The justices ruled that the search on August 18, 2009 was in breach of the New Zealand Bill of Rights Act 1990.
The court heard evidence from three prison officers involved in the search, who argued the search had been justified because Forrest had sparked a "control and restraint incident involving threats to staff".
They also claimed it was standard practice to strip-search inmates on admission to J Block.
But the justices dismissed their justifications, saying that nobody thought Forrest could have been carrying an "unauthorised item", and that any informal blanket policy of strip-searching every prisoner on admission to J Block would have been "unlawful".
They concluded that Forrest could do nothing to "mitigate the loss or damage" he suffered from the unlawful strip search, except complain to Corrections, "which he did".
And while they accepted the officers concerned had not set out deliberately to breach the inmate's rights, or "act in bad faith", they never stopped to wonder if such a search was illegal.
They concluded it was an "exceptional case" and fixed compensation at $600.
But the justices doubted if Forrest would ever see the cash, as it would be paid subject to the Prisoners' and Victims' Claims Act and "others will probably have a better statutory claim to the money than Mr Forrest has".