DOWELL & ORS V COMMISSIONER OF INLAND REVENUE HC AK CIV 2001-404-004075

DOWELL & ORS V COMMISSIONER OF INLAND REVENUE HC AK CIV 2001-404-004075 21 November 2005IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2001-404-004075BETWEEN ANTHONY JAMES DOWELL & ORS AS TRUSTEES OF THE ESTATE OF FRANK HILLYER KING First Plaintiff AND BRENDA MARY KING Second Plaintiff AND ANN VERONICA KING Third Plaintiff AND COMMISSIONER OF INLAND REVENUE Defendant Hearing: 26, 27, 28 September 2005 Appearances: M S Hinde for Plaintiffs M Deligiannis & R Wallace for Defendant Judgment: 21 November 2005JUDGMENT OF HON JUSTICE JOHN HANSEN[1] The First Plaintiffs are the executors of Frank Hillyer King, a retired engineer who died on 15 May 2000. The Second Plaintiff, who suffers from Alzheimer's, is his widow. The Third Plaintiff is the daughter of Frank and Brenda King.BACKGROUND FACTS [2] Frank King was born in England in 1912. Brenda King was born in England in 1910. Their daughter Ann has been variously employed as a music librarian, a trainee nurse and a medical secretary. In 1996 she gave up employment to nurse her father and mother. [3] When the Kings emigrated to New Zealand in the 1970s Mr King, a former RAF engineer, decided to leave all of the family investments in England in the care of an English stockbroker, Mr Graham Cloake. It is apparent that Mr King made all decisions for the family, and that he had absolute faith and trust in Mr Cloake. He gave him a completely free hand as long as the family's income expectations were met. The Kings depended on these investments for their day to day living. [4] By 1984 the three Kings had built up a significant portfolio of shares in each of their names. In that year they transferred their investments into a controlled foreign company, registered in Jersey, called AMCE Jersey (Ltd). AMCE paid for the transfer through the issue of shares to the Kings and the opening of loan accounts for them with AMCE. Those investment funds were held in the company from November 1984 until November 1989. Throughout this period, notwithstanding the transfer to the company, it is clear that Mr Cloake continued to make the decisions in relation to the sale and purchase of shares in the investment portfolios. [5] The Defendant assessed income in the years 1989, 1990, 1991, 1992, 1993, 1994 and 1995. On 26 March 1996 he purported to reassess the 1989 and 1990 income years under the Income Tax Act 1994. Objections were lodged in relation to the years ending 31 March 1989 and 1990, and they have been heard by the Taxation Review Authority. [6] Each of the Kings received payments of £600 (sterling) per month from AMCE. The exact nature of Mr Cloake's activity will need to be considered in more detail in a parallel appeal to this judicial review proceeding. However, in short the Commissioner alleges that Mr Cloake's activities amounted to share trading because AMCE was a controlled foreign company, and tax was payable on the profits of such trading. The Taxation Review Authority rejected that.[7] The Authority was also confronted with the nullity argument that features in these judicial review proceedings, but declined to deal with them, merely stating:137. Having found against the Commissioner on the merits of the assessments it is not necessary for me to deal with the nullity argument. It raises significant practical questions affecting the Tax Administration Act 1994 and it is undesirable it be approached in an obiter way.THE PLAINTIFFS' SUBMISSIONS [8] In the statement of claim the Plaintiffs allege that the reassessments made in March 1996 are nullities because the letter of reassessment forwarded to the Plaintiffs relied on the Income Tax Act 1994 and were not made under the Income Tax Act 1976. It is pleaded and argued that the transitional provisions of the Income Tax Act 1994 YB 5(2) do not save the Commissioner from the reference to the 1994 Act. [9] There are three issues for determination: a) When the Commissioner reassessed the Plaintiffs in March 1996 (in respect of the years 1989 and 1990) did the Commissioner make those reassessments under the Income Tax Act 1994? b) Does the Income Tax Act 1994 apply to the years 1989 and 1990? c) If the March 1996 reassessments were made under the Income Tax Act 1994, and if that Act does not apply to the years 1989 and 1990, then were the reassessments for those years ineffective to assess tax i.e. were they nullities? [10] Mrs Hinde said that the Defendant had accepted the first issue, i.e. that the reassessments were made under the Income Tax Act 1994. [11] In relation to the second issue, the pleadings and submissions were based on the hypothetical (but denied) situation that there was undeclared income for the relevant years. She submitted that any such tax could only be levied under the 1976 Act and is