Deputy Commissioner of Taxation v Cranswick - [2010] FCA 1155 - FCA 2010 case summary — Zoe

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Deputy Commissioner of Taxation v Cranswick

[2010] FCA 1155

Federal Court of Australia|2010-10-27|Before: McKerracher J

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Court

Federal Court of Australia

Decision date

2010-10-27

Before

McKerracher J

Source

Original judgment source is linked above.

Judgment (16 paragraphs)

[1]

A Sequestration Order be made against the estate of Andrew Noel Cranswick ('the respondent').
The respondent to pay the costs of the applicant, to be taxed if not agreed.
The Court notes that the date of the act of bankruptcy is 9 June 2009. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

[2]

GENERAL DIVISION WAD 223 of 2009

[3]

REASONS FOR JUDGMENT 1 The applicant (the Commissioner) has applied for a sequestration order under the Bankruptcy Act 1966 (Cth) (the Act) to be made against the estate of the respondent taxpayer (Mr Cranswick). The application is made by a creditor's petition filed on 8 December 2009 commencing these proceedings. 2 On 5 August 2010 I gave the Commissioner leave to serve the petition and associated documents on Mr Cranswick out of the jurisdiction, and for substituted service: See Deputy Commissioner of Taxation v Cranswick [2010] FCA 891 (Cranswick No 1). 3 By affidavits sworn by M/s Cheryl Lorraine Harrison on 13 August 2010 and M/s Maria Scutti on 20 August, the Commissioner has satisfied me that the petition and the other papers were duly served. (These affidavits did not comply with r 4.06 (2)(b) of the Federal Court (Bankruptcy) Rules 2005 (Cth) in that they did not have attached copies of the documents served. The Commissioner sought a dispensation from that rule (based on volume of material). The Court may grant such a dispensation under O 1 r 8 of the Federal Court Rules as applied by r 1.03(2) of the Federal Court (Bankruptcy) Rules 2005 (Cth). I granted the dispensation.

[4]

LEGAL PRINCIPLES 4 Some of the matters to follow were discussed in Cranswick No 1. However for convenience they are also included in these reasons. 5 The relevant provisions of the Act are set out below: 43 Jurisdiction to make sequestration orders (1) Subject to this Act, where: (a) a debtor has committed an act of bankruptcy; and (b) at the time when the act of bankruptcy was committed, the debtor: (i) was personally present or ordinarily resident in Australia; (ii) had a dwelling‑house or place of business in Australia; (iii) was carrying on business in Australia, either personally or by means of an agent or manager; or (iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager; the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor. 6 The conditions on which a creditor may petition are set out in s 44 of the Act which is in the following terms: 44 Conditions on which creditor may petition (1) A creditor's petition shall not be presented against a debtor unless: (a) there is owing by the debtor to the petitioning creditor a debt that amounts to $5,000 or 2 or more debts that amount in the aggregate to $5,000, or, where 2 or more creditors join in the petition, there is owing by the debtor to the several petitioning creditors debts that amount in the aggregate to $5,000; (b) that debt, or each of those debts, as the case may be: (i) is a liquidated sum due at law or in equity or partly at law and partly in equity; and (ii) is payable either immediately or at a certain future time; and (c) the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition. ... 7 Therefore, to obtain a sequestration order against Mr Cranswick's estate, the Commissioner was required to satisfy the Court that: 1. at the time of the presentation of the petition the Commissioner was a creditor to whom Mr Cranswick owes a debt of at least $2,000 (the very recent amendment to $5,000 post dates the presentation of this petition); 2. that debt was a liquidated sum; 3. that debt was payable either immediately or at a certain future time; 4. Mr Cranswick committed an act of bankruptcy; 5. as at the time when the act of bankruptcy was committed, Mr Cranswick was: 5.1 Personally present in Australia; 5.2 Ordinarily resident in Australia; or 5.3 Had a dwelling house in Australia. 6. the act of bankruptcy on which the petition is founded was committed within six months before the presentation of the petition. 8 For reasons which follow, those elements were established and the sequestration order was made.

