“fraudulent diversion” forces judge to consider recusal

Consider the all too convenient and unlikely coincidence at the heart of this tale and despair.

Some five months after finding Sydney man Nahi Gazal to be in contempt of court over almost $5 million withdrawn from bank accounts that were the subject of freezing orders, the ruling judge this week declared that he may have to disqualify himself from further hearings after learning that his tax refund had been fraudulently diverted.

In the NSW Supreme Court on Monday, Corporations List judge Ashley Black advised the legal representatives for plaintiff and defendant in Deputy Commissioner of Taxation v Westmeat Development Pty Ltd as Trustee for Westmeat Development Trust that he had to consider disqualifying himself after being informed last Thursday by the ATO that there had been a “fraudulent change of his bank account details” in regard to payment of his tax refund.

Describing his refund as a “material amount” Justice Black said he must seriously consider disqualifying himself from continuing to hear the matter given any future decisions he might make would be vulnerable to accusations of bias.

Speaking to an almost deserted court room the judge said the ATO had not provided him with any information about how the “fraudulent diversion” of his refund was executed, though it is difficult to imagine how anyone other than an ATO employee could covertly alter a taxpayer’s bank account details.

Justice Black offered Gazal and the DCT’s lawyers two weeks to consider whether to waive any offer of disqualification he might make.

The fraudulent diversion and subsequent impact on the judge’s ability to be seen as independent comes at a convenient time for Gazal, who has been trying to slow the timetable on a hearing on penalties to be imposed as consequence of the contempt findings so he can run an appeal. See: Deputy Commissioner of Taxation v Westmeat Development Pty Ltd [2025] NSWSC 655.

Gazal is also arguing he lacks capacity to defend himself or competently instruct his lawyers though if he’s that far gone how would he know?

On Tuesday iNO sent a list of questions to the ATO, asking whether any ATO staff member had been sacked, suspended, reported to the police or all of the above in respect of so-called fraudulent diversion in the last 12 months.

We also asked if the incident with the judge was isolated, and if not, how many instances of fraudulent diversion had the ATO identified in the current calendar year, and what actions had been taken to prosecute those responsible.

Late Wednesday evening the ATO responded, saying it is unable to comment “due to our obligations under taxpayer confidentiality laws”.

It then padded out this exercise in evasion by claiming its “systems are secure, resilient and have not been compromised”, in essence responding to a question it wasn’t asked.

A spokesman who refused to provide his surname because “we’re not obligated to” said it shouldn’t be assumed that the fraud was perpetrated by a tax office employee.

Third party fraud, he said was quite common.

iNO won’t bore you with the rest.

The facts as Justice Black disclosed them are these. Someone either within the ATO or outside altered his account details without the judge’s knowledge.

That led to the judge’s tax refund failing to be deposited in his bank account. It was the ATO that brought the matter to the judge’s attention on Thursday November 27.

The ATO has refused to address questions about whether any employee or employees have been suspended or referred to the police. It insists its systems are “secure, resilient and have not been compromised”.

The ATO’s spin is that the judge has been the victim of a third party fraud possibly involving identity theft, and that may well be the case.

It may also however be the case that the ATO, one of the most attractive targets for infiltration by criminals, is compromised.

If this was an isolated incident then questions need to be asked about how coincidental it is that the fraudulent diversion had the effect of forcing a judge to consider disqualifying himself from hearing a case brought by the Deputy Commissioner of Taxation against Gazal, who’s alleged to have defrauded tax payers of more than $50 million by falsely claiming GST credits.

If it wasn’t an isolated incident then how many taxpayers are contacted in a year by the ATO and told their refund has been fraudulently diverted?

Perhaps the ATO can generally compel taxpayers to remain silent by intimating that it will assist in a speedy resolution and earlier payment of their refund but given the circumstances of Justice Black’s role as primary judge hearing the Westmeat matters his honour was required to inform the parties. Why he chose to do so in open court is another interesting question.

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