Shayne Graeme Maynard, who appeared via video link, punched his fists above his head and smiled when magistrate Ian Cheetham dismissed a charge of murder.

The prosecutor told Newcastle Local Court that the department would not pursue proceedings against Maynard, Damien Graham Small or Tracey Ann Bridge.

Mrs Gall, 50, was murdered in her Raymond Terrace home on March 25, 2002.

She was found by her partner at their Adelaide Street address.

A post mortem examination revealed she had suffered extensive head injuries between 2pm and 4.40pm that day.

Maynard, formerly of Cove Boulevard, North Arm Cove, was granted bail to live in Smith Street, Maitland.

He will return to court on April 23, charged with possessing ammunition, drugs and cultivating prohibited plants.

Small will remain in a Mid North Coast Correctional Centre where he was serving a period of imprisonment for another matter, while Tracey Ann Bridge, of Ballina, appeared in court on bail granted by the Supreme Court last month.

A spokesperson for the Department of Public Prosecutions said it could not discuss why the matters were withdrawn because of the ongoing proceedings of the fourth co-accused Anne Maree Wotherspoon, formerly of Glebe Road, Hamilton South.

She will appear in custody at Sydney Supreme Court on August 27.