[6]

THE DEBT 14 As stated above, the ATO's intention to audit Mr Cranswick's tax affairs was made known to him on 30 March 2009 and on 15 April 2009 an interview was conducted by ATO auditors. 15 During the course of the interview Mr Cranswick stated that: 1. His wife, two children, brother and parents-in-law reside in Australia, and that he does not have any immediate family in Australia; 2. He had not considered himself to be a permanent resident for the purposes of paying income tax in Australia since at least 2003; 3. One of his primary motivations for allegedly ceasing permanent residency in Australia was due to irreconcilable differences with his wife which had manifested in 2003; 4. Despite considering himself a resident of Zimbabwe at all material times, he had in fact not lodged any income tax returns in that country during the years in issue; 5. He had lodged some non-resident income tax returns for the income years ended 30 June 2005 to 30 June 2008 in the United Kingdom reporting about 10% of his gross income; 6. He still banked in Australia and tried to visit his children every six weeks; 7. He was aware there may be issues concerning the status of his residency by reason of the manner in which he was conducting his affairs; 8. That he opened bank accounts in Australia and only had bank accounts in Australia. It was further stated that he had started to apply for an account in the United Kingdom 'partly because of these inquiries', 'just to avoid this whole issue' and 'to keep it clean from a tax issue', and intended to apply for an account with the Standard Bank Isle of Man; 9. He was trying to become a tax resident and permanent resident in Mauritius; and 10. He would be returning to Australia on 22 June 2009 for at least 10 days. 16 By letter of 3 December 2009 the Commissioner informed Mr Cranswick that an audit of his tax affairs for the financial years ended 30 June 2003 to 30 June 2009 inclusive had been completed, together with the Reason for Decisions Paper and Notices of Assessment for the relevant years. The Notices of Assessment disclosed the following debts: Year ended Taxable Income Tax payable Due Date 30 June 2005 $372,821 $170,258.39 5 June 2006 30 June 2006 $731,286 $345,536.57 5 June 2007 30 June 2007 $184,220 $67,854.50 21 November 2007 30 June 2008 $335,537 $138,980.07 21 November 2008 30 June 2009 $321,041 $129,494.47 21 November 2009

[9]

Departure from Australia 22 The circumstances of Mr Cranswick's departure were as follows. 23 Between 1 July 2004 to 9 December 2008, Mr Cranswick travelled in and out of Australia on 58 occasions. On the 28 occasions that he arrived in Australia, Mr Cranswick's incoming passenger cards declared that: 1. He was a resident returning to Australia; 2. His intended address; and 3. He intended to live in Australia for the next 12 months. 24 On the 29 times he departed Australia, Mr Cranswick's outgoing passenger cards declared that: 1. He was an Australian resident departing temporarily; and 2. On 27 of the 29 occasions, the purpose of travel was for 'business' while on the remaining two occasions, the purpose of travel was declared as a holiday. 25 From 1 January 2009 to 9 June 2009, Mr Cranswick travelled internationally on a further three occasions. On each of the first two occasions he arrived in Australia, that is on 27 February 2009 and 11 April 2009, Mr Cranswick's incoming passenger cards declared that he was a resident returning to Australia and, on the first occasion that he intended to live in Australia for 12 months. On the second occasion he declared that he did not intend to live in Australia. On each of the first two occasions he departed Australia, on 4 March 2009 and 16 April 2009, Mr Cranswick's outgoing passenger cards declared that he was an Australian resident departing temporarily and that the purpose of travel was for 'business'. 26 On the last occasion he returned to Australia, 5 June 2009, subsequent to his interview with the ATO on the 15 April 2009, his incoming passenger card declared that he was a visitor or temporary entrant and that he did not intend to live in Australia. On 9 June 2009 he departed from Australia once again. His outgoing passenger card declared that he was a visitor or temporary entrant departing. As at the time of hearing, Mr Cranswick had not returned to Australia following this final departure. 27 The Commissioner submits that Mr Cranswick left Australia on 9 June 2009 and has remained out of Australia since that time with intent to defeat or delay his creditors. 28 Consistent with s 40(1)(c)(i) of the Act, it is not necessary that the debtor be personally present in Australia provided that, at the commission of the act of bankruptcy, he or she has a connection with Australia within the meaning of s43(1)(b). The act of bankruptcy constituted by remaining outside of Australia with intent to delay or defeat creditors is a continuing one and a debtor commits an act of bankruptcy on each day the debtor remains out of Australia with the requisite intent (Re Thai; Ex parte Commissioner of Taxation (1994) 50 FCR 127 at 128-129).

