Gazal v DFC of T

Members:
Slattery J

Tribunal:
Supreme Court of New South Wales

MEDIA NEUTRAL CITATION: [2024] NSWSC 1

Decision date: 8 January 2024

Slattery J

1. On 11 December 2023, the Deputy Commissioner of Taxation ("the Commissioner") issued a Departure Prohibition Order ("the DPO") under the Taxation Administration Act 1953 (Cth) ("TAA"), s 14S against Mr Nahi Nasri Gazal. The DPO remains in force to prevent him from leaving Australia until revoked by the Commissioner, or the Commissioner issues a Departure Authorisation Certificate ("DAC"), or a Court sets the DPO aside.

2.

ATC 28003

On 29 December 2023 Mr Gazal filed a Summons seeking an order setting aside the DPO. He amended his Summons on 1 January 2024.

3. Mr Gazal claims that the Commissioner did not hold the belief required by TAA, s 14S for the issue of the DPO, and that the Commissioner did not have reasonable grounds to hold such a belief. These proceedings have come on urgently for a final hearing, which took place on 2 and 3 January 2024, subject to the exigencies of the vacation duty list. Mr Gazal sought an early final hearing because he wished to leave Australia to undertake urgent medical treatment in Slovenia commencing on 4 January 2024. The Commissioner did not object to an urgent final hearing but opposed the application.

4. Ms M. Bateman of counsel, instructed by Eden King Lawyers Pty Limited, appeared for Mr Gazal. Ms S. Scott of counsel, instructed by K & L Gates Lawyers appeared for the Commissioner.

5. The Court has decided to dismiss Mr Gazal's application. These reasons set out the legal framework governing the Court's decision, the factual background to the application, and the Court's consideration of the merits of the application.

6. The evidence suggests that the decision to issue the DPO to Mr Gazal appears to have been made by an Assistant Commissioner on behalf of the defendant, the Deputy Commissioner of Taxation. Mr Gazal did not challenge in these proceedings the delegation of authority to the decision-maker, or the procedural regularity of the decision associated with that delegation. For convenience in these reasons the Court adopts the convention used by the parties in their submissions and mostly refers to the defendant and the decision-maker to issue the DPO as "the Commissioner".

Departure Prohibition Orders - The Legal Framework

7. TAA, s 14S empowers the Commissioner by order in accordance with the prescribed form to prohibit the departure of a person from Australia for a foreign country under certain conditions. Section 14S provides as follows:

"Departure prohibition orders

  • (1) Where:
    • (a) a person is subject to a tax liability; and
    • (b) the Commissioner believes on reasonable grounds that it is desirable to do so for the purpose of ensuring that the person does not depart from Australia for a foreign country without:
      • (i) wholly discharging the tax liability; or
      • (ii) making arrangements satisfactory to the Commissioner for the tax liability to be wholly discharged;

    the Commissioner may, by order in accordance with the prescribed form, prohibit the departure of the person from Australia for a foreign country.

  • (2) Subject to subsection (3), a departure prohibition order remains in force unless and until revoked under section 14T or set aside by a court.
  • (3) A departure prohibition order made in respect of a person shall be taken, by virtue of this subsection, not to be in force in respect of the person during any period during which an order is in force under the Migration Act 1958 for the deportation of the person.
  • (4) Where a departure prohibition order is made in respect of a person, the Commissioner shall forthwith:
    • (a) cause the person to be informed, as prescribed, of the making of the order; and
    • (b) subject to subsection (5), cause a copy of the order, and such information as the Commissioner considers is likely to facilitate the identification of the person, to be given to:
      • (i) the Immigration Secretary; and
      • (ii) such other persons as the Commissioner considers appropriate, being persons prescribed, or included in a class of persons prescribed, for the purposes of this paragraph.
  • (5) Where a departure prohibition order is made in respect of a person whom the Commissioner is satisfied is an Australian

    ATC 28004

    citizen, the Commissioner shall not cause a copy of the order, or any information likely to facilitate the identification of the person, to be given to the Immigration Secretary unless the Commissioner is of the opinion that it is desirable to do so."

