The post traumatic stress disorder she suffered during her ordeal means she can no longer work again as a teacher. Ms Connor, who originally lived in Esher but has since moved to Wales, became head teacher in 1998 after four years as deputy head.
During her time as head until 2002 the Sats results "improved very considerably", said the judge. "She ran a happy and successful school where there were no real problems until 2003."
In his ruling, the judge said the council ignored her "health and welfare" because it was clear they were concerned about the reference to racism, and feared Mr Martin could complain to the CRE.
He described Ms Connor as "a most honest witness" and a "successful headmistress". But from 2003 the council failed to keep the activities of Mr Martin and Mr Saleem in check.