[11]

Connection with Australia 31 The evidence relied on by the Commissioner to support a finding that Mr Cranswick had a connection with Australia within the meaning of s 43(b) of the Act was as follows: 32 On 5 April 2002 Mr Cranswick and his family were granted a BN-136 Skilled Independent (Migrant) Visa by the Department of Immigration and Citizenship. Since then Mr Cranswick has held a valid visa for residence in Australia. 33 After initially renting a house, Mr Cranswick and his wife applied to the Colonial Bank for a home loan of $800,000 to fund the purchase of a residential property at 2 Philip Street. In that loan application Mr Cranswick stated that he was a citizen or permanent resident of Australia. Subsequent to completing the finance application, Mr Cranswick's wife executed a contract for the Philip Street property. Mr Cranswick paid for the purchase of the property. 34 On 29 October 2005, Mr Cranswick's wife entered into a contract for the purchase of another residential property at 3/5 Swan Road and on 18 November 2005, Mr Cranswick and his wife lodged a further application for finance with the Colonial Bank for the amount of $420,000 to fund the purchase of the Swan Road property. In the loan application, Mr Cranswick stated that he was an Australian citizen or permanent resident of Australia. According to the transcript of Mr Cranswick's interview with ATO officers, the 3/5 Swan Road property was purchased for Mr Cranswick's parents-in-law, but Mr Cranswick stated that although his parents-in-law paid rent, that did not cover the interest on the loan which he and his wife paid. The loan repayments for the property came from a Commonwealth Bank account in the joint names of Mr Cranswick and his wife. When describing his net worth, Mr Cranswick included this property as one of his assets. 35 On 14 December 2005 and 10 July 2006, Mr Cranswick and his wife established two lines of credit with the Commonwealth Bank. As at 15 April 2009 Mr Cranswick had 13 bank accounts in Australia in his name, five of which he jointly held with his wife. 36 In relation to the 7A Swan Road property, Mr Cranswick's wife purchased the property on 23 March 2006. Mr Cranswick stated in his interview with ATO officers that he and his wife owned it although it was in his wife's name. According to the transcript of interview Mr Cranswick stated that: 1. his net worth included the 7A Swan Road property; 2. the funds for the purchase of the 7A Swan Road property were procured from the sale of the Philip Street property; 3. he met all household expenses including the children's school fees and the debts on the 7A Swan Road and 3/5 Swan Road properties; 4. the 7A Swan Road property was at the date of the interview with the ATO his registered address for banking purposes and that he had no other bank accounts outside of Australia; and 5. he stayed at the 7A Swan Road property when his wife was there and he sometimes stayed with his brother. 37 As stated above, on the 28 occasions that Mr Cranswick arrived in Australia between 1 July 2004 and 9 December 2008, he listed his intended address as the Philip Street property or the 7A Swan Road property, except on one occasion when he gave his address as 6A Swan Road. On each of these occasions he stated that he was a resident returning to Australia and on each occasion he left Australia during this period he stated that he was a resident temporarily leaving Australia. 38 On 5 April 2007 Mr Cranswick's resident visa expired while he was absent from Australia and on arrival in Perth International Airport on 14 April 2007 he completed an application for a border visa, which was granted. On his application Mr Cranswick declared that he was resuming residence in Australia indefinitely and intended to reside at 7A Swan Road. 39 As at 4 December 2009 Mr Cranswick was a director of two companies incorporated in Western Australia and held one of the two shares issued in one of the companies. His address for both companies was listed as the Philip Street property. Further, he is the secretary of one proprietary company. Section 204A (1) of the Corporation Act 2001 (Cth) provides that a proprietary company is not required to have a secretary, but if it does have one or more secretaries then one of them must ordinarily reside in Australia. 40 Further, at his interview with the ATO, Mr Cranswick stated that he was a member of the East-Fremantle Yacht Club, the owner of a motor vehicle with registered address of 7A Swan Road and held an Australian driver's licence. The 7A Swan Road property had a fixed line telephone service, a Foxtel subscription and an electricity service connected to it in Mr Cranswick's name. Mr Cranswick also owned a mobile telephone account in Australia and possessed a valid visa for residence in Australia. This he continued. He has also remained the registered owner of the Nissan Patrol with registered address of 7A Swan Road. 41 On 21 February 2008 Mr Cranswick sat and successfully completed an Australian citizenship test. 42 As at 3 December 2009 Mr Cranswick was listed on the White Pages interest entry as residing at 7A Swan Road and monies were being transferred into his Australian bank accounts from outside Australia 43 On the basis of this (unopposed) evidence, I am satisfied that Mr Cranswick was 'ordinarily resident' in Australia at the time of the acts of bankruptcy.