8. The expression "tax liability" where it occurs in s 14S is defined by TAA, s 2 as meaning "a liability to the Commonwealth arising under, or by virtue of, a taxation law".

9. The Courts have periodically considered the function and purpose of s 14S since its enactment in cases that include
Dalco v FCT (1987) ATR 443 ("Dalco"),
Edelsten v FCT (1989) 85 ALR 226 ("Edlesten"),
Skase v FCT (1991) 32 FCR 206 ("Skase"),
Thai v DCT (1994) 123 ALR 570 ("Thai"),
Poletti v Commissioner of Taxation (1994) 52 FCR 154 ("Poletti"), and more recently in
Pattenden v Commissioner of Taxation [2008] FCA 1590 ("Pattenden"),
Troughton v Deputy Commissioner of Taxation (2008) 166 FCR 9; [2008] FCA 18 ("Troughton") and
Bakri v Deputy Commissioner of Taxation [2017] FCA 20 ("Bakri").

10. The operation of s 14 and the approach to its interpretation have been settled since Dalco. Drawing upon Dalco, Jessup J set out in Troughton (ay [21] - [23]) a concise summary of the interpretation and legal effect of this section:

"21. However, there is authority which I should follow that suggests that the purposive dimension of s 14S should not be ascertained from such a literal reading of the words of the section. In
Dalco v Federal Commissioner of Taxation (1987) 19 ATR 443, 447-448, Young J said of s 14S:

I am of the view that that is the way that one approaches the section. The Commissioner is to believe on reasonable grounds that it is desirable to stop a person leaving Australia because it is necessary to collect the tax that is owed to the government and that that discharging of the tax liability will be affected by the person going overseas.

His Honour's view was endorsed in this court in
Edelsten v Federal Commissioner of Taxation (1989) 85 ALR 226, 230 and in
Skase v Commissioner of Taxation (1991) 32 FCR 206, 209 and 210-211. In the latter case, Pincus J said that "there must be … the circumstance that recoverability will be affected by the departure of the taxpayer from Australia." (32 FCR at 211)

22. It follows that s 14S(1)(b) should be read not literally, but as though it referred to a belief by the Commissioner (on reasonable grounds) that it was desirable that the person not leave Australia without discharging the tax liability or making the arrangements there referred to. Thus it is not to be taken as a given that, in every case, the departure of the person from Australia will make it unlikely, or at least less likely, that the tax liability will be discharged, or that the ability of the Commissioner to recover the tax will be impaired. These are things which must be considered by the Commissioner in every case. The purpose of s 14S, and accordingly a central purpose of Part IVA, is not the prevention of persons (owing tax) from leaving Australia simpliciter: it is the prevention of such persons from leaving Australia where, in the Commissioner's belief reasonably arrived at, the recovery of tax would or might thereby be impaired.

23. In that result, at least so far as revealed by s 14S, the general scope and objects of Part IVA of the Administration Act are as contended for by both sides in the present case. As contended for by the Commissioner, they are the protection of the revenue. As contended for by the applicant, they are the prevention of persons (owing tax) from leaving Australia where that would affect the recoverability thereof."

11. A party aggrieved by the making of the DPO, such as Mr Gazal, has a right of appeal under TAA, s 14V, which provides as follow:

"Appeals to courts against making of departure prohibition orders

  • (1) A person aggrieved by the making of a departure prohibition order - departure_prohibition_order may appeal to the Federal Court - federal_court of Australia - australia or the Supreme Court of a State - state or Territory - territory against the making of the departure prohibition order - departure_prohibition_order.

    ATC 28005

  • (2) This section has effect:
    • (a) subject to chapter III of the Constitution; and
    • (b) notwithstanding anything contained in section 9 of the Administrative Decisions (Judicial Review) Act 1977."

