Judge Mackintosh referenced a Court of Appeal decision in relation to run-away millionaire Leo Gao who was falsely credited millions of dollars by Westpac.
She said the decision highlighted the fact financial institutions should be able to trust their customers and have honest transactions with them.
"They should be able to trust that customers will not take advantage when mistakes are made."
Judge Mackintosh said the offending was not a one off.
"There were a number of transactions, wheeling and dealing, buying and selling of motor vehicles. It appears there was some effort to conceal the money by the wheeling and dealing of motor vehicles."
Douglas' lawyer, Russell Fairbrother, told the court his client was not acting dishonestly when he spent the money.
"The difficulty is that when the money was credited to his account he was expecting payments from two other sources."
Mr Fairbrother said Douglas was expecting a payment after believing he had won an overseas lottery.
He said Douglas had attempted to resolve the matter with the bank.
"The bank would not discuss a constructive way to resolve this matter."
Mr Fairbrother said Douglas "will spend his dying days thinking he is the victim of the bank's activity".
A summary of facts said Douglas applied for an extension to his mortgage in June 2011 which was granted before an error at the BNZ resulted in $172,250 being credited to his account rather than the $7000 he applied for.
During the next three weeks he spent $171,546.35 on a variety of Holden cars.
On July 5, 2011 Douglas went to Stephen Hill Motors in Napier and purchased a 2006 Clubsport R8 with a $51,000 bank cheque.
He originally registered the car in his own name but it was changed a few days later.
Later the same day he withdrew another $30,000 from his account and transferred $14,948.32 to the Oxford Finance Corporation.
The next day he met an associate, Barry Bell, at a car yard in Hastings where he purchased a 2002 Holden Commodore SS ute for $17,000.
The car was registered in Bell's name and was later traded in for a 2002 Holden Clubsport which was also registered to Bell.
A couple of days later Douglas purchased a 2002 Holden Commodore VX and paid the $15,500 purchase price in cash.
The vehicle was registered in his daughter's name and was onsold two months later with the proceeds going towards the purchase of a 2007 Holden ute.
The BNZ discovered its mistake in early September 2011 when Douglas' mortgage payments went into arrears.
Douglas told the bank he had won some money on a lottery and had been expecting a Winz payment around the time the large amount from the bank was credited into his account.
He told the bank it was normal for him to make $50,000 withdrawals.
Three vehicles, a 2004 Holden ute valued at $34,990, a 2006 Holden Clubsport valued at $51,000 and a 2004 Holden Maloo valued at $35,990, were recovered by police.
An order was sought by the BNZ to repatriate the Clubsport purchased with the bank cheque.
The bank is also taking action through the civil court to recover money owed to them.
In a statement, a BNZ spokeswoman said Douglas used funds that were incorrectly allocated to his account due to a "keying error".
"When BNZ contacted Mr Douglas he said he won some money from a lottery.
"Debt recovery was undertaken through the bank's usual processes and the matter was forwarded to police for criminal investigation."