A 16-month jail sentence given to a Sydney financier who mutilated and killed 17 rabbits and a guinea pig was a "disappointing mistake", a judge has found.
Brendan Francis McMahon, 37, won an appeal against his July conviction on 18 counts of aggravated animal cruelty.
The New Zealand-born businessman used his company credit card to purchase the animals before torturing them to death and dumping their corpses in and around his inner-city office building.
McMahon appealed the conviction on the grounds of mental illness, saying his mental disorder - which has been described as extreme social anxiety - was aggravated by his heavy drug use before and during his offence.
McMahon was smoking $250 worth of ice every three days at the time, his sentence hearing was told.
District Court Judge Peter Berman found sentencing magistrate Ian Barnett made an error in rejecting McMahon's mental health defence, and described the prosecution case against him as "flawed".
"It is disappointing that such mistake was made," Judge Berman said of McMahon's conviction.
"A moment's reflection, or an understanding of the context" of the relevant section of the Crimes Act and the defence of mental illness would have resulted in McMahon's defence being accepted, Judge Berman said.
Psychiatrist Stephen Allnutt had earlier told the appeal hearing that McMahon suffers from an underlying mental illness which was exacerbated by his drug use.
Even after spending a month in prison after his arrest, he was still showing signs of severe mental illness, Dr Allnutt told the hearing.
"I thought he was probably psychotic at the time that I saw him," Allnutt said.
Judge Berman found McMahon could not be held responsible for his actions given his mental disorder.
"It is reprehensible to torture animals and only the evil or the insane would argue otherwise," Berman said.
"That is what right thinking members of the community believe, but Dr Allnutt found ... that at the time the appellant did these terrible things, he was not a right thinking member of the community.
"His mind was so disordered that he did not understand that what he was doing was wrong."
Punishing a mentally ill person for actions over which they have no control would be cruel, he said.
The case was adjourned until November 10, when submissions will be made about whether McMahon should undergo further psychiatric treatment.
McMahon told reporters he would make a statement once the hearing was completed.