12. The nature of an appeal under TAA, s 14V was comprehensively analysed and explained in Poletti. The Court gratefully adopts the concise summary of the effect of Poletti set out in Logan J's judgment in Pattenden at [7] - [9], which is reproduced below:

13. Knowing contravention of a departure prohibition order renders a person liable potentially to 12 months imprisonment: TAA, s 14R. The Commissioner shall, upon application, revoke a departure prohibition order in certain circumstances but may otherwise exercise a discretion to revoke the order pursuant to TAA, s 14T, which relevantly provides as follows:

"Revocation and variation of departure prohibition orders

  • (1) Where a departure prohibition order is in force in respect of a person and:

    • ATC 28006

      (a) the tax liabilities to which the person is subject have been wholly discharged and the Commissioner is satisfied that it is likely that the tax liabilities to which the person may become subject in respect of, or arising out of, matters that have occurred will be:
      • (i) wholly discharged; or
      • (ii) completely irrecoverable; or
    • (b) the Commissioner is satisfied that the tax liabilities to which the person is subject are completely irrecoverable;

    the Commissioner shall, on application being made to the Commissioner by the person to do so or on the Commissioner's own motion, revoke the departure prohibition order.

  • (2) Where a departure prohibition order is in force in respect of a person, the Commissioner may, in the Commissioner's discretion and on application being made to the Commissioner to do so or on the Commissioner's own motion, revoke or vary the departure prohibition order.
  • …"

14. The Commissioner may, upon application, by a person in respect of whom a departure prohibition order is in force, issue a certificate, known as a "departure authorisation certificate", authorising the person to depart from Australia for a foreign country. The Commissioner may only issue a departure authorisation certificate in limited circumstances. These are essentially: if the Commissioner is satisfied that the person will depart from Australia and return to Australia within such period as the Commissioner considers appropriate and upon such conditions including security as the Commissioner may impose, or if security is not available, on humanitarian grounds or on the basis that refusal to issue a departure authorisation certificate would be detrimental to the interests of Australia: TAA, s 14U.

15. On an appeal under TAA, s 14V a Court hearing the appeal may make an order setting aside the departure prohibition order or dismiss the appeal: TAA, s 14X. As Poletti and Pattenden explain, though termed an "appeal", an application under s 14V is a proceeding in the original jurisdiction of the Court.

16. Decisions of the Commissioner made under TAA, ss 14T or 14U are reviewable by the Administrative Review Tribunal by a process distinct from the appeal mechanism in s 14V for appeals from decisions under s 14S.

Mr Gazal, the Commissioner, and an Unpaid Tax Liability - 2020 to 2024

17. The DPO made on 11 December 2023 arises in part from events that began over three years earlier in other proceedings brought by the Commissioner in this Court. In those proceedings the Commissioner sought relief against Mr Gazal, other family members and companies controlled by him (or by other family members) to secure the recovery of tax said to be owing to the Commissioner ("the tax recovery proceedings"). The Commissioner joined 14 defendants in the tax recovery proceedings, including Mr Gazal and four other family members and nine corporate entities wholly or partially controlled by those family members. The Commissioner alleged that those defendants had taxation liabilities due and payable to the Commissioner of almost $45 million.

18. The Commissioner claimed in the tax recovery proceedings these taxation liabilities accrued because certain of the corporate defendants related to Mr Gazal had claimed more than $23 million in GST input tax credits in the period January 2017 to May 2020, in relation to construction projects in New South Wales. The Commissioner alleged that verification of the GST claims showed that these developments had been completed by other developers and that the corporate parties involved had fabricated invoices to claim the GST input tax credits, resulting in more than $21 million of GST refunds. The Commissioner alleged that tracing these refunds showed they had been dispersed among some of the corporate defendants related to Mr Gazal.

19. This Court made interim freezing orders in the tax recovery proceedings on 24 December 2020 and final freezing orders on 4 January 2021 ("the freezing orders"). The freezing orders were varied and expanded to further assets in March 2021 ("the March 2021 orders").

