Gagged former Fonterra director Leonie Guiney and Fonterra have settled the legal proceedings between them, with the dairy company agreeing to meet Guiney's costs.

Fonterra has advised of the settlement in a notice to its 10,000-odd farmer-owners, signed by the Fonterra board.

Guiney, who left the Fonterra board last year, was named in a High Court injunction sought by the company in March.

The court orders restrained Guiney from "breaching her duties of confidentiality" to Fonterra and prevented media from using information received from her.

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In turn, Guiney filed defamation proceedings against the Fonterra board of directors.

She did not seek damages.

Her defamation claim was over a letter sent by the Fonterra board to shareholders explaining the injunction action, in which the board alleged Guiney had leaked and misrepresented details of board discussions.

Guiney said in a statement she was delighted with the outcome.

"Commonsense has eventually prevailed.

"I look forward to more timely and transparent action on issues that impact we farmer owners' investment in Fonterra, our co-operative and therefore New Zealand.

"Credit and thanks to all the shareholders who supported me. All funds donated will now be donated to Farm Strong.

"The honesty and action on the bad news, openly reflecting the real state of our Fonterra balance sheet from Mr Monaghan last week is a positive step in the right direction"

Fonterra has been approached for comment.