The Independent Police Conduct Authority has found the police illegally detained two women and three young children during an armed offenders call-out.
In November 2013, a violent confrontation broke out between family members and officers at an address in south Auckland, during which a man pulled out what officers thought was a shotgun.
An officer, fearing for his life, fired a shot at him, but missed and the man fled.
Armed officers were called in, and they used a loud hailer to order everyone in the house, including the women and children, to get out.
The authority's chair, Judge Sir David Carruthers, said the women, who were detained, were given no explanation about their rights and were made to believe they were not free to go.
He said police were justified in firing at the man who pulled the gun, but should take more care in dealing with vulnerable people caught up in such situations.
Counties Manukau police said they accepted the findings, and that the officers involved should have explained more clearly to the women that they were not being detained.
District commander John Tims said one man from the property had since admitted to breaching home detention, escaping custody and assaulting the police, while another man was also convicted of using an imitation firearm to avoid arrest.