incapable of collection until it is both quantified and then assessed. Thatis governed by the 1976 Act and the resultant issue of notices of assessment is a procedural step governed by the Tax Administration Act 1994. She distinguished the substantive step of assessing tax and the procedural step of issuing resultant notices. While it is the Commissioner who acts in quantification of the amount due, it is the Act itself which imposes, independently, the obligation to pay (Reckitt & Colman (NZ) Ltd v Taxation Board of Review [1966] NZLR 1032). The charge is distinct from the administrative function of quantifying, making assessments and collecting. [12] Mrs Hinde pointed out that the charge to income tax was levied by s38 of the Income Tax Act 1976 and under the 1994 Act it was sBB 1. Section BB 1 reads:BB 1 Income tax imposed(1) Subject to this Act, there shall be levied and paid for the use of the Crown, for the year commencing on 1 April in each year, a tax in this Act referred to as income tax. (2) Subject to this Act, income tax shall be payable by every person on all income derived by that person during the year for which the tax is payable.[13] "This Act" in sBB 1 is defined in sAA 3 of the Act as:AA 3 References to 'this Act'—A reference to 'this Act' is to be taken to include a reference to those provisions of the Tax Administration Act 1994 which substantially correspond to provisions of the Income Tax Act 1976, unless the context otherwise requires.[14] From that she argued that the combined effect of the sections was to confine the charge of tax to the specific income tax Act for the year in question, as there was no provision of the Tax Administration Act 1994 creating a charge on tax. It follows that the Commissioner must bring his mind to bear on the correct provisions of the applicable Act for each of the years in question, and then arrive at an amount of tax and issue his resulting assessment of the amount so charged by that Act. She said the evidence clearly pointed to the fact that the Commissioner assessed under the Income Tax Act 1994 and the Act under which the Commissioner issued the notice of assessment is not relevant in the proceedings. She referred in passing to s79(1) of the Taxation (Remedial Provisions) Act 1997 which inserted s109A of the Tax Administration Act 1994.[15] Turning to the division that occurred after 1994 by the introduction of the Income Tax Act and the Tax Administration Act, Mrs Hinde referred to the Privy Council decision Vela Fishing v CIR (2003) 21 NZTC 18, 123 at 18, 124 where the Court noted that the New Zealand Parliament enacted the legislation to divide between two new statutes the provisions as to the levying and administration of income tax previously contained in the 1976 Act. She submitted this meant that the Commissioner could continue to assess and reassess the income years prior to 1 April 1995, but using the provisions of the Tax Administration Act 1994. However, this meant that the administrative tasks and processes had to be grounded in the respective income tax act that contained the substance of the income tax law, i.e. the charge. [16] Mrs Hinde submitted that the failure to assess under the correct Act was a fundamental flaw that precluded any attempt to grade degrees of compliance of the resultant assessments according to the degree of divergence of the substantive charging provisions of the two Acts. She said that sYB 5(4) did not empower the Commissioner to issue an assessment using the provisions of the 1994 Act for a pre 1 April 1995 year. She submitted if the Commissioner could use the 1994 Act for all tax years there would be no need to have transitional provisions at all, as the new Act would act retrospectively. [17] Finally she submitted that the reassessments under the wrong Act were accordingly a nullity. They no longer remained effective because it was not a mere procedural failure, but a fundamental failure to bring the Defendant's mind to bear and quantify tax under the Act that generated the tax charge. She referred to the validation provisions of s26 of the 1976 Act, but submitted that a total failure to quantify and assess under the correct Act would not qualify for validation. [18] Mrs Hinde further submitted that s114 of the Tax Administration Act does not validate the assessments. DEFENDANT'S SUBMISSIONS [19] Ms Deligiannis accepted that the assessment referred to the 1994 Act, but referred to Departmental documents that show a reference to the relevant provisions in that Act, and correct 1976 Act, during the working stages of this reassessment.