20.

ATC 28007

In the result, the freezing orders covered a range of bank accounts and assets, including bank accounts in the names of three companies controlled by Gazal family members. Dealings with these three bank accounts featured prominently in the factual narrative leading up to the commencement of these proceedings. The bank accounts were maintained in the name of Belfield Development Pty Ltd ("Belfield") as trustee for the Belfield Development Unit Trust, NNG Holdings Pty Ltd ("NNG") as trustee for the NNG Family Trust and NG Sydney Corporation Pty Limited ("NG Sydney"). Mr Gazal and each of these three companies were defendants in the tax recovery proceedings.

21. Mr Gazal swore on affidavit on 29 January 2021 in the tax recovery proceedings that (a) he had no assets other than $5500 in a bank account, a personal computer, a television, a lounge and a dining table, and (b) NNG's bank account contained $3.1 million, Belfield's account contained $1.4 million and NG Sydney's bank account contained $2.6 million.

22. By the time the Court made the March 2021 freezing orders, extending freezing order relief to an NG Sydney account at BankWest, a subsidiary of the Commonwealth Bank of Australia ("CBA") the funds then held in the name of NG Sydney were $1,710,000. Thus, in round figures the total amount said to be in the accounts was little over $6 million ($3.1 million + $1.4 million + $1.7 million). More precise figures are given below.

23. The Commissioner has advanced evidence, which the Court accepts, that by 15 June 2021 Mr Gazal had caused 14 withdrawals (totalling approximately $1.2 million) to be made from the bank account maintained by Belfield and 26 withdrawals (totalling approximately $2.1 million) from the bank account maintained by NNG. This Commissioner says and the Court accepts that the Commissioner was unaware these withdrawals were being made. The fact that the Commissioner did not take any action consequent upon those withdrawals strongly support the inference that the Commissioner was unaware of them. More precise current balance figures in relation to these accounts appear later in these reasons.

24. The account maintained the name of NG Sydney was also later depleted between 24 February 2023 and 1 April 2023 but for the sum of $897.54. The Court accepts that the Commissioner was unaware of these withdrawals at the time they were made. Given the existence of the freezing orders, the Commissioner's failure to call for the immediate restoration of the funds is a basis to infer the Commissioner's lack of knowledge.

25. The Commissioner contends that all these withdrawals were made in contempt of the freezing orders. This Court does not have to decide whether a contempt occurred. But the case that the withdrawals were a contempt is well maintainable.

26. Take for example the withdrawals between 24 February 2023 and 1 April 2023 from the bank account maintained by NG Sydney. Although he puts it in issue, the Court is satisfied that Mr Gazal was a signatory on that account at all relevant times. The freezing orders contained an exception for payments made in the ordinary course of business. In the space of five weeks almost 20 payments were made from this account, all but three of which were in the range between $93,500 and $122,100, apparently because someone presented invoices in person to the bank for payment. Many of the recipients of these funds seem to be related parties of Mr Gazal. On one day, 14 March 2023, five withdrawals occur, all but one of them in the range of $106,920 to $123,750, and accounting for approximately $450,000 of the total withdrawals. In a context where few other payments had been made from this account before that that five-week period, a case that these payments were made in the ordinary course of a real business conducted by these companies looks difficult to maintain.

27. Ms Bateman does not concede that Mr Gazal was the person who presented the invoices to BankWest (CBA), or the ANZ for these payments to be made. But the Court is satisfied that a soundly arguable case can be made that if these banks were following their normal operating procedures and verifying authorised signatures before proving funds transfers, then Mr Gazal is probably the person who presented the invoices. The success of any contempt action will then depend upon

ATC 28008

establishing whether these invoices were issued in the ordinary course of the business of Belfield, NNG, or NG Sydney. It may be difficult for Mr Gazal to establish the course of any legitimate business of any of these three entities to which these invoices could be connected.

