Downing Street received legal advice that Jeremy Hunt's views might appear to pre-judge the BSkyB deal on the day it handed him the job, the Leveson Inquiry has heard.
As Business Secretary Vince Cable was being stripped of responsibility for the controversial bid, No 10 chief of staff Ed Llewellyn was being told a previous "utterance" made by the Culture Secretary "tends towards an element of pre-judging the issue".
The inquiry also heard Mr Hunt had attempted to lobby Mr Cable when he still held the role but received legal advice saying it would be "unwise".
Jonathan Stephens, top civil servant at the Department of Culture, Media and Sport (DCMS), said he recalled a conversation with Mr Hunt's officials saying he had asked if could express a view on the bid.
The inquiry heard lawyers sent a note stating: "Whilst there's nothing legally which normally precludes the Secretary of State CMS from making recommendations to the Secretary of State BIS to inform the latter's decision as to whether to refer the public interest considerations in this merger to the Competition Commission it would be unwise to do so."
DCMS acquired responsibility for the bid on December 21 after Mr Cable was covertly recorded saying he could go to "war" with Rupert Murdoch. Its lawyers warned Mr Hunt may be compromised but said it would "probably not be fatal" if Mr Hunt could show that his decision was well reasoned.
The Culture Secretary has come under intense pressure over his handling of the bid since the release of a raft of emails and text messages between his former special adviser, Adam Smith, and News Corporation's Fred Michel.
Mr Smith admitted that he had resigned after Mr Hunt told him "everyone thinks you need to go". He told the Culture Secretary that if the pressure became so great that it would help if he resigned, he would "not hesitate to do so", but Mr Hunt said "something along the lines of 'it won't come to that'", he said.
The pair had a drink with other special advisers in the Department for Culture, Media and Sport and he was told not to worry. But the following day Mr Smith said he was "aware Mr Hunt was having meetings and I was not present". Asked what Mr Hunt said to him when he was later called to see him, he replied: "To the best of my recollection, 'everyone here thinks you need to go' was what he said."
A No 10 spokeswoman said: "The advice referred to was entirely consistent with that given by the Government's most senior lawyer - the Treasury Solicitor - to the Cabinet Secretary and on which he gave his advice to the Prime Minister."