The Government has agreed to hold off its consideration of David Bain's compensation claim while his lawyers take a legal claim against Justice Minister Judith Collins.
Mr Bain has filed papers in the High Court in Auckland seeking a judicial review of Ms Collins' actions after she rejected a report she commissioned from retired Canadian judge Ian Binnie into Mr Bain's claim.
Justice Binnie's paper found Mr Bain was innocent on the balance of probabilities and recommended he be compensated for his 13 years in jail after being convicted of murdering his family.
But a peer review by Robert Fisher QC, which Ms Collins requested after reading Justice Binnie's report, found the Binnie report "fundamentally flawed".
A statement from Mr Bain's long-time supporter Joe Karam last month alleged Ms Collins had breached Mr Bain's rights to natural justice, abused her power, acted in bad faith and acted in a biased, unreasonable and predetermined manner.
Mr Bain's legal team asked for cabinet to put off further consideration of the compensation claim pending the judicial review.
Today, Ms Collins issued a statement saying cabinet has agreed to do so.
She said the legal proceedings will cause further delays over the claim.
The Government will not comment further while the matter is before the courts.
Last month, Ms Collins rejected Mr Karam's comments, saying she had taken steps to ensure the process was fair and proper throughout.
"Put simply, it would be unacceptable for cabinet to base its decision for compensation on an unsafe and flawed report.
"That would not have resulted in justice for anyone, let alone Mr Bain."
Mr Bain was jailed after being convicted in 1995 of killing his father, mother, brother and two sisters at their Dunedin home.
The Privy Council quashed the convictions in 2007 and in 2009 Mr Bain was acquitted at a retrial.
The Government is not obliged to pay compensation but Mr Bain could receive about $2 million based on a previously used formula.