The volcano, also known as White Island, was a popular tourist attraction until the deadly blast six years ago, which claimed the lives of 14 Australians.
Those victims now stand to receive less in reparations after Friday's judgment.
New Zealand's workplace safety watchdog launched the country's most complex and costly investigation into the eruption, which led to the conviction of five tour companies and the government agency which monitored the volcano.
The owners - Andrew, James and Peter Buttle - were cleared of individual liability but their company, Whakaari Management Ltd (WML), was also found guilty at trial in October 2023.
In that judgment, Justice Evangelos Thomas lashed "astonishing failures" of safety audits and said WML "needed to stop and re-evaluate" safety audits.
"It should have been no surprise that Whakaari could erupt at any time, and without warning, at the risk of death and serious injury," Mr Thomas said.
In a 99-page judgement released on Friday which overturns the 2023 decision, Justice Simon Moore decided owning the land did not necessarily transfer workplace safety responsibilities.
Justice Moore stressed he had "not overlooked or minimised the unquantifiable tragedy" of the victims and their families.
"The 47 people who were on Whakaari at the time it erupted should never have been there. The fact that they were reveals ... multiple systemic failures," he said.
"However, this appeal has been decided on what I consider the particular law and facts reveal on the question of WML's criminal liability."
Justice Moore said he offered Justice Thomas "no criticism" and that "reasonable minds have differed".
When Whakaari erupted on 9 December 2019, 47 people - tourists and tour guides - were on the island, including 24 Australians.
Most had booked day trips while visiting on cruise ship Ovation of the Seas.
A total of 20 people were killed, either on the island, while being ferried back to North Island for treatment, or while receiving care for severe burns and volcanic ash inhalation, while two bodies remain missing, presumed dead.
Others suffered debilitating burns, which were treated in hospitals across Australia and New Zealand after emergency airlifts.
The active stratovolcano was assessed at "level two" during the eruption, indicating "moderate to heightened volcanic unrest".
Survivors testified that they were told of the risks and signed waivers, but also informed that it was "nothing to worry about".
This week's judgment means the Buttles do not have to pay a fine of $A940,000 or $A4.4million in reparations from the March 2024 sentencing.
The five tour companies, which pleaded guilty to charges, were levied with fines totalling roughly $A1.6 million with reparations of $4.8 million.
GNS Science, the government agency which monitors seismic activity in New Zealand, was fined $A48,000.
The judgment will impact the management of New Zealand's adventure tourism industry, a significant drawcard for many visitors.
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