The Ministry of Social Development (MSD) will not appeal the High Court judgement that earlier this month ruled bank loans and credit cards do not constitute income.
The ministry fought a solo-mother-of-two for eight and a half years through successive courts, arguing that more than $100,000 she borrowed from her mother and the bank between 2005 and 2010 needed to be paid back.
But earlier this month the High Court ruled loans were not income because they had to be paid back.
The ministry said it accepted the judgement, but would not work to identify similar historical cases where loans have been treated as income.
MSD deputy chief executive of service delivery Viv Rickard told Checkpoint that the case was more complex than it appeared.
"We had an individual that was receiving $180,000 worth of money from about 140 different payments and clearly there was a lot of money involved and they were getting a benefit. So on part of that the court has indicated that some of it could not be treated as income but they left some questions open."
Mr Rickard said the ministry did not treat loan as income but believed they were right in taking the case to court.
"We administer $23 billion, I'm not going to open the gates so everyone can come and just get money," he said.
"If it was just one loan it would've been an easy thing to deal with. But don't forget there are 140 other different payments, not just the loan, there were a number of other payments [in Ms F's case] and it was entirely appropriate to seek clarifications."
The ministry accepted the guidance of the court and there were only four or five cases in a similar circumstance currently, which he said was low in comparison with the thousands of people they dealt with everyday.
Lawyer Frances Joychild QC, who took Ms F's case, told Checkpoint she did not agree with the point of view Ms F's case was unique.
"If they thought Ms F was doing anything unlawfully, of course they need to protect the integrity of the welfare system and the way you protect the integrity of the welfare system is by prosecuting people for fraud," Ms Joychild said.
"It is not by going to court and arguing the definition of income that means the loans that she had were counted as income. That's nonsense, it's a civil jurisdiction."
She said the ministry had made their argument clear in the case about loan being income during court proceedings.
"What MSD were arguing in court was that for every person a loan was to be counted as income. They weren't saying we want one little we exception just for Ms F. The case was argued for everyone."
And people on the benefit who borrowed money were considered to be overpaid by MSD, she said.
"I would also say that there would be a large number of people who will have continuing over-payments to MSD because people can't live on the level of the benefit - it's so low, it's not liveable."
She said that debts established by MSD should be reviewed by someone independent.
"I think there are a large number of debts that people are paying that are actually unlawful, that MSD's got no legal right to take that money, and because of the system it's impossible for such vulnerable people to challenge the system and to be accountable."