[12]

Intent to defeat creditors 44 In order for Mr Cranswick to have committed an act of bankruptcy by departing from Australia, the necessary intention to defeat or delay creditors must have been complete at the time of departure (Edge Technology Pty Ltd v Wang [2000] FCA 1586). The intent must be proved. The mere departure of the debtor without proof of the intention behind it is insufficient (Ex parte Coates; Re Skelton (1877) 5 Ch D 979 at 980; Andrews, Re; Manning, Ex p (1966) 8 FLR 56 at 58; Edge Technology at [5]). 45 There is no direct evidence of intent. If the Court is to be satisfied that Mr Cranswick held the intent it must be established by inference according to the circumstances of the debtor's departure (Andrews, Re; Manning, Ex p at 58 per Clyne J). 46 The relevant intent may be established by attributing to a debtor the necessary consequences of his or her acts (Edge Technology at [5]; Deputy Commissioner of Taxation v Wachjo (2005) 59 ATR 253 (at [21]). It is not necessary that the intent to defeat or delay his or her creditors be the debtor's sole intent in remaining out of Australia, or that the intent is only to defeat or delay one creditor (Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370 at 375 per Stephen J). 47 Factors that may indicate an intent to defeat or delay creditors include: a. the debtor's awareness of an impending liability; b. the debtor acting so as to render it impossible for creditors to ascertain the debtor's whereabouts; c. an absence of evidence as to any specific reason for remaining overseas which may negate or assist in negating an inference as to intent. 48 The Court has only had the benefit of evidence and submissions from the Commissioner. The Commissioner asserts that the Court may infer that Mr Cranswick departed and has remained out of Australia with intent to defeat or delay his creditors as: 1. When Mr Cranswick departed from Australia he was aware of the ongoing ATO audit of his taxation affairs and the likelihood of income tax assessments ensuing. 2. During the course of his interview with the ATO Mr Cranswick stated that he would be returning to Australia on 22 June 2009 for at least 10 days. In fact he returned on 5 June but left on 9 June 2009 and has not returned. 3. On previous arrival cards Mr Cranswick stated that he intended to resume residence in Australia but after he was interviewed by the ATO on 15 April 2009 when he became aware on an impending tax assessment said he was a visitor or temporary entrant to Australia. 4. Since Mr Cranswick's arrival in September 2002 he regularly and ordinarily lived in Australia but he has not returned to Australia since departing on 9 June 2009. 5. Mr Cranswick's non-return to Australia has occurred despite his wife and children being resident in Australia and his personal and business connection with Australia. 6. Through the period 9 June 2009 to 4 December 2009 Mr Cranswick continued to hold directorship and shareholding interests in Western Australian companies and listed his address as being in Western Australia. 7. At all material dates Mr Cranswick continued to have a Foxtel connection in his name, is listed as the contact person with respect to the electricity services and as a person receiving mail at the 7A Swan Road property. 8. Mr Cranswick has remained out of Australia knowing that notices of assessment have issued. 49 I am satisfied for the totality of the reasons in the previous paragraph and in the absence of any other evidence that it may reasonably be inferred that Mr Cranswick left Australia and has remained out of Australia with intent to defeat or delay his creditors. 50 The acts of bankruptcy referred to in [20] above first occurred on 9 June 2009, that is within 6 months of the filing of the petition on 8 December 2009.

