The man, who cannot be identified for legal reasons, successfully challenged his conviction for intimidation over an incident involving the child, who at the time was 11 years old.
During an argument that took place during a school drop-off in November 2020, the man screamed and berated the child as they sobbed uncontrollably.
On Monday at Sydney's Downing Centre District Court, Judge Sean Grant threw out the conviction after finding the spat was a trivial disagreement between a child and a parent who was stressed and frustrated.
With the child failing to give evidence in court about how they felt during the incident during the case's initial hearing, there was no proof they felt fearful of physical or mental harm, the judge said.
At the hearing, prosecutors relied on covert recordings made by detectives investigating William's disappearance, who had tapped the couple's home and vehicles.
Over the course of 14 months in 2020 and 2021, police made more than 1000 hours of covert recordings in the couple's home and vehicles.
In audio clips played to the court, the man could be heard yelling from the car at the child to "shut the front door" and "move, f***ing move".
"I'm done with this family. I'm out, this is f***ing ridiculous," the man said as the youth was heard sobbing.
"F***ing stupid little s***. You do this every day."
Judge Grant said the child was distressed as the foster father berated them, but the cause of that distress was an argument that occurred in the home prior and not the words or tone of voice that were used against them.
"There is no evidence that (the child) felt intimidated," he found.
In a conversation the day after the argument when the foster father learned the child had spoken to a teacher, he advised them to talk to him or his wife instead.
He said he would never hurt them.
"You might have felt scared, but I'm so exhausted because what you do consumes everyone," he said.
"I don't want to do this anymore."
Judge Grant said the discussion may not have even related to the car-ride argument, with the child revealing they had told the teacher about another confrontation with the foster father in their bedroom.
He was not charged over that incident.
Judge Grant said the Local Court magistrate had erred by unjustifiably using that later conversation as proof the foster father knew he had intimidated the child.
"It is akin to a bootstrap argument," he said.
William was three years old when he went missing while playing at his foster grandmother's home in Kendall on the NSW mid-north coast on September 12, 2014.
No one has ever been charged over his disappearance, although police have aired a theory that his foster mother disposed of his body after his accidental death.
The woman, who denies having anything to do with William's disappearance, is also appealing convictions for two counts of intimidation over separate incidents in which she threatened to slap the same child.
The foster father's barrister, Phillip English, indicated to the court that he would be applying to get his client's legal costs of defending the case paid for by the state.
He did not say anything to reporters as he left the court.