[20] She submitted that sYB 5(4) excuses any mistaken statutory references and requires that they be read as references to the correct provisions of the relevant Act. Therefore the reference by the Commissioner to the provisions of the Income Tax Act 1994 "shall" be read as reference to the corresponding statutory provisions in the 1976 Act. [21] Further, she submitted it was of significance that the statutory provision did not draw the distinction between taxing, levying or qualification, and the administrative functions that the Plaintiffs sought to make. Section YB 5(4) applies to the whole of the 1994 Act and does not attempt to distinguish between the nature of the statutory provisions in issue. [22] It was accepted the administrative functions had, by and large, been moved to the Tax Administration Act 1994, but because the Act was silent as to the proposed difference relied on by the Plaintiffs, and sYB 5(4) was of such sweeping reference, the basis of the Plaintiffs distinguishing the functions of the Commissioner failed to have any statutory foundation. [23] Mrs Deligiannis accepted there was no case law exactly on point but relied on the Court of Appeal decision in CIR v Vela Fishing Ltd (2001) 20 NZTC 17, 242 to support her interpretation of the Act. [24] Further, she said Case V4 (2001) 20 NZTC 10, 045 was not good law and should be viewed with considerable caution. This was because it was decided prior to the Court of Appeal's decision, with its subsequent approval on this point in the Privy Council, so the authority lacked the benefits of that decision. Furthermore, inCIR v Liburne Holdings Ltd (2001) 20 NZTC 17, 268 the High Court allowed the Commissioner to continue with an appeal from Case V4. The taxpayer's response was to accept the correctness of the Commissioner's assessment and ask the Authority to "reverse" the decision in Case V4 by conceding the case prior to the Authority's final judgment. That reverse was recorded in Case V10 (2002) 20 NZTC 10, 131. Mrs Deligiannis said this throws into question the reliability of the analysis in Case V4.[25] As a second answer to the Plaintiffs' submission the Commissioner relied on a line of cases where actions are upheld notwithstanding a mistake. [26] While the Commissioner accepted that the incorrect Act was referred to in the reassessments of 27 March 1996, the Commissioner did not accept that his officer failed to consider the appropriate statutory provisions under the Income Act 1976 when he issued the reassessments. In the final audit report dated 22 March 1996 the officer expressly referred to s65(2)(a) and (e) of the Income Tax Act 1976 as being the previously applicable sections. The Commissioner's officer, Mr Trezise, gave evidence to the Review Authority that in his opinion the relevant assessments were made when his manager approved, on 26 March 1996, the recommendations to reassess contained in the final audit report. Mr Trezise's recommendation to his manager concludes with "assess under s65(2)(a) & (e) / BB4(a) and (c)". The manager, Ms Deligiannis submitted, was giving approval for the issuing of reassessments under the provisions of both Acts. [27] In any event, it is submitted that the mistake of referencing the wrong Act does not invalidate the reassessments given the Commissioner's officer had the power to reassess under a different Act. The Commissioner submits that, if one considers the matter objectively, the officer did not act outside his powers, but under a mistaken belief as to the source of those powers which he had, but under another Act. There is no dispute that the Commissioner's officer and manager had the delegated power to issue the reassessments. [28] Ms Deligiannis referred to a number of authorities, all to the effect that non- compliance is to be considered in the statutory context, the degree and seriousness of non-compliance and consequences of it, and what prejudice has arisen to the person affected. In this case it is submitted the officer did not act outside his powers, but under a mistaken belief as to the source of the powers. It is said there is no prejudice to the Plaintiffs, other than the potential liability to pay tax which is subject to the objection proceedings. [29] Finally, Ms Deligiannis submitted that the Plaintiffs' objection to validation under s114 Tax Administration Act is misplaced. She submitted that the Plaintiffs failed to explain why s227(4) and (5) (the equivalents in the Tax Administration Actto sYB 5(4)) are not applicable to s114. In the present case the amended assessments were made with an express reliance on the 1994 Act, although the 1976 Act had been considered by the assessing officer. Section 114 is the same as its predecessor in the 1976 Act. Both the earlier section in the Income Tax Act 1976 and s114 are aimed at confirming the validity of assessments regardless that provisions of the Acts have not been complied with. There are no substantive changes. Further, there is no suggestion in either provision that it is confined to procedural provisions. As Ms