Corrections Minister Judith Collins has strongly indicated the Government will change the law after a ruling that some criminals have been locked up too long, and said the chances of compensation are "remote".
"I think if I was any of these offenders I would not be going out to buy a new car based on what I think I might get," Collins told the Herald after a briefing from Corrections today.
The Supreme Court ruling could create "very perverse" outcomes, Collins said - including that prisoners could offend while in jail on remand without any extra time being added to a sentence.
"That is obviously something we need to look at. But it's very early to talk about legislation. There may well be a need to revisit the Parole Act."
The lawyer for a man who successfully appealed to the Supreme Court has confirmed he will seek compensation for wrongful imprisonment, and expects thousands of others could be similarly affected.
More than 500 prisoners have had their prison sentences calculated wrongly, the Corrections Department has confirmed.
Twenty-one will be freed today after the Supreme Court ruled yesterday that Corrections had miscalculated the release dates for two inmates.
This morning, Corrections chief executive Ray Smith said the department had "solid plans" in place to ensure the release of the 21 prisoners today were well managed from a public safety and reintegration perspective.
"Around 500 serving prisoners out of the prisoner population of approximately 9800 are also affected, and will have their release dates brought forward. In most cases this will only be by a matter of a few days or weeks rather than a significant period of time."
The figure did not include ex-prisoners.
Collins said she did not know how many people could be affected by the ruling.
She strongly defended Corrections, saying the department had done nothing wrong and had acted in accordance with how the Court of Appeal ruled the law should be interpreted on four occasions.
"In fact, if Corrections had not complied with the Court of Appeal judgments it would itself have been in breach, so it's between a rock and a hard place."
Douglas Ewen is the lawyer for Michael Marino, who took the Supreme Court case. Yesterday's ruling confirmed Marino had served four-and-a-half months too long in jail.
"In terms of numbers of people affected it may not be a stretch to say that there are thousands of people who have been wrongfully detained in New Zealand prisons," Ewen said.
In the judgment released yesterday the Supreme Court unanimously held that Corrections had misinterpreted the Parole Act in some instances.
Time held in detention before a person is sentenced to imprisonment is treated by the law as time already served when release dates and parole are determined.
The Supreme Court has ruled that time in detention from arrest counts as pre-sentence detention for all charges, even those that are filed after arrest.
Corrections has instead been working out time in detention on a charge-by-charge basis, meaning some people have been given jail sentences that are too long.
This was done in the case of Marino, who was taken into custody in February last year on family violence charges.
In March and June further charges were laid of attempting to pervert the course of justice as a result of telephone calls he made from prison.
Marino pleaded guilty to all charges and was jailed for 22 months, less any time already held in detention..
Corrections worked out he would get out of jail in May this year - calculating time in detention from when the second perverting the course of justice charge was laid.
That was June 19 last year - meaning he didn't get credit for the period from February to June when he was held on family violence charges.
Marino's appeals were unsuccessful in the High Court and Court of Appeal, but the Supreme Court granted him leave to appeal.
That mattered to another offender, Edward Thomas Booth who, because of Corrections' approach to calculating detention, was wrongly sentenced to eight months' extra jail.
Marino is no longer in custody, but the ruling means Booth no longer needs to pursue his appeal and will have his sentence reduced.
Booth's offending did not happen while he was held in custody. Asked if she considered it a perverse outcome that his time in detention on all charges started from the point of his arrest, Collins said "I am sure the victims would think that".
Collins said if the Parole Act was changed it could be done so in such a way as to rule out compensation.
However, under the Prisoners and Victims Claims Act any compensation would likely be considered a windfall and be paid to victims, and the Limitation Act could also limit the number of people who could take a compensation claim.
Corrections had also been acting in accordance with the law as determined by the Court of Appeal on a number of occasions, Collins said.
Green Party Corrections spokesman David Clendon said Corrections had clearly got it wrong and was in urgent need of an overhaul.
"Finding out hundreds, possibly thousands, of people have been held in prison for longer than they should have been is the latest in a long list of failures for this disastrous department," Clendon said.
"Judges and Corrections have been speaking at cross purposes for years on this issue. When Judges set sentence dates for the length of time they want a person to stay in custody, Corrections should have been following that."
Labour's Corrections spokesman Kelvin Davis last night said the mistake would cost taxpayers, and he hoped it wouldn't put pressure on Corrections' budget.
Davis said he had spoken with prisoners who had raised.
Being wrongly imprisoned would make offenders angry and resentful and would make their rehabilitation harder, Davis said.
• 21: The number of prisoners immediately identifiable who could be released this week.
• 2002: The year the problem dates back to.
• Thousands: Thousands of prisoners could be affected by the miscalculation, a lawyer says.
• Four-and-a-half months: The extra jail time served by Michael Marino.