Supreme Court rejects application by Jordan Williams to recall the judgment which means the defamation case against Colin Craig is heading back to a second trial.

The Supreme Court has decided against recalling a judgment in which one of its judges went on holiday with a Queen's Counsel while considering a high-profile appeal case in which the top lawyer was representing one of the parties.

Justice Terence Arnold was one of five Supreme Court judges who heard an appeal last September in the long-running defamation saga between Colin Craig, the former Conservative Party leader, and Jordan Williams.

Several months after the hearing, Craig's lawyer Stephen Mills, QC, called Williams' lawyer Peter McKnight to explain he was booked to go on a sailing trip with Justice Arnold over summer.

McKnight gave consent to Mills for the trip to go ahead.

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Then in April, the Supreme Court ruled in favour of Colin Craig and ordered a new trial be held.

The judges were split 3-2, with Justice Arnold siding with the majority.

While there is no suggestion Justice Arnold and Mills discussed the case while on holiday, Williams' legal team have taken the rare step of asking for the Supreme Court judgment to be "recalled".

When the Herald broke the story on Wednesday, Colin Craig said his lawyer had been professional in seeking approval from McKnight before going on holiday.

"In this particular case, Mr Mills took the very appropriate step of telling Mr Williams that [the holiday] had been planned and offering him the chance to say no," said Craig.

"He was offered that opportunity. If Mr Williams had concerns, he could have said no. But he didn't. I think that's quite professional [of Mr Mills]. I don't think Mr Mills can be criticised. He took Mr Williams at his word."

Williams' legal team applied for the Supreme Court decision to be recalled.

Today the Supreme Court released its judgment - which declined the application.

The judgment states McKnight explained that his client Williams was "troubled" by the proposed sailing trip but reluctantly agreed as McKnight "felt... only one answer could be given".

An email from McKnight to Mills noted his belief that Justice Arnold and Mills would not discuss the case.

"In such circumstances, while it will be appreciated our client had some concerns at face value, after careful discussion, Mr Williams offers no opposition to the suggestion of the February trip."

While friendships between judges and lawyers are common in New Zealand's small legal world, the guidelines for judicial conduct state "care should be taken to avoid direct social contact with practitioners who are engaged in current cases before the judge".

"A judge may accept invitations to speak at law firms or barristers' chambers but should be careful to avoid any perception of a lack of impartiality," the rules state.

In response to Williams' application for recall, Colin Craig's legal team said there was no "logical link" between the trip and the possibility the case may have been decided on an improper basis.

"Further it is argued the that the [judicial' guidelines are not a code and that the authorities confirm breach of the guidelines does not create apparent bias.

"In any event, the submission is that there was compliance with the guidelines because Mr Williams' consent was obtained and there was no discussion of the case."

In rejecting the application, the Supreme Court said Williams' decision not to object was a considered one in which he consulted his lawyer.

"We see no reason why a party could not consent, so long as it is informed, to such contact," said the Supreme Court.

"This is not a situation where there was, for example, confusion as to what was proposed. Nor did the nature of the event change in some say, for example, from a trip with a much larger group of people to the small group involved here.

"Rather, the trip went ahead as foreshadowed with no suggestion on the evidence before us that, contrary to the undertaking given by Mr Mills, any discussion about the appeal took place on the trip.

"Finally, there is force in the submission made on behalf of Mr Craig that the delay in raising this matter is both tactical and disqualifying. The point made in the authorities cited by Mr Miles QC is that a party who is legally represented, as here, cannot "stand by" until judgement and then, "if those contents prove unpalatable" complain about the appearance of lack of partiality."

Legal costs of $3500 were awarded to Colin Craig.

The decision means the Supreme Court's original ruling, to send the case back to the High Court for a second trial, stands.

Comment is being sought from Williams and Craig.