Deligiannis submitted, they are expressed in universal terms " any of the provisions have not been complied with". [30] She submitted that s227(4) and (5) require reference to one Act or provision in it to be read as a reference to the corresponding provision in another Act. She said accordingly the Plaintiffs' argument in that regard fails as well. [31] Finally, in response, Mrs Hinde submitted that common law principles of validation for non-compliance with procedural requirements did not apply in this case (see London & Clydeside Estates Ltd v Aberdeen District Council [1979] 3 All ER 876). She submitted it would be contrary to long standing and understood legislative schemes to allow the Commissioner to issue assessments under an Income Tax Act that did not levy tax for the years covered by such assessments, and for them to be treated as effective where there had been a validly constituted objection made as to the tax assessed. DECISION [32] Despite Mrs Hinde's ingenious argument, I am satisfied that the Commissioner's view is correct. [33] Section YB 5(4) reads:(4) Any express or implied reference in any enactment, instrument, or document (including this Act) to any provision of this Act, or to things done or to be done or failing to be done under or for the purposes of any provision of this Act, shall, if and so far as the nature of the reference permits, be construed as including, in relation to the times, circumstances, or purposes in relation to which the corresponding provision in the enactments repealed by section YB 3 has or had effect, a reference to, or to things done or to be done or failing to be done under or for the purposes of, that corresponding provision.[34] A virtually identical provision can be found in the Tax Administration Act 1994 (s227(4)). [35] Although s YB 5(4) has not been the subject of decision in the High Court and the Court of Appeal, s227(4) was considered by the Court of Appeal in CIR v Vela Fishing Ltd (supra). The Court of Appeal said of the transitional provisions:[22] Both s YB 5 of the Income Tax Act and s 227 of the Tax Administration Act are directed to the enactments repealed by s YB 3. The savings provisions of s YB 5(4) and s 227(4) are in identical terms. They are both capable of the like application of the same corresponding provision test to the income year of the taxpayer ending 31 March 1991 and to the income year ending 31 March 1994 in which the return was filed and the notice of original assessment was issued. Given that co-incidence of coverage, expression and timing it would be artificial to view s YB 5(4) and s 227(4) as separate and unrelated. [23] The blanket duplication in s YB 5(4) and s 227(4) may simply reflect an illogically extreme drafting caution stemming from the splitting of the Income Tax Act 1976 into two Acts in 1994. [36] In that case Vela had waived the six month time bar under the Tax Administration Act 1994. It then became apparent to Vela that the return period fell under the old statutory provisions that did not include a waiver provision. Vela argued the waiver given was ineffective as there was no such provision in the 1976 Act, and the Commissioner could not amend their returns to embrace the tax liability as the time bar had expired. [37] Given the identical nature of ss227(4) and sYB 5(4) the Court of Appeal comments in relation to s227(4), in my view, equally apply to sYB 5(4). As to the purpose of those sections, the Court said:[27] The touchstone provided in s 227(4) is whether there is a "corresponding" former provision and, as that word itself indicates, it does not require coincidence. In Winter v Ministry of Transport [1972] NZLR 539 at p 541, referring to s 20A of the Acts Interpretation Act 1924, Turner J said: We read 'corresponding' in s 20A as including a new section dealing with the same subject matter as the old one, in a manner or with a result not so far different from the old as to strain the accepted meaning of the word 'corresponding' as given in the Shorter Oxford English Dictionary — 'answering to in character and function; similar to' . The new s 58A(6) answers to the old one (the second part of old s 59B(1)) in character and function; it is similar inpurpose, prescribes the same thing to be done, and is designed to produce the same result. We hold it to be a 'corresponding section' . [28] Clearly the framers of s 227(4) intended an expansive application of s 227(4). It is directed to "any express or implied reference in any enactment ... " . It is to be construed "if and so far as the nature of the reference permits" , as including "in relation to the times, circumstances, or purposes in relation to which the corresponding provision in the repealed enactment has or had effect, a reference ... to things ... to be done ... under or for the purposes of, that corresponding provision" .