[13]

Debt as at the act of bankruptcy 51 The Court is without the benefit of a contradictor as Mr Cranswick has not appeared on any occasion either in person or by counsel. 52 The Commissioner brought to the attention of the Court that it could be argued (against the Commissioner) that the requirements of s 44(1)(a) and (b) of the Act must be met as at the date of the act of bankruptcy. In other words, that as at that date the applicant must have had a debt which could have founded a creditor's petition. 53 In Mendonca, Re; Commissioner of Taxation, Ex p (1969) 15 FLR 256 at 258, Gibbs J (then a Judge of the Federal Court of Bankruptcy) stated: It is clear that, to support a petition, the petitioning creditor's debt must amount to … and must be a liquidated sum payable either immediately or at a certain future time (s. 44(1)(a) and(b)). In my opinion, the debt must also have answered this description at the date of the act of bankruptcy, or as Warrington L.J. said in In re Debtors, "the debt must, at the date of the act of bankruptcy, be such a debt as could be relied upon by the petitioning creditor to support his bankruptcy petition." (footnotes omitted) (emphasis added) 54 The requirement established in Mendonca has been applied in Dean v QUF Industries Ltd (1981) 51 FLR 317 at 323 (Deane, McGregor and Sheppard JJ), and Re Tait; Ex parte Commissioner of Taxation (1996) 65 FCR 592 at 595 (Lockhart J). In Re Tait, Lockhart J articulated the principle in the following terms: '…the debt, upon which a petition and a sequestration order are based, must be a debt which existed at the date of the relevant act of bankruptcy'. The principle can be traced to Moss v Smith (1808) 1 Camp 489, which concerned a petitioning creditor's debt for goods sold upon credit for a period of time not expiring until three days after the date of the act of bankruptcy. 55 The Mendonca proposition impacts on each of the acts of bankruptcy referred to above at [20]. Both acts of bankruptcy first occurred on 9 June 2009. At that time the Commissioner had not issued Mr Cranswick with tax assessments. This was not done until 3 December 2009. 56 The evidentiary certificate issued on 8 December 2009 pursuant to s 255-45 in Sch 1 of the TAA is relied on by the Commissioner as prima facie evidence of the amount owed by Mr Cranswick. However, in the face of Mendonca, it is difficult to see that it may be relied upon as evidence that as at 9 June 2009 there was a debt due and payable by Mr Cranswick either immediately or at some future time. 57 The Commissioner contends that by virtue of s 204 of the ITAA, the subsequent issue of the tax assessments to Mr Cranswick, as at 9 June 2009, Mr Cranswick did owe the Commissioner a debt which could have founded a creditor's petition. Secondly, the Commissioner says that Mendonca is no longer 'good law'. It is necessary to consider each argument.

