The decision will not result in Whittall facing charges, with the court noting both sides agreed too much time had passed.
Sonya Rockhouse, who lost her son Ben in the disaster, said the result was so exciting she could barely believe it.
"This is the fourth court we've been to, so I'm just ecstatic, I'm bursting. I'm so excited I can't even think.
"This will show him [Whittall] that we just didn't take what he'd done lying down. We weren't going to give up.
"It's a pity we couldn't bring him back [to face charges], but we can't, so we'll take this.
"This shows you cannot pay to get out of charges, so chequebook justice doesn't work now.
"This will set a precedent now, and lawyers will have to think twice before they make this sort of deal in the future.
"If nothing else, it will stop other people going through what we've had to go through."
WorkSafe released a statement that said it fully accepted the Supreme Court's decision.
Chief executive Nicole Rosie said it clarified the approach they should have taken, and would take in future.
"We hope this decision will bring some relief to the families, and we will be seeking a meeting with them shortly to discuss the decision.
"As a result of the families' commitment to their loved ones, New Zealand has new health and safety legislation and a regulatory unit focused on high hazard activities.
"There is now far greater recognition and commitment to health and safety across the country."
Nigel Hampton QC, who took the case for Rockhouse and Osborne, said there was never any point fighting for charges to be laid against Whittall.
"The reality is that seven years have gone by, and we didn't seek to get WorkSafe to resume the prosecution.
"What we wanted was a clear decision that principle still wins over pragmatic payment of money."
He said the Supreme Court decision prompted tears of joy from the Pike River families.
"Here we are, seven years on since the explosion. And in one week they got the keys to the gate so that they can proceed with the recovery to the drift of the mine itself.
"Then four days later we get a decision saying that WorkSafe were wrong in doing what they did.
"It's a very important decision on principle.
"That principle is that criminal justice cannot be bought here in New Zealand, that we have a principled system of criminal justice, that a bargain to stifle a prosecution by paying money always was unlawful and remains unlawful in New Zealand."
SIDEBAR
Where is Peter Whittall now?
The former mine boss was front and centre in the early days following the mine explosion in November 2010, but disappeared from public view as serious safety breaches came to light.
In 2012 he left his wife Leanne Whittall for former Pike finance controller Angela Horne.
At the time, Leanne spoke out about her bitterness in standing by him throughout the disaster, and her worries about whether or not the new relationship had started after they separated.
Peter Whittall now lives in Australia, where he is the CEO of aged care community Illawarra Diggers, in New South Wales.
Calls to Illawarra Diggers were not returned.