28. The parties agreed to mediate their differences in August 2023. This resulted in the execution of a deed of settlement (the Settlement Deed) on 1 September 2023 between the Deputy Commissioner of Taxation and the 14 defendants to the taxation recovery proceedings, who were described in the Settlement Deed as "the Gazal Parties" and will for convenience be so described from time to time in these reasons.

29. The execution of the Settlement Deed became the first of a series of related events that led to the filing of the Summons in these proceedings on 29 December 2023. The parties' competing contentions draw closely upon the sequence of events during this four-month period.

30. Under the terms of the Settlement Deed the Gazal Parties, including Mr Gazal, acknowledged that they had taxation liabilities due and payable in the sum of $44,364,926.26: clause 2.1(a). But provided the Gazal Parties adhered to the terms of the Settlement Deed the Commissioner agreed to accept the sum of $18 million in satisfaction of those liabilities ("the settlement sum"). The Gazal Parties agreed to pay the monies held in the bank accounts, including those maintained by Belfield, NNG and NG Sydney to the Commissioner: clause 3.4(a). By no later than six months after the date of the Settlement Deed the Gazal Parties agreed to pay the balance of the settlement sum to the Commissioner: clause 3.6. The Gazal Parties warranted that they had made true disclosure of all relevant material facts to the Commissioner: clause 5.3(a). The Gazal Parties acknowledged that if disclosure "of all relevant and material facts to the Commissioner as required by clause 5.3 (a) of the deed did not take place, the Commissioner was entitled to terminate the Settlement Deed, elect that it was void or otherwise rescind what the Commissioner had agreed to do under the Settlement Deed: clause 5.3 (b). If a Gazal party fails to comply with any of their obligations under the Settlement Deed, including obligations to make full disclosure, the Commissioner is entitled to issue a Notice of Default, seeking rectification within seven days and if the default remains unrectified the Deed provided for the consent of the Gazal parties to judgments and various other forms of recovery action: clause 6.2.

31. K & L Gates, the lawyers on behalf of the Gazal Parties discovered on 19 September 2023 from correspondence from Hardinlaw, the lawyers for Mr Gazal, that there was less than $1,000 in funds left in the bank accounts maintained by NNG, Belfield or NG Sydney and available to remit to the Commissioner in accordance with Settlement Deed, clause 3.4. The Commissioner reacted to this news on 2 November 2023, when K & L Gates demanded from Hardinlaw the return of the unaccounted-for funds in each of the Belfield, NNG and NG Sydney accounts. The Commissioner contended that non-payment of these funds was an event of default under the Settlement Deed. The Commissioner gave the Gazal Parties seven days to rectify the default.

32. K & L Gates inquired from the ANZ bank for the accounts maintained there on behalf of Belfield and NNG and inquired of the CBA in respect of the account it maintained on behalf of NG Sydney, seeking an explanation as to why the banks had permitted the withdrawals, despite the freezing orders. Both banks replied by 10 November, indicating that the transactions had been permitted in accordance with exceptions to the freezing orders. The ANZ specifically cited the exemption in clause 8(c) of the freezing orders, namely "dealing with, or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred."

33. In K & L Gates' letter to Hardinlaw of 2 November 2023, they summarised the precise known figures to that date of the depletion of these various accounts. In respect of the freezing orders over the Belfield and NNG accounts, the picture was as follows:

ATC 28009


Belfield account NNG account
Balance on or after 24/12/20 $1,484,167.00 $3,287,825.00
Balance as at 11/10/23 $2,444.39 $7,543.13
Difference -$1,481,722.61 -$3,280,281.87

34. In relation to the March 2021 freezing order the picture was as follows:


NG account
Balance on or after 26/3/21 $1,709,827.46
Balance as at 17/5/23 $897.54
Difference -$1,708,929.92

35. The total amount of funds depleted across the three accounts while the various freezing orders were in effect is therefore $6,470,934.40.

