The 48-year-old confessed to a senior detective to murdering Miss O’Callaghan and missing prostitute Rebecca Godden and even led officers to their bodies.
But a High Court judge ruled the admissions the father-of-three made during a three-hour period on the day of his arrest were inadmissible because Detective Superintendent Steve Fulcher breached police guidelines governing the interviewing of suspects.
The detective, who was leading the hunt for Miss O’Callaghan, failed to caution Halliwell and denied him a solicitor. The officer has now been suspended and is subject to an independent investigation.
The ruling by Mrs Justice Cox meant Wiltshire Police had no other evidence to link Halliwell to Miss Godden’s murder and the charge was withdrawn.
Wiltshire Police vowed yesterday to catch Miss Godden’s killer after a judge sentenced Halliwell to at least 25 years for Miss O’Callaghan’s murder.
Miss O’Callaghan, 22, had disappeared after leaving Swindon’s Suju nightclub in the early hours of March 19, last year after a night out with friends.
On the night she vanished, Halliwell had signed off from work but instead of going home he cruised the streets in his Toyota Avensis taxi looking for a victim. As she made the short walk to the home she shared with boyfriend Kevin Reape, she fell into his clutches by getting into his taxi.
Police believe Halliwell took the young woman to the Savernake Forest where he murdered her.
Detectives discovered that in the 24 hours after Miss O’Callaghan was abducted, Halliwell made four visits to the area where her body was hidden.
It is thought that by March 21, Halliwell had moved the body from the forest to the spot where it was later found. He then tried to cover his tracks by cleaning his car and burning the seat covers.
He even put a police appeal poster in his car as her disappearance made national headlines.
Within three days, however, Halliwell was the prime suspect and he was placed under 24-hour surveillance, before his arrest on March 24.
Detectives described him as looking “like a rabbit caught in the headlights” but he stayed silent, demanding a solicitor.
Halliwell was being driven to a police station when Mr Fulcher overruled junior officers and had him taken to a rural castle.
Over a three-hour period – without being cautioned or offered a solicitor – Halliwell admitted he was a “sick f*****”, confessed to murdering the two women and showed police the locations of their bodies.
Eventually he was taken to a police station and cautioned. Before a solicitor even arrived, Mr Fulcher announced live on television that Miss O’Callaghan’s remains had been found and the location of a second body had been identified to police.
Miss O’Callaghan’s semi-naked body was found down a steep bank. She had suffered a brutal attack and there was evidence to suggest a sexual assault.
A post-mortem examination found she died from the combined effects of two stab wounds to the head and neck, as well as compression to the neck. There were also injuries to her left breast, consistent with bite marks.
Forensic examinations found her blood in Halliwell’s car and police also had CCTV and automatic number plate recognition evidence to put him in the Old Town area when she vanished.
Halliwell, of Asbury Avenue, Swindon, was told by Mrs Justice Cox he had committed a “savage and brutal attack”.
“The pain, terror, anguish and desperation she would have suffered, as you assaulted and then murdered her, is truly horrifying to contemplate,” she said.
“But her terror would have started long before then. She would have been terrified and panic-stricken right from the moment she realised that you were not going to drive her home. She was terrified, helpless and alone.”
Speaking afterwards, Mick O’Callaghan, Miss O’Callaghan’s father, said: “It has been a very emotional day. Justice has been done today. I also want to put on record what a wonderful job Mr Fulcher did in finding my daughter so early. Our thoughts go to Becky’s family.”
Miss Godden’s father hit out at police, saying they had “made massive mistakes”. “It seems to me: Come to Swindon, commit murder and you’ll get away with it,” John Godden said. “I’ll never put my trust in the police again. Why should we pay with this pain for somebody else’s mistakes? I want proper closure. I want closure. I want justice.”