[38] This approach to s227(4) was approved by the Privy Council (Vela Fishing v CIR (2003) 21 NZTC 18, 123 at paras 9, 16-17. [39] In my view, those statements of the purpose of s227(4) equally set out the purpose of sYB 5(4). It is a section to be read expansively, and not limited to artificial divisions. In this case I accept the Crown submission that the Plaintiffs suggest that such artificial divisions do exist. That submission of the Plaintiffs' I reject. [40] It appears to be common ground between the Plaintiffs and the Defendant that reassessments made under the 1976 Act would be valid, subject to the rights of the Plaintiffs to object. It was not suggested by Mrs Hinde that the Commissioner could not have made reassessments under the 1976 Act. [41] Section YB 5(4) makes it mandatory that any reference to the provisions of the 1994 Act are to be construed as including "in relation to the times, circumstances, or purposes in relation to which the corresponding provision in the enactments" repealed by sYB 3 was done under the corresponding provision. In this case the corresponding provisions are identical in the material aspects as can be seen by a comparison between sCG 1 Income Tax Act 1994 and s65 (2)(ea) and (eb) Income Tax Act 1976; and sBB 4(a) and (c) Income Tax Act 1994 with s65(2)(a) and (e) Income Tax Act 1976. [42] It follows, in my view, that sYB 5(4) is a complete answer to the Plaintiffs' case. MISTAKE AND STATUTORY POWERS [43] The cases referred to by Ms Deligiannis are instructive.[44] In JK Steel Ltd v Union of India (1970) AIR 1173 at 1188 the Court recognised:If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question.[45] A consideration of the facts of cases dealing with this principle is also instructive in the present case. In Finbow v Air Ministry [1963] 2 All ER 647 various agricultural licences were issued by the Minister, expressly relying upon s40 of the Agriculture Act 1947. At the date the licences in fact issued that Act had been repealed and replaced by s2 of the Agricultural Holdings Act 1948. The plaintiff sought a declaration that the licences were nullities. McNair J rejected this, stating at 655-656:The document was in the circumstances in which it was executed, plainly intended by the minister to be an approval in the exercise of his statutory powers. These powers at the date of the instrument were to be found only in s 2 of the Act of 1948. To hold that the misdescription of his powers rendered the document a nullity, would, in my judgment, defeat the plain intention of the minister to be deduced from the circumstances and the date of its execution. It is, in my judgment, a plain case for the application of the maxim falsa demonstratio non nocet [46] R v Dover Magistrates' Court ex p Webb (unreported, English High Court, QBD, CO/4423/96, 18/3/98, Lord Bingham CJ and Dyson J) involved a case where a Mr Webb was stopped in October 1994 by Customs. Customs seized cash pursuant to a power in the Criminal Justice (International Co-Operation) Act 1990. Over a period of time the detention order applicable to that cash was renewed relying on the same Act. A forfeiture order was made in April of 1995 under that Act, by which time the Act had in fact been repealed and replaced by the Drug Trafficking Act 1994. It follows that the April 1995 application and forfeiture order were made relying on a repealed Act. [47] The Court rejected an argument that the application and order made in April were invalid, stating:17. It is, therefore, clear that the 1990 Act introduced a power to seize cash in certain circumstances; powers to apply for and order the interim detention of cash seized; and a right to apply for an order for the forfeiture ofcash seized and detained. The 1994 Act re-enacted these provisions. It was very plainly the intention of Parliament that the 1994 powers should come into force as and when the 1990 powers lapsed. There was never to be an instant of time when these rights and powers did not exist and were not exercisable. The 1990 and 1994 Acts were to represent, in these respects, a continuum, a seamless web of legislative authority. 19. If (as the applicant contends) reference was indeed made to the wrong (repealed) section 26 when reference should have been made to the re-enacted section 43, HM Customs having throughout the right to apply for forfeiture and the justices the power to order it, the maxim falsa demonstratio non nocet would apply: see Finbow v Air Ministry [1963] 1 WLR 697 at 709, Like Dyson J, I consider this a complete answer to this application. Per Lord Bingham CJ[48] Dyson J stated:43. In my view Finbow , is a valuable illustration of the maxim falsa demonstratio non nocet, or to translate, the wrong label does not invalidate. If it is right, as was held in that case, to save the exercise by a Minister of a formal power, mistakenly made under a repealed section of a statute instead of its re-enacted successor, I can see no reason for refusing to save an application for forfeiture mistakenly made under the repealed section 26, instead of its re-enacted successor.