Elizabeth Yates, of Meir Park, Stoke-on-Trent, left her job as school administrator at Fulford county primary in October 1999 suffering from depression and anxiety after 14 years at the school.
She said this week: "I am just happy that the affair is over, it has gone on for five years. It has been five years of constant worry and hassle. Now I feel that justice has been done.
"My two children have been hugely supportive, and my husband has been incredible. I am sure many other husbands would have packed their bags by now."
In documents prepared for the High Court, the 56-year-old's legal team said Allan Drake, the former headteacher at Fulford who died in February 2002, was abusive to her.
They said Mr Drake bullied and intimidated her until she dreaded him walking through the door and that he created an atmosphere of unhappiness and insecurity at the school.
Mrs Yates said Staffordshire county council failed to provide her with counselling or a confidential helpline through which she could express her concerns, and failed to check whether Mr Drake was a suitable head.
Staffordshire agreed to settle out of court earlier this month but accepted no liability. It will pay Mrs Yates pound;30,000 compensation and court costs which may be in excess of pound;10,000 according to her solicitors Bailey, Wain and Curzon.
High Court documents obtained by The TES show that a key council argument was to be that Mrs Yates did not make her claim within three years of knowing she had what "almost certainly amounted to a psychiatric illness" - as is required by law. Mrs Yates' lawyers denied this.
A Staffordshire spokeswoman said: "No liability was accepted on our part and the compromise was reached at the instigation of Mrs Yates' s counsel."