She found that the consequences of a conviction would out-weigh the seriousness of the crime.
But the Crown sought a judicial review at the High Court at Auckland earlier this year which found that the comedian needed to be re-sentenced.
Justice Murray Gilbert agreed with the Crown that Judge Cunningham had made errors in her assessment of the gravity of the man's offending as low.
Today Judge Mark Perkins said he would reserve his decision.
He said the man's new sentence would be delivered in court next Friday and he needed time to consider new legal arguments from the comedian's lawyers and the Crown.
The court was told the man went to bed with his partner after returning home drunk from a Christmas work party in December 2009.
After he fell asleep, his 4-year-old daughter came into the couple's bedroom and got into bed with them, and that is when the incident occurred.
The man's partner woke up and asked him what he was doing. He replied: "I thought it was you.''
He later told police that he remembered nothing of the incident.