A woman who was accused of being an unfit mother by Oranga Tamariki when her file was merged with another woman's has rejected an offer of $50,000 compensation.

The Herald on Sunday revealed in April the her identity was mistaken with another woman of a similar name for 20 years.

The agency accused Anna - not her real name - of violence against her family, hiding children that weren't hers, benefit fraud, and neglect. Her four children were left traumatised after they were removed from Anna's care by Oranga Tamariki and placed in a violent home.

After years of trying to prove she was not the "other woman", Anna found the father of the children involved in the identity mix-up who corroborated her story.

Oranga Tamariki acknowledged the case of mistaken identity and breach of privacy and apologised for the "deep distress" caused.

Now, after Anna took the case to the Privacy Commission, Oranga Tamariki have offered her $50,000. In a letter obtained by the Herald on Sunday, the agency said the offer was a "full and final settlement" to Anna.

By accepting the payment, Anna could not pursue legal action with the Human Rights Review Tribunal, negotiate any ex-gratia payments, and is required to hand over files from the other family, the letter said.

Anna told the Herald on Sunday that, in her opinion, "This is an insult.

"This is a heartless payment; they pay us s**t to shut us down. I feel totally ripped off, they sort of acknowledged they made a mistake with the kids but they refuse to acknowledge what they put me through. What got me is we can't talk about their wider failings and it's just wrong.

"OT have no integrity; we don't want their shut-up money, we want them to be held accountable. I told my son, 'Your life is not worth $50,000', it was hard for him to hear that. We have been robbed of our lives and how do you put a price on the scars that are evident on the children."

Darrin Sykes, DCE People Culture & Enabling Services said in a statement: "On behalf of Oranga Tamariki, I again unreservedly apologise to [Anna], her whānau, and all of those who have been affected over a long period because of the privacy breach. We have acknowledged the breach and recognise the stress this has caused [Anna] and her whānau. The error was unacceptable at the time and made more so by the length of time taken to resolve it.

"Oranga Tamariki and its predecessor have apologised... both in writing and verbally. Of course an apology is not enough in such circumstances which is why we have attempted to resolve this matter. We will continue to try to resolve this matter in good faith. There is nothing preventing [Anna] from talking publicly."

Civil and criminal barrister, Jessica Matheson, told the Herald on Sunday, that Oranga Tamariki's offer was a "pittance."

"Generally speaking, this would seem to be a pitiful amount for the damage that has been caused by OT's admission they were at fault. If this case of mistaken identity had been brought to their attention and the social workers chose to ignore it and failed to investigate, I can only say that is negligent."

Civil and criminal barrister Jessica Matheson. Photo / Supplied

Matheson recommended that instead of potential litigants going through an internal complaints process with OT or the Human Rights Review Tribunal they should seek advice from a civil and public law barrister to properly assess whether there have been breaches under the Oranga Tamariki Act that can be heard at the High Court.

"We need a lot more case law in this area, we need to set some precedent which will greatly benefit OT litigants."

For years, Anna pleaded with the agency to correct the errors but they failed to do so.

In February, the Commission met with the agency who agreed to correct the file and offer compensation.

Life since the mistake was made in 2002 has been anguish for the North Island mother. She says she has tried to take her own life five times leaving her children destabilised.

The father of the other children told the Herald on Sunday Oranga Tamariki should have helped the two families rather than destroying them. The agency refused to say how many cases of mistaken identity have occurred in New Zealand.

He has decided not to pursue legal action and is happy for Anna to keep his family's file.

"The damage is done, no amount of money is going to fix what they did to us. The offer is a joke, if it was $50,000 for each child and the mother that might be a considerable amount but no further claims against OT and having to stay quiet is ridiculous."

Anna says although she has waited twenty years to be heard she's not giving up on justice.

"We will take this to the Human Rights Commission. Our case shows the horrible failures of OT and can be used as an example to make things better for other families. It's not about the money, we have an opportunity to do good in life and hold OT to account. There has to be a greater purpose than money."