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The Independent Police Conduct Authority (IPCA) released a report last week detailing its findings on the November 17, 2017 incident, which took place in a paddock near the town’s Cross Recreation Centre.
The report says the incident unfolded about 11.30pm, after the unnamed man had finished work, and was driving down Glasgow St in his ute to feed his horses.
An unnamed officer patrolling the area said the man behaved "suspiciously" when he stopped, then accelerated when he saw the patrol car.
The officer turned on his lights and siren and followed the man, who stopped about 400 metres beyond and got out to open the gate to a paddock.
The man asked the officer to follow him through the gate where they could talk, and got back in his ute.
The officer reached into the ute and turned the engine off.
After the man swore at him and got out of the ute, the officer pepper-sprayed him, before arresting him for failing to stop, and for obstruction.
The IPCA found that, although the arrest for failing to stop was lawful, it was "unnecessary and unreasonable" in the circumstances.
The authority accepted the officer pepper-sprayed the man because he believed the man posed a risk and was fearful for his safety, but said the officer "over-reacted" to the situation, as the man was not carrying a weapon and was standing a few metres away from him.
In his report, IPCA chairman Judge Colin Doherty said he believed the officer was "overzealous", and had acted "in an overly robust manner".
"The officer seems to have a heightened expectation that he was dealing with someone who would be assaultive.
"There were more reasonable tactical options he could have used," he said.
The authority also found police had no grounds to detain the man overnight, and it was unreasonable to suggest a bail condition be imposed, forbidding the man to drive.
Otago coastal area commander Inspector Marty Gray said police acknowledged the report.
"Police conducted an employment investigation into the matter, and action was taken in accordance with the disciplinary process under the New Zealand Police Code of Conduct.
"We will continue to reinforce education and training for officers, [to provide] the best service delivery as a result of the authority’s findings."