Time magazine's chief of correspondents testified today that he was concerned about the work habits and political activities of Israeli correspondent David Halevy long before one of Halevy's dispatches prompted former Israeli defense minister Ariel Sharon's $50 million libel suit.

Richard L. Duncan, supervisor of Time's 90 correspondents in the United States and overseas, said Halevy, an Israeli citizen, is a proud man who experienced difficulty adhering to rules and regulations of a large U.S. corporation.

"It wasn't very easy . . . to put Mr. Halevy into a gray flannel suit," Duncan testified.

Duncan acknowledged that he once admonished Halevy for acting as a political adviser to one of Sharon's political foes, Shimon Peres, now Israel's prime minister, while Halevy worked for Time. Duncan said he believes that the activity occurred when Halevy worked part time for the magazine in Israel but he was vague about the date.

Duncan said he was concerned about Halevy's tendency to take trips without letting his superiors know his whereabouts and about "bad chemistry" between Halevy and a supervisor.

Duncan also acknowledged writing a memorandum in which he described Halevy as a "Mossad partisan," a reference to Israel's intelligence agency, and in which he said he could not defend Halevy "as a figure free of intrigue."

Duncan said he was referring to the fact that Halevy was "fairly widely known to have an intelligence background and to have sources who were very well-placed within the defense and intelligence establishment." In the Sharon trial, the only such references have been to the fact that Halevy, a lieutenant colonel in the Israeli reserve, attended intelligence school.

Halevy, sitting with Time lawyers at the counsel table during Duncan's testimony, often sat slumped as Sharon's associate attorney, Richard Goldstein, wrung the assessment from Duncan.

Like other Time employes who have testified, Duncan was called as a "hostile witness" for Sharon. That designation frees lawyers to ask leading questions, which Goldstein used liberally today.

Goldstein repeatedly confronted Duncan with contradictions between his testimony here and in a deposition sworn in September before the trial. Duncan frequently was forced to recant, pleading that he had "misremembered," "misrecalled" or "misspoken."

Duncan also encountered problems in attempting to defend the February 1983 article at issue.

In it, Halevy reported that a secret appendix to a report by an Israeli commission investigating 1982 massacres at two refugee camps included details of a conversation the day before killings began there. It said Sharon discussed with Lebanese Christian leaders, whose militiamen were involved in the slayings, the need for them to avenge the assassination of Lebanese president-elect Bashir Gemayel.

Halevy had testified in a roundabout way that, although confidential sources told him that the commission had notes of the conversation, he had no source for his conclusion that the notes were included in the secret appendix.

Duncan said he initially believed that Halevy made a "logical conclusion" from various pieces of information that he had gathered and various inferences in the commission's report.

Duncan testified later that he did not give great weight to former Israeli prime minister Menachem Begin's denunciation of the Time article because he does not believe that Begin knew details of Sharon's conversation. He acknowledged, however, that Begin would have had access to the appendix.

After excusing the jury, U.S. District Court Judge Abraham D. Sofaer said this appeared to be a "classic admission" that Duncan does not believe that the conversation notes are in the appendix.