[49] Both those decisions approved the Finbow (supra) approach and the decision was approved, although in the Court of Appeal (QBCOF 98/1609/4, 15/7/99) Pill LJ noted:I say diffidently and confess that I should prefer to decide this case on the basis already considered and without reference to the maxim falsa demonstratio non nocet The difference is itself, however, only one of labelling because I respectfully agree with the substance of the conclusion of Lord Bingham CJ. The Lord Chief Justice concluded that "if (as the applicant contends) reference was indeed made to the wrong (repealed) section 26 when reference should have been made to the re-enacted section 43, HM Customs having throughout the right to apply for forfeiture and the justices the power to order it", there is a complete answer to the application. Because it is a complete answer, counsel were not invited by the Court to make submissions upon the detailed effect of the transitional provisions in the 1994 Act.[50] R v Hall [1982] 1 All ER 75 involved a defendant facing trial for assault with the possibility of imprisonment upon conviction. During the committal proceedings the Magistrates Court Act 1980 came into effect. The previous Act remained relevant for existing proceedings. When Hall was committed the Magistrates, in thecertificate of committal, relied on the new Act. The defendant sought to argue that the committal was a nullity as a result. The Court of Appeal expressed itself satisfied the Magistrates had the power to commit, and although there was a reference to the wrong Act that mistake did not mean the committal was a nullity. Lord Lane CJ said at 79: If there is a mistake on the face of the certificate, such as the one which exists here, it is a mistake of the clerk. But that is not the basis of our decision. The justices undoubtedly had power to act as they did under the Magistrates' Courts Act 1952, and under the Criminal Justice Act 1967, Consequently the fact that in the certificate which comes into existence later the wrong Act was mentioned seems to us in no way to invalidate the committal. [51] Although Hall faced potential imprisonment that was not sufficient to invalidate the exercise of the power held by the decision maker where there was a reference to the incorrect statutory source. [52] Mrs Hinde had relied on the decision in London & Clydeside Estates Ltd v Aberdeen District Council [1979] 3 All ER 876 which has been applied in New Zealand on a number of occasions, most recently in R v Jury [2004] 2 NZLR 457 at para 30. In particular, she relied on the passage from the judgment of Lord Hailsham LC at 883 where he stated:When Parliament lays down a statutory requirement for the exercise of legal authority it expects its authority to be obeyed down to the minutest detail.[53] Ms Deligiannis, however, referred to the passage in full, and said the limited citation relied on by the Plaintiffs was misleading. I agree. The full citation reads:When Parliament lays down a statutory requirement for the exercise of legal authority it expects its authority to be obeyed down to the minutest detail. But what the courts have to decide in a particular case is the legal consequence of non compliance on the rights of the subject viewed in the light of a concrete state of facts and a continuing chain of events. It may be that what the courts are faced with is not so much a stark choice of alternatives but a spectrum of possibilities in which one compartment or description fades gradually into another. At one end of this spectrum there may be cases in which a fundamental obligation may have been so outrageously and flagrantly ignored or defied that the subject may safely ignore what has been done and treat it as having no legal consequences on himself. In such a case if the defaulting authority seeks to rely on its action it may be that the subject is entitled to use the defect in procedure simply as a shield or defence without having taken any positive action of his own. At the other end of the spectrum the defect in procedure may be so nugatory ortrivial that the authority can safely proceed without remedial action, confident that, if the subject is so misguided as to rely on the fault, the courts will decline to listen to his complaint. But in a very great number of cases, it may be in a majority of them, it may be necessary for a subject, in order to safeguard himself, to go to the court for declaration of his rights, the grant of which may well be discretionary, and by the like token it may be wise for an