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On Saturday, Mr Cunliffe told a Young Labour conference that his grandfather Bob Tuke won the medal after his World War I service.
He said: "At my local RSA, I spoke of my grandfather Bob Tuke, who fought in World War I.
"Although his letters home understated it, he lived in constant fear; he lived with lice, damp and dysentery. He watched his friends die in France, Egypt and Gallipoli.
"He was awarded a Military Medal for valour, but hardly mentioned it to his family."
Military records showed that his grandfather was a second lieutenant between 1914 and 1919 and was wounded but did not win a Military Medal.
The records showed that he won the British War Medal.
A spokesman for Mr Cunliffe said that the Labour leader's great uncle Edmund Tuke also fought in the War and won a Military Medal for valour.
Both of the men were decorated soldiers and this was part of the family lore. But in his speech on Saturday Mr Cunliffe had confused the names of the medals.
The spokesman said Bob Tuke also won other medals including the Victory Medal, the Gallipoli Medallion, the War Medal 1939-45 and the NZ War Service Medal.
- Isaac Davison of the New Zealand Herald