Hall Chadwick duped into misdirecting legal fees

iNO had to suppress a grimace on seeing the financial complaints ombudsman David Locke spruik the Commonwealth Bank of Australia’s (CBA) latest anti-scam initiatives over the weekend.

The Australian Financial Complaints Authority (AFCA) ceo and chief ombudsman did his bit for the bank by posting on Linked In a Sydney Morning Herald (SMH) piece on CBA’s Scam Indicator and NameCheck solutions published the previous Thursday.

“Hall Chadwick accepted the veracity of the email and transferred the money to the stipulated bank account. In fact, the email had not emanated from the first plaintiff but was a fraudulent impersonation giving details of a fraudulent bank account.” NSW Supreme Court acting justice Michael Elkaim.

Coincidentally or otherwise, the SMH article was published one day before CBA’s fraud prevention credentials were laid open to scrutiny in the matter of CCSG Legal Pty Ltd & Anor v Commonwealth Bank of Australia & Ors [2023] NSWSC 1276.

Such propitious timing we’re sure will be owned by CBA’s lavishly remunerated corporate spinners, irrespective of whether it was by dark design or dumb luck.

In that judgment, delivered by NSW Supreme Court acting justice Michael Elkaim, it’s revealed that national insolvency firm Hall Chadwick was tricked into paying $145,282.20 owed to CCSG Legal into an account, the details of which differed to the account number and BSB the law firm originally supplied.

The funds represented legal fees incurred by Hall Chadwick partner John Shanahan in his capacity as the trustee in bankruptcy of the estate of Rex Henry Morgan.

CCSG had invoiced Hall Chadwick on July 31 requesting the sum be paid within 14 days. On August 3 Hall Chadwick received an email purporting to be from CCSG requesting that the funds be paid into a different account and this is where neither CBA’s AFCA-backed fraud prevention mechanisms or any suitably suspicious minds in Hall Chadwick accounts’ division proved up to the mark.

“Hall Chadwick accepted the veracity of the email and transferred the money to the stipulated bank account,” the judge said.

“In fact, the email had not emanated from the first plaintiff (CCSG Legal) but was a fraudulent impersonation giving details of a fraudulent bank account.”

The account described by his honour as “fraudulent” was registered at CBA. So was a second fraudulent account into which $101,000 of CCSG’s fees was transferred on August 21.

Judge Elkaim didn’t explain how the possibility of “fraudulent interference” came to the attention of CCSG on the same date but iNO’s not convinced it was thanks to CBA’s NameCheck app.

Regardless the firm and Shanahan as first and second plaintiffs made an urgent application for freezing orders after hours on the same day and then commenced proceedings to have the funds returned.

Last Friday the judge found in their favour, ordering the second and third defendants – Karlin Julian Buxton-Bennett and Karlin Julian Buxton-Bennett trading as Gemstone Pumps International – to repay $145,282.20 and pay pre-judgment interest in the sum of $2,256.85 and costs.

Despite the positive outcome neither Shanahan or CCSG Legal ceo Daniel Taylor were prepared to answer the question iNO readers want answered: How did the fraudster or fraudsters know to send that email on August 3?