Alan Morison and Chutima Sidasathian, of news website Phuketwan, were accused in case that alarmed human rights and press freedom groups

An Australian editor and his Thai reporter colleague were found not guilty on Tuesday of criminal defamation for reporting on the alleged involvement of Thai naval officers in the trafficking of Burmese Rohingya refugees.

“We’re delighted. It’s such a wonderful day for media freedom and Thai justice. When the judge read out the verdict there was a huge sense of relief. And there was a round of applause when we left the court house,” Alan Morison, editor of independent news website Phuketwan, told the Guardian on the telephone.

He and reporter Chutima Sidasathian faced up to seven years in jail and thousands of US dollars in fines.

Morison said that the year-long case had deeply affected the duo’s daily life in Phuket, a tourist hotspot in the Andaman Sea.

“We’ve felt constant pressure one way or another,” he said before the court session. “We’ve conscientiously used work as a diversion and evidently being sued by an organisation as mighty as the Royal Thai navy, you can’t help but feel some the pressure.”

The case – widely condemned by human rights and media freedom groups – has damaged Thailand’s reputation. Morison, who is 67, had said a guilty verdict would be a death sentence for him at his age.

A note posted before the trial on the Phuketwan website said: “Two Phuketwan journalists face judgement day in the trial triggered by the Royal Thai navy so the island’s online news source of preference is suspended from September 1. The future of the site has yet to be determined.”

The defamation claims and charges under the Computer Crime Act, which bans online material considered a threat to national security, relate to a 41-word paragraph from a Reuters news agency report on Rohingya refugees, which was republished in Phuketwan.

Reuters, a huge news organisation of more than 2,600 journalists which won a Pulitzer prize for its reporting on the Rohingya issue, has not been charged.

Thailand’s navy has denied its officers were involved in human trafficking. But since the charges were made against the two journalists, the Thai government has launched investigations into official complicity into the trafficking trade and a senior military official was arrested.

Morison said he was going to think over the next few days whether to continue the Phuketwan website. “We certainly want the work we were doing on behalf of the Rohingya to continue in one way or another.”

Phil Robertson (@Reaproy) Free at last! Alan & Oi of @Bigislandmedia outside the #Phuket court house talking to media about dismissed charges pic.twitter.com/VyP32NehXC

He said he was pleased that the judge ruled that the Computer Crimes Act should be used against hackers and cybercrime and not for journalists.

Josef Benedict, Amnesty International’s Southeast Asia campaigns director, said the acquittal was a positive decision. “But the fact is that they should never have had to stand trial in the first place let alone face the possibility of years in jail. The Thai authorities have again shown their disregard for freedom of expression by pursuing this case.”

Thailand’s ruling junta, which toppled the government in a coup last May, has stifled the media and banned political gatherings.

Phil Robertson, deputy director for the Asia division of Human Rights Watch, was observing the court and said there “was a great deal of elation.”

“This nightmare is finally over. It is an important victory for media freedom in Thailand,” he said. But, he warned: “There is further work to be done in amending the Computer Crimes Act and doing away with criminal defamation.”