authority (as it certainly would have been here) to do everything in its power to remedy the fault in its procedure so as not to deprive the subject of his due or themselves of their power to act. [54] Effectively Lord Hailsham was recognising that non-compliance with a statutory requirement was not necessarily fatal. Rather there was a sliding scale of seriousness, but in that particular case there was a substantive failure to apply the law and as a consequence the company, not having notice, failed to exercise appeal rights. [55] In Wang v Minister of Internal Affairs [1998] 1 NZLR 309 a notice by the Minister failed to meet all the necessary statutory requirements of the Citizenship Act 1977. Randerson J considered the notice still valid and stated at 318:It is therefore necessary to consider the effect of the defects identified in the notice. It is now well established that non-compliance with a statute will not necessarily be fatal to the validity of a notice. The Courts no longer find helpful the distinction between mandatory and directory provisions. Rather, the consequences of non-compliance are to be considered in the statutory context, relevant factors including the place of the provision in the scheme of the Act or regulation, the degree and seriousness of the non-compliance, the potential consequences which may arise through the non-compliance, and whether prejudice has occurred or is likely to have occurred [56] In this case, as noted earlier, the only prejudice that the Plaintiffs can allege is their potential liability to pay income tax. That has been subject to the objection procedure, ultimately ending up in appeal to this Court in the parallel proceedings. Consequences in the other cases seem to me to be more significant. In Finbow(supra) it was the loss of farm land. In Hall (supra) it was a criminal conviction and imprisonment. In ex p Webb (supra) it was the loss and eventual forfeiture of £39,000 sterling. In Wang (supra) there was the potential loss of New Zealand citizenship. [57] This case may be contrasted with London & Clydeside Estate Ltd (supra) where, because of a failure to serve a notice, the company lost their rights of appeal.Here the Plaintiffs have not lost their rights of objection and, indeed, have exercised them to the full. [58] There is no suggestion the officer did not have the statutory power to make the reassessments, subject to the rights of objection. All that occurred was a misidentification of the statutory source of those powers in the reassessment where there had been cross-references to the earlier sections in other documentary material on the assessment file. [59] The officer had the authority to make the reassessment, there is a lack of prejudicial consequences to the Plaintiffs as they have exercised their rights of objection, and in my view this should not invalidate the reassessments made. [60] It follows that if the Plaintiffs had been successful on their argument on sYB 5(4) I would have found for the Commissioner on this ground. SECTION 114 TAX ADMINISTRATION ACT 1994 [61] The Plaintiffs' submissions on s114 do not make reference to s227(4), the Tax Administration Act equivalent to sYB 5(4). [62] As the Court of Appeal noted in Vela (supra):[27] The touchstone provided in s 227(4) is whether there is a "corresponding" former provision and, as that word itself indicates, it does not require coincidence. [63] That same touchstone is found in s227(5). It follows that a variation in the form of provision will not mean the sections are not corresponding. [64] While there are differences between s26 Income Tax Act 1976 and s114 Tax Administration Act 1994, in my view they are not sufficient to say s26 is not a corresponding provision in the earlier Income Tax Act. The sections are designed to confirm the validity of assessments, regardless that certain provisions of the Act may not have been complied with. On their face they are not limited to procedural provisions as they are expressed in universal terms in both sections.[65] Ms Deligiannis is correct, in my view, when she submitted the sections were intended to correspond. She demonstrated this by reference to schedule 23 of the Income Tax Act 1994 where s114 is identified as a successor to s26. In my view s227(4) and (5) require the reference in one Act, or a provision in it, to be read as a reference to the corresponding provision in the other Act. [66] It follows that the Plaintiffs' argument in relation to s114 must also fail. [67] Accordingly, it follows that the Plaintiffs' claim for relief by way of judicial review declaring the reassessments a nullity must be dismissed. [68] Memoranda as to costs are to be filed within ten working days.Solicitors: Lovegroves, Auckland for Plaintiffs (Counsel – M Hinde, Auckland) Crown Law Office, Wellington for Defendant