Mr Karam said it was that secrecy that Mr Bain wanted the High Court to look at.
"She said she adopted a proper process. Well secret missions by the government are SAS, KGB, Robert Mugabe-type operations ... this is the Minister of Justice, not the Minister of War we're talking about."
Yesterday, Mr Karam said Mr Bain had been left with no option to take the court action, but he was doing it reluctantly.
Ms Collins had stated she intended to recommend further options to Cabinet on Monday, he said.
"In the circumstances, a request has been made to the Crown that any further action in relation to David's claim be deferred pending the outcome of this judicial review," Mr Karam said.
In a statement from Ms Collins' office, she warned that any decision on Mr Bain's compensation would be delayed even longer because of the court action.
It would be unacceptable for Cabinet to base its decision for compensation on an unsafe and flawed report, she said.
"That would not have resulted in justice for anyone, let alone Mr Bain."
She said Mr Bain's request for the Government to put the compensation application on hold while a judicial review went ahead would only result in a further delay.
Mr Bain was acquitted of killing five family members in 2009, and has made a bid for compensation for spending more than 13 years in prison for the murders.
Justice Binnie's report found that on the balance of probabilities Mr Bain was innocent of murdering his parents, two sisters and brother in Dunedin in 1994 and had been wrongfully imprisoned.
Ms Collins had the report peer reviewed by former New Zealand High Court judge Robert Fisher, who found inaccuracies.
Last week, Prime Minister John Key said a further report into the compensation bid seemed likely.
Read more: Bain takes High Court action against Collins