Judge Anton Veldhuizen, who presided in the R46m damages action, said the amount claimable still had to be determined in further high court proceedings next year.
Veldhuizen said Lotz's body was found on a bench in the lounge of her Stellenbosch apartment in March 2005. She had serious head injuries, inflicted with a blunt object, and stab wounds to her chest.
He said Van der Vyver, with whom she had had a serious romantic relationship, was arrested for the murder three months later, and released on R10 000 bail.
Numerous requests from Van der Vyver's defence team for the prosecution to be abandoned, were rejected.
Van der Vyver was found not guilty by Judge Deon van Zyl and two assessors after a trial that lasted nine months.
In order to succeed with a claim for malicious prosecution, Van der Vyver's legal team had to prove four elements.
These were that the police instigated the proceedings, that investigators acted without reasonable and probable cause, that they acted with malice, and that the prosecution failed.
Veldhuizen said malice meant those involved in the investigation must have foreseen the possibility of an acquittal, but continued with the investigation against Van der Vyver nevertheless.
Malice meant more than mere negligence, or even gross negligence, he said.
Veldhuizen said the decision to prosecute Van der Vyver was based on the opinion of an expert involved in the investigation, and that this was "not worth the paper that it was written on".
Without this opinion, the prosecuting authorities would have realised there was no valid case against Van der Vyver, and would not have proceeded with the case.
He was satisfied, on a balance of probablilties, that the prosecution should never have taken place, and that the police ministry was liable for the damage caused to Van der Vyver.