Balding murderer and sex offender Phillip John Smith has won a legal challenge against Corrections over a decision to take away his toupe.

Smith this month took the Department of Corrections to court because they prevented him wearing a hairpiece ever since he used one as part of a disguise to flee to Rio de Janeiro in November 2014.

At the time of his escape, he was on a temporary release while serving a life sentence for the 1995 murder of the father of a 12-year-old Wellington boy he had been molesting.

In a decision released on Thursday, the High Court at Auckland ruled the department had failed to take into account Smith's rights under the Bill or Rights Acts.

"I have concluded that Mr Smith's fundamental right to freedom of expression was ignored," Justice Edwin Wylie said.

"An important right has been breached and the breach may be material."

He quashed Correction's decision and has given the department two weeks to rethink the matter with further explanation.

Smith argued prison authorities had not given him a valid reason for why he could not wear a hairpiece and used exaggerated concerns about security to justify their decision.

But Justice Wylie said there did appear to be some legitimate reasons given by Corrections for the toupe ban after the fact that may support its decision if it reapplied.

He declined to award Smith a requested $5000 in damages.

Representing himself in court earlier this month, Smith said the days after he was returned to custody were among the lowest in his life because New Zealand newspapers ran pictures of him appearing bald on their front pages.

"I felt belittled, degraded and humiliated," he said.

He told the court he began balding in his early 20s and hairpieces gave him the confidence to present himself in public.

Crown lawyer Vicki McCall, representing the Attorney-General on behalf of Corrections, opened her statement saying the prison's decision had been an operational matter the courts should be reluctant to interfere with.

Comment has been requested from Corrections.