Shane Cribb (20), of Alexandra, fought for three years to clear his name after his vehicle was in a collision with a four-wheel-drive vehicle being driven by a police officer at Earnscleugh in 2005.
Mr Cribb had his conviction dismissed at a rehearing in the Alexandra District Court last month, when police offered no evidence.
Lawyer Russell Checketts was seeking more than $25,000 from the police for costs incurred fighting the conviction.
In a letter to Mr Checketts, New Zealand Police legal adviser Beverley Curtis said police agreed under requirements of section 13(3) of the Criminal Cases Act 1967, there were some circumstances of special importance in the case, and it was appropriate to pay Mr Cribb for the costs to seek a rehearing.
While police accepted a reinvestigation of the matter had been instigated by Mr Cribb and his supporters, police had also continued to investigate the matter as new information and evidence had come to light, she said.
Police would pay $17,900.45 to cover actual costs incurred for lawyers, barristers and crash experts. Police would neither recognise claims for the costs incurred with the Legal Services Agency for the original prosecution, nor for time spent by the defendant's supporters.
Claims for compensation to reflect the "unco-operative and difficult approach of the police" were also refused.
Compensation for the value of the car being driven by Mr Cribb was being dealt with by the police risk assessors.
In his memorandum for costs Mr Checketts said: "It is the applicant's submission that the Court at the original hearing was placed in a position where a sworn Police Officer perjured himself when giving evidence and that was the main reason why the defendant was originally convicted."
Ms Curtis said there was no evidence to suggest Mr Ford had perjured himself.
Mr Checketts told the Otago Daily Times yesterday the response from police was "very predictable" and it was up to the judge in the final analysis when it went before the court in September.
