Justice Bill Wilson has resigned as a judge of the Supreme Court over an issue which shook New Zealand's judiciary.

Acting Attorney-General Judith Collins announced Justice Wilson's resignation this afternoon, saying he would get a year's salary of $410,000, which is taxable.

She later revealed that Justice Wilson had offered to resign a few weeks ago, but under terms that were not acceptable to her. She said the payment of a year's salary was appropriate because if he had not resigned his case would have continued at more expense to the taxpayer.

The Crown will pay Justice Wilson's solicitor-client costs which to date have been calculated at $475,000. These are payable under the Judicial Conduct Commissioner and Judicial Conduct Act 2004.

He will also get existing entitlements, including untaken sabbatical leave and retiring leave. The amount has yet to be calculated.

Justice Wilson has been involved in a judicial conduct case over conflict of interest and Ms Collins said his resignation was "the best outcome under the circumstances".

"It resolves an unprecedented situation in New Zealand's legal history," she said.

"To proceed with this case would have caused incalculable damage to confidence in the judiciary."

Ms Collins said if the situation had continued it would have meant considerably greater costs being paid by the taxpayer in relation to Justice Wilson's salary and legal fees for an indeterminate time.

His resignation is effective from November 5.

The scandal over Justice Wilson, 65, resulted from his sitting on a case in 2007 when he was on the Court of Appeal bench in which Queen's Counsel Alan Galbraith appeared for the Wood Board Disestablishment Company.

The court overturned a High Court ruling awarding wool growers group Saxmere repayment of $8 million in levies from the former Wool Board.

Allegations were made that Justice Wilson did not disclose his business relationship with Mr Galbraith.

They were co-owners of Rich Hill Ltd, which owned the site of Rich Hill thoroughbred stud, part-owned by Mr Galbraith. There were allegations that Justice Wilson owed Mr Galbraith $242,804, which was not disclosed to the Court of Appeal hearing. The debt was denied by Justice Wilson.

The Supreme Court last November ordered the decision be set aside and the case re-heard, on the grounds Justice Wilson and Mr Galbraith's relationship could raise a perception of bias.

In May this year, Ms Collins accepted the recommendation of Judicial Conduct Commissioner Sir David Gascoigne that there should be further inquiries into complaints against Justice Wilson.

A judicial conduct panel was set up for the first time in New Zealand to hear the complaints.

But the High Court last month quashed the decision to establish it following a judicial review sought by Justice Wilson. The matter was sent back to Sir David to make a more complete recommendation.

- NZPA