* Rugby Australia apologises to Folau family in statement
* Folau says "vindicated", calls for "freedom of speech" legislation
* Terms of settlement undisclosed (Adds Folau statement in paras 9-11)
By Ian Ransom
MELBOURNE, Dec 4 (Reuters) - Former Wallabies fullback Israel Folau has settled his unfair dismissal case with Rugby Australia and Super Rugby team the New South Wales Waratahs, bringing an end to a prolonged and bitter dispute triggered by an explosive social media post.
Folau, a fundamentalist Christian, launched legal action after his four-year contract was torn up in May for posting a meme on social media that said hell awaits "drunks, homosexuals, adulterers" and other groups.
Rugby Australia (RA) and Folau announced the settlement in a joint statement on Wednesday after being locked in mediation for some 14 hours.
RA apologised to Folau and his family in the statement.
"While it was not Rugby Australia's intention, Rugby Australia acknowledges and apologises for any hurt or harm caused to the Folaus," it said.
"Similarly, Mr Folau did not intend to hurt or harm the game of rugby and acknowledges and apologises for any hurt or harm caused."
Days before entering mediation at the Federal Circuit Court on Monday, Folau had hiked his compensation claim for lost income and sponsorship from A$10 million ($6.79 million) to A$14 million and reiterated his demand to have his contract reinstated.
The terms of the settlement were undisclosed.
Later on Wednesday, Folau and his wife Maria released a video message saying they were "extremely pleased with the settlement".
"With today's apology and acknowledgement by Rugby Australia, we have been vindicated and can now move on with our lives," Folau said.
"We started this journey on behalf of all people of faith, to protect their rights of freedom of speech and religion. We now look forward to the ... government enacting the legislation necessary to further protect these rights."
Folau's social media post in April triggered condemnation by LGBTI activists, former team mates and media pundits.
It followed another social media post a year before in which he said homosexuals were headed for "hell" if they did not repent, which also caused a media storm and placed RA under pressure from sponsors to act.
RA did not sanction Folau for the first post but sacked him for the second, citing a code of conduct violation and terminating his four-year contract on the recommendation of a disciplinary panel.
His dismissal proved polarising, igniting a debate that travelled well beyond the rugby pitch and became a touchstone for some in Australia who felt freedom of speech was being eroded.
The 30-year-old Folau, who was capped 73 times for the Wallabies after also representing Australia in rugby league, cast his legal challenge as a fight for religious freedom.
He had support from other Wallabies players who shared his Christian faith and Pacific islands heritage, briefly raising fears the issue might drive a wedge through the squad.
A fund-raising drive set up by a Christian lobby group raised more than A$2 million in donations to help his legal challenge.
The joint statement on Wednesday said Folau's social media post "reflected (his) genuinely held religious beliefs" and that he "did not intend to harm or offend" when he uploaded it.
"Mr Folau wants all Australians to know that he does not condone discrimination of any kind against any person on the grounds of their sexuality," it said.
RA said it did not in any way agree with the content of the Folau's post.
"Inclusiveness is one of rugby's core values and it welcomes all people to the game, including all members of the LGBTI community," the statement said. ($1 = 1.4736 Australian dollars) (Reporting by Ian Ransom; Editing by Clarence Fernandez, Peter Rutherford and Michael Perry)