[14]

Section 204 ITAA 58 The Commissioner argues that although when Mr Cranswick left Australia there were no tax debts, that changed, in effect, by the date of presentation of the creditor's petition by reason of the issue of the assessments and the operation of s 204(1)(b) ITAA. By then the debts in all years except 2009 had become due and payable at dates prior to 9 June 2009. 59 Section 204 of the ITAA prior to its repeal on 29 June 2010 provided: 204 When tax payable (1) Subject to the provisions of this Part, the tax payable by a taxpayer other than a full self‑assessment taxpayer for a year of income becomes due and payable: (a) if the taxpayer's return of income is lodged on or before the due date for lodgment - on the later of: (i) 21 days after the due date for lodgment of that return specified in the Gazette under section 161 for the year of income; or (ii) 21 days after a notice of assessment is given to the taxpayer; or (b) in any other case - 21 days after that due date for lodgment. … 60 Mr Cranswick was not a full self-assessment taxpayer. He did not lodge a return of income on or before the due date for lodgement. As such the tax payable became due and payable 21 days after the due date for lodgement pursuant to s 204(1)(b) of the ITAA. The due dates for payment in each of the years by the operation of that section were those specified above at [16]. 61 The making of an assessment which ascertains the taxable income and the tax payable thereon is a precondition for an amount of tax becoming due and payable. When an assessment is issued and served the date when the tax becomes due and payable is fixed by s 204(1)(b). The Commissioner submits that as a result of its amendment in 2000, s 204 now operates both prospectively and retrospectively as the date fixed under the section can be in the past. (Prior to amendment, s 204 could operate only prospectively). 62 As at the date of the presentation of the creditor's petition and by reference to the evidence before the Court when the matter is decided, the Notices of Assessments specify amounts of tax due and payable by virtue of s 204 of the ITAA at dates prior to 9 June 2009 for all years except 2009. Tax debts are statutory in nature and the legislature has attached special incidents or characteristics to them which do not pertain to debts owed within the general sense of the law (Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [51]). 63 The legislative framework is different from that which operated at the time of Mendonca. At that time s 204 of the ITAA made tax as assessed due and payable no less than thirty days after service of the assessment notice. Its operation at that time could only be prospective. The Commissioner contends that the amendment of s 204 in 2000 now produces a different result and that as at the date of presentation of the petition the Commissioner has a provable debt established by force of the conclusive evidence provision of s 177 of the ITAA. 64 Section 177 of the ITAA provides: 177 Evidence (1) The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct. 65 By reason of that provision, as at 9 June 2009, at the date of Mr Cranswick's departure from Australia there were debts owing by him within the meaning of subs 44(1)(a) and (b) of the Act. 66 By virtue of s 204 ITAA Mr Cranswick owed monies for years ending 30 June 2005 to 30 June 2008 to the Commissioner which were due and payable on 5 June 2006, 5 June 2007, 21 November 2007 and 21 November 2009. The tax debt for year ending 30 June 2009 was not due and payable as at 9 June 2010.

[15]

