brisbane, but Mr Russo said: "It is still detention, if for any other word."

Shadow attorney-general Joe Ludwig said the Government must establish an external review into the handling of the case by the Office of the Commonwealth Director of Public Prosecutions.

Greens leader Bob Brown called on Mr Andrews to resign. "Australia's international reputation is being put through the grinder by the false imprisonment of Dr Mohamed Haneef," he said.

Queensland Premier Peter Beattie said Dr Haneef was welcome to return to his job at the Gold Coast Hospital if the Federal Government restored his work visa.

However, a hospital spokesman said he remained suspended without pay as he did not have a visa.

Immigration lawyer David Manne said the dropped charges made the continued cancellation of Dr Haneef's visa less tenable.

With AAP, AMRIT DILLON, MARK FORBES