The justification is that Peter Ellis has not exhausted all his appeal rights as he file an application for special leave to appeal to the Privy Council.
They also cite advice from Crown Law that such an inquiry may be ultra vires, as Ellis (unlike Arthur Allan Thomas) has not been pardoned. This is a classic argument of form over substance to my eyes. So the Government has to make its mind up that he is innocent and pardon him before they can establish a Royal Commission to investigate if he was innocent!
I really hoped Simon Power would not just go along with the recommendations of his officials, because it was always inevitable they would oppose this.