Justice Minister Amy Adams yesterday announced the Government would not award compensation to Mr Bain, but agreed to pay an ex gratia sum of $925,000 "in recognition of the time involved and expenses incurred by Mr Bain during the compensation process, and the desirability of avoiding further litigation''.
Mr Bain spent almost 13 years in prison after being convicted in 1995 of the murders of his father, Robin, his mother, Margaret, and his three siblings, Arawa, Laniet and Stephen, at the family home in Dunedin.
The Privy Council quashed those convictions in 2007 and Mr Bain was acquitted of the murders following a retrial in 2009.
The settlement brings an end to Mr Bain's six-year bid for compensation, in which the case was reviewed by three legal experts.
Prof Henaghan, the University of Otago's dean of law, said the decision to make an ex gratia payment was "pragmatic'' and marked an end to the saga and a stalemate in the ongoing question of Mr Bain's innocence.
Ms Adams said Cabinet decided to make the payment to bring closure to the case.
Compensation would not be offered because Ian Callinan QC, a former justice of Australia's highest court appointed to provide advice on Mr Bain's claim, found he had not established his innocence on the balance of probabilities.
"It's as sensible an outcome as you can get in a case like this,'' Prof Henaghan said.
"I can understand why David Bain's supporters were upset but ... this case doesn't fit nicely [into the guidelines for compensation] like the Teina Pora case because his conviction was quashed and there was no retrial.''
Unlike in the case of Arthur Allan Thomas, who was convicted of the murders of Jeannette and Harvey Crewe after police planted evidence, there was no proof of deliberate wrongdoing, Prof Henaghan said.
"I think we have to put things in context. There was great public pressure on them at the time. There were things they would have done differently and they didn't have the forensics they have now,'' he said.
"But there was no deliberate intentions here to mislead. There's no evidence of bad faith on their part.
"The Privy Council ruled there were some irregularities within the evidence brought to court but there was enough evidence for a retrial.''
Ms Adams described the case as "one of the most complex, unique and high-profile cases New Zealand has ever known''.
"Mr Callinan's report found that Mr Bain has not established his innocence on the balance of probabilities,'' she said.
"As such, no statement of innocence or compensation payment will be made to Mr Bain.
"However, the Crown recognises that the compensation application process has lasted nearly six and a-half years and that this has been an incredibly difficult and complicated case for all involved. Reaching this point has taken longer than anyone would have wanted it to.''
Mr Bain and his advisers did not accept Mr Callinan's findings and had intended to legally challenge the report, which would have led to further cost, she said.
"While the Crown is confident in the strength of its position in any such review, it's clearly desirable to bring finality to this case and avoid the cost and uncertainty of further proceedings. In my view, no-one benefits from this matter continuing to drag on.''
Mr Bain had accepted the payment in full and final settlement of the case, she said.
Mr Bain told reporters on the doorstep of his Christchurch home yesterday he was disappointed not to receive compensation.
"Quite frankly, the only thing I have to say is that Mr Callinan, Ms Adams and everybody that's been involved in the case to date have got it wrong: I am innocent. That will always be my only comment and there's nothing else I have to say on the matter,'' Mr Bain said.
Supporter Joe Karam said he could not comment until the settlement was finalised.
Friends of David Bain spokeswoman Catherine Spencer said the decision was "another example of justice being denied''.
She understood a need for a "line to be drawn'' under the case, but believed the Crown had used its "time and huge resources'' against Mr Bain.
"The Crown have got it wrong again,'' she said.
Southern district police, who have always maintained the thoroughness and integrity of their investigation into the murders, declined to comment when contacted yesterday.
Robin Bain's younger brother, Michael Bain, also did not wish to comment on the settlement, saying it was a "matter between David and Amy Adams''.
When asked if his views about the case had changed since he penned an article for the Listener in 2009, which said "Robin was no killer'', he replied: "Not at all''.