Mendonca 67 In the alternative, the Commissioner contends that in light of the principles of statutory construction enunciated in cases such as Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, provided that a debtor is indebted to the creditor at the time of the act of bankruptcy within s 40 of the Act, the precondition is s 44(1) of the presentation of a creditor's petition at a certain time does not limit the scope of the acts of bankruptcy to which s 40 applies. The Commissioner contends that earlier cases that have held to the contrary should be taken to have been wrongly decided. 68 In particular, the Commissioner contends that Mendonca and other cases that follow it, such as Re Tait per Lockhart J are not correct so far as they hold that as at the date of the act of bankruptcy the debt relied upon must have been a liquidated sum due and payable either immediately or at a certain future time. 69 The Commissioner argues that Mendonca is not correct insofar as it held that as at the date of the act of bankruptcy, the debt relied upon must have been a liquidated sum due and payable either immediately or at a certain future time. As a matter of statutory construction of the Act creates a different rule. Scope, object and purpose support that alternative construction. The facts of the present case illustrate the difficulties that can arise if a debt that is due but not yet payable nor payable on a fixed future date leads to the debtor leaving the country and not returning. 70 The Commissioner contends that the scheme of the Act, read in accordance with modern statutory construction principles, is that an act of bankruptcy within s 40 occurs when 'a debtor' does one of the listed acts, including with intent to defeat or delay his or her creditors, departs or remains out of Australia. There can be no doubt that, as at that date, there must be a debt (for there to be 'a debtor' and 'a creditor'). However, the specific requirement that the debt be liquidated, and immediately due and payable at a certain time, is specified in s 44(1)(b) of the Act as a precondition only to the presentation of a creditor's petition. The Act should not be construed so as to include the s 44(1)(b) requirement upon the act of bankruptcy in s 40 of the Act. All that is required at the time of the act of bankruptcy is the existence of a debt. The judgment of Stephen J (with whom Menzies and Gibbs JJ agreed) in Barton (at 374), albeit dicta, supports the proposition that an impending tax liability is sufficient for the purposes of s 40(1)(c)(i) of the Act. 71 There is nothing in s 40(1) of the Act which expressly or impliedly 'picks up' s 44(1) of the Act. Indeed, the Commissioner argues that the wording of s 40(1) tells against a 'picking up' of s 44(1): see below. 72 Section 40(1) of the Act refers to 'debtor' and creditors'. Those words imply the existence of a 'debt' arising out of a debtor/creditor relationship. Further, s 40(1)(h) of the Act refers simply to 'debts'. Section 5(1) of the Act defines 'debt' as including a 'liability'. The words 'with intent to defeat or delay his or her creditors' in s 40(1)(c) of the Act are very similar to the Statute of Elizabeth: see Barton at 374 per Stephen J (with whom Menzies and Gibbs JJ agreed). Modern equivalents of the Statute of Elizabeth include s 89 of the Property Law Act 1969 (WA) and s 37A of the Conveyancing Act 1919 (NSW) as well as the former version of s 121 of the Act: see Andrew v Zant Pty Ltd (2004) 213 ALR 812 (at [20]) per Hill J. 73 Contingent or prospective creditors are included in the concept of creditors for the purposes of the Statute of Elizabeth. See Green v Schneller (2001) 189 ALR 464 (at [16]) per Barrett J; Ebner v Official Trustee in Bankruptcy (1999) 91 FCR 353 (at [60]-[62]) per Sackville, Finn and Kenny JJ. 74 Even a person with bona fide claim for unliquidated damages is a 'creditor' for the purposes of the Statute of Elizabeth: see Chen v Marcolongo (2009) 260 ALR 353 (at [27]) per Allsop P. 75 If a person fears that his or her activities may generate creditors or puts property out of the reach of such possible persons, the transfer of the property can be attacked under the Statute of Elizabeth. It does not matter that at the time of the impugned transaction the person does not then have any creditors: see Chen v Marcolongo (at [180]) per Young JA. 76 A contingent debt in respect of payroll tax has been held to be capable of constituting a 'debt' for the purposes of a director's liability for corporate insolvent trading under s 556(1) of the former Companies (Western Australia) Code: see Commissioner of State Taxation (WA) v Pollock (1993) 11 WAR 64 (Full Court) in which cases such as Mendonca, Clyne v Deputy Commission of Taxation (1981) 150 CLR 1 and Taylor v Commissioner of Taxation (1987) 16 FCR 212 were considered. Section 556(1) used the phrase 'a company incurs a debt'. The Commissioner argues that a similar construction should be given to s 40(1) of the Act. 77 Given my view of the effect of s 204 of the ITAA, it is not necessary to resolve this interesting and persuasive argument and in the absence of a contradictor and any authority on the point, it is preferable that it await consideration for another day.