Zac Fleming, Checkpoint Producer
A solo mother of two has won her seven-year fight against the Ministry of Social Development (MSD), which unlawfully tried to argue bank loans and credit cards constituted income.
The Ministry was trying to recover $109,852 from the woman, who has name suppression and can only be identified as 'Ms F'.
MSD claimed it overpaid her to that amount while she was earning a benefit between 2005 and 2010 because she borrowed from her mother, a finance company and the bank to stay afloat.
But in a High Court appeal released today, Justice Paul Davison ruled MSD was wrong to classify those sources of money as income.
"The bank loans did not truly add to Ms F's resources as she was required to repay the funds she received," Justice Davison wrote.
"Bank borrowings by use of a credit card have the same essential characteristics as a bank loan, in that credit card expenditure is to be repaid. Credit card spending is therefore a loan, and is not properly treated as income."
The ruling is likely to have a wide-reaching impact as the High Court has given direction on what can and cannot legally be classified as income.
Justice Davison said the Social Security Appeal Authority wrongly classified the money borrowed from her mother as a gift, rather than a loan, by failing to check whether Ms F had made any repayments.
Ms F told the court Authority she had repaid the bulk of the $130,000 loan through the sale of her home.
"The fact of repayment is in most cases direct and compelling evidence that the parties have treated funds advanced as a loan," Justice Davison wrote.
But Ms F may have to repay some of the $109,852 claimed by MSD, from what MSD labelled "unknown sources".
MSD had originally sought $120,000 but lowered it to $109,852 for the High Court appeal.
Ms F's lawyer, Frances Joychild QC, also appealed to the High Court that the Authority was wrong to include "unknown sources" in Ms F's spending, saying that "Ms F has given clear credible evidence that all her spending over and above benefit income was borrowed money".
However Justice Davison said it was not for him reconsider the financial advice given to the Authority, only whether it "erred in law in its interpretation and application of what constituted income".
"The Authority plainly preferred the evidence of the Ministry's financial analyst and its preference for the evidence of a competing expert is not a matter for this Court to review," Justice Davison said.
Justice Davison ruled that Ms F was entitled to costs.