When he arrived home after being away for a week and boasted about being responsible for Miss Cantwell's death, his flatmates called the police.
He was interviewed soon after and confessed quickly. In December 1989, he was convicted and sentenced to life in prison.
But for the past 17 years, the Department of Corrections has had no responsibility for him and even the Parole Board cannot stop him being released into the community.
In 1996, Coulam was diagnosed with schizophrenia and transferred from prison to a mental health facility. A court order made Coulam a special patient under the Mental Health Act, meaning he must remain in a secure mental health facility indefinitely.
For the past few years he has been detained and undergoing treatment at the Mason Clinic in Auckland.
He became eligible for parole in 2011 but was refused on the basis that he still posed a risk to public safety.
Now 43, he appeared before the board again in January, where it was revealed that he had been out in the community on a regular basis - and could soon be allowed even more freedom if an application for him to have unescorted leave was successful.
The special patient order means Coulam is no longer a prison inmate, and is not in the custody of the Department of Corrections.
A Corrections spokeswoman told the Weekend Herald that as a Mason Clinic patient, Coulam was legally under the care of the Waitemata District Health Board, which runs the facility.
Corrections would take responsibility for him again only if he were transferred back to prison.
While Coulam is a special patient, he is technically still a "prisoner" so, by law, his case must still be considered by the Parole Board.
But because of his patient status, his supervision and treatment are managed under mental health legislation - which is outside the Parole Board's jurisdiction.
This means he can be denied parole - but the clinician responsible for his treatment could approve Coulam for unescorted leave, meaning he would be on his own in the community for periods of time.
On January 22, Coulam appeared before a four-person Parole Board panel that included Justice Marion Frater and associate professor of forensic psychiatry Philip Brinded.
The board heard that since Coulam's schizophrenia was diagnosed he had been treated with the antipsychotic medication clozapine and an anti-obsessional drug, clomipramine.
While in the Mason Clinic he had participated in a programme for sex offenders and continued to work with a psychologist. The Parole Board's decision, released to the Weekend Herald, revealed that Coulam also "enjoys weekly escorted leaves into the community" with other patients from his unit, and one-to-one escorted leaves every Friday.
Those trips include supervised shopping outings, considered to be a "reintegrative activity".
"We understand that an application will be made for Mr Coulam to have unescorted leaves into the community," Justice Frater said in the decision.
"His responsible clinician sought our endorsement of that step. In our view, his readiness for that is a matter for his responsible clinician and those treating him to assess. They see him on a daily basis and are able to form a proper view of his risk to the community."
Justice Frater went on to say that the only way forward for Coulam was for him to remain in treatment.
"There is no question of him returning to custody. But his rehabilitation and reintegration will be a long process ... While he is making progress, there is no question of him being ready to be released into the community."
Justice Frater said the board was not prepared to make an order releasing Coulam on parole into the care of the Mason Clinic.
"If we did so we would be unable to monitor his compliance with release conditions."
Parole Board chairman Justice Warwick Gendall said that while Coulam was being "managed" by the Mason Clinic, as he was still a prisoner the board must consider him for release each year.
Even if he was denied parole, his day-to-day management including any community leave and treatment was up to the judgment of his "responsible medical clinician".
Mason Clinic clinical director Dr Jeremy Skipworth would not speak about Coulam's case or care, citing patient confidentiality.
But he said leave was part of the treatment process for patients, including inmates who had been transferred from prisons.
"This allows the rehabilitative gains and assessed risk to be tested carefully in a range of settings prior to the decision regarding parole," he said.
"Community visits can be for a range of reasons including work rehabilitation, strengthening support networks [and] attending medical appointments."
Temporary release into the community, which could be for up to one week, required the approval of the Director of Mental Health at the Ministry of Health and the local director of area mental health services.
It is understood that an application asking for temporary release has not been filed for Coulam.
Community leave system can be trusted, says QC
Legal expert Nigel Hampton, QC, says community leave is essential to test whether Coulam could be considered for parole.
The system had been in place for cases such as Coulam's for many years and he believed it could be trusted.
"The responsibility, as a matter of the law, is the mental health authorities', in this sort of situation. It has been thus for a very long time and the system, in my opinion, has worked well," he said.
"Faith may be put on it - safety of the public will always be the paramount consideration for both the mental health people and the Parole Board."
Mr Hampton said further community leave including unescorted leave was clearly seen as part of Coulam's rehabilitation and reintegration with the community.
"It is through such necessary programmes that community safety can be assured as much as possible when this man is, if he is, ultimately released.
"With experience over the years with persons both in the prison system and in the secure psychiatric system, this Parole Board decision seems to me to be sensible and legally sound, and given with public safety in mind."
But in 2011, the two police officers in charge of the Monica Cantwell murder investigation spoke of Coulam's "sick" fantasies and their fears that he would reoffend.
Retired detective Alan Collin was second in charge on the case and recalled Coulam's confession.
"He was quite dispassionate about it. He had no conscience, no remorse," he told the Listener magazine in 2011.
Coulam also admitted breaking into an Auckland woman's home before he killed Miss Cantwell in an attempt to fulfil his fantasy of raping and strangling a woman. But, he fled when she saw him and started screaming.
He also revealed he had almost attacked another woman on Mt Maunganui the day before the murder, but he stopped when other walkers appeared on the track.
Investigation head Colin Lines, at the time a detective inspector, said Coulam was "one of the few murderers I could say with almost certainty that he would reoffend".
"He was one of those guys who had this very unusual outlook on women ... They were there for his sexual use," he told the magazine.
"He would have reoffended. I don't think succeeding in this (Miss Cantwell's rape and murder) was going to stop him."
