One of the students said he asked Dr Conaglen why he "sought deliberately to humiliate the student".
"Dr Conaglen's response was said to have been to deny the suggestion, to say the student cried because of her cultural background and to say that a 'Kiwi girl' would not have cried."
The complaint included allegations Dr Conaglen was unfair, offensive and humiliated students and his actions were part of a pattern of bullying. The students called for his suitability as a clinical teacher to be reviewed.
Dr Conaglen responded by expressing regret at distress caused and saying he had reviewed his teaching style. He also provided investigating staff with eight statements of support from colleagues and former students.
However, the university's investigating team said it could not condone the unacceptable form of teaching and reached a finding of misconduct.
Dr Conaglen complained to the ERA saying the university did not act as a fair and reasonable employer. He argued the substantive decision and penalty were unreasonable.
The ERA found Dr Conaglen was "unnecessarily destructive" in the way he addressed the negative aspects of the student's performance and requiring the shyest student to play the main role was "unacceptable".
It agreed with the university's findings that he "overstepped the line and his criticism was destructive".
However, it ruled the university's disciplinary procedure was "fatally flawed" and Dr Conaglen had a personal grievance on the grounds he was disadvantaged in his employment by unjustified actions of the university.
The university's investigating delegate exceeded its authority in imposing the penalties it did and the ERA accepted Dr Conaglen experienced "strong feelings of humiliation and upset" as a result.
The university was ordered to pay him $10,000 compensation for injury to his feelings.
Dr Conaglen was not available for comment. A university spokesman said a decision would be made by the end of the month on whether to appeal.