36. On 5 December 2020, K & L Gates wrote to Hardinlaw noting the Gazal Parties' failure to provide an explanation for the withdrawal of funds from the three accounts. K & L Gates contended that "at all times during the approximately 2.5 years leading up to the execution of the Settlement Deed your clients continued to represent that the funds in the [three] accounts have remained untouched since the freezing orders were made". The Commissioner maintained an entitlement to terminate the deed in part on the grounds of non-disclosure by the Gazal Parties dealings with these accounts.

37. But the letter recorded that the Commissioner was prepared to forbear from termination provided the settlement sum of $18 million, payable under the Settlement Deed by 1 March 2024 was paid by three instalments of $6 million in December 2023, January 2024 and February 2024, with the first instalment of $6 million being made on 22 December 2023. The Commissioner agreed without prejudice to the Commissioner's other rights under the Settlement Deed, and otherwise, to allow the Gazal Parties until midday 22 December 2023 to pay the $6 million towards the settlement sum.

38. The DPO issued on 11 December 2023. It was in the form of a document addressed to Mr Gazal and signed on behalf of the Deputy Commissioner of Taxation was sent to Mr Gazal at his home address. After a preliminary explanation of what is a DPO and what it means for a person to whom it is addressed, under the heading, "why has the ATO issued you with a DPO?" the DPO said the following:

"Why has the ATO issued you with a DPO?

The ATO believes on reasonable grounds that it is desirable to prevent you from leaving Australia for the following reasons:

  • (1) You have significant income tax liability totalling $4,312,928.37. Based on the Deed of Settlement that you signed on 1 September 2023, as one of the parties, you have also undertaken to pay the amount of $18,000,000 by 1 March 2024;
  • (2) There is a risk to revenue for the following reasons:
    • a. You have previously transferred funds overseas and to other entities and individuals.
    • b. You frequently travel overseas. Since the Covid-19 travel restrictions was lifted, you have travelled multiple times overseas for no apparent reason.
    • c. You have disobeyed the Supreme Court of NSW's freezing orders (Matter number: 2020/00365632) granted on 24 December 2020 and extended on 24 March 2021 by disposing of, dealing with and/or diminishing the value of assets held by [Belfield] as trustee of the Belfield Development Unit Trust (ABN 29 973 708 574); [NNG] as trustee for the NNG Family Trust (ABN 74 497 353 852 or ABN 52 415 392 105); and [NG Sydney]."

39. The evidence shows that on 4 December 2023 Ms Llorca sought approval for the DPO. She provided an oral briefing to the Assistant Commissioner decisionmaker to form the basis of a belief that the Commissioner had reasonable grounds to issue a DPO. The recommendation to issue the DPO was

ATC 28010

approved on 8 December 2023. A copy of the briefing note used by Ms Llorca and others as the resource to brief the relevant Assistant Commissioner ("the Briefing Note") was extracted in evidence, subject to redactions of otherwise confidential material.

40. After setting out much of the background already outlined in these reasons, the Briefing Note under the heading "Executive Summary" outlined its recommendations as follows:

"[REDACTED]

12. Based on the above, we recommend the issue of the DPO. Based on his travel pattern, there is a risk of flight and should [Mr Gazal] be able to leave the country, there is a risk that he will abscond and avoid his tax liabilities based on the following factors:

[REDACTED]

  • - he might think to evade the possibility of prosecution for offences committed against the Commonwealth as well as contempt charges for violating the freezing orders;
  • - he might wish to escape the mounting pressures brought by his accomplices/associates to pay the settlement amount; and
  • - he has distanced himself from assets here in Australia."

41. The Briefing Note then covered the background showing how the primary taxation liability came to be owed under the Settlement Deed. It then expanded on the legislative background and then a more detailed history under the heading "Background Material".

42. Under the heading "Travel Movement of Taxpayer" the Briefing Note spoke to Mr Gazal travelling overseas to various destinations frequently, since the year 2000, subject to periods of time in which he was incarcerated and also during the Covid-19 restrictions. The Briefing Note indicated that since 11 January 2022 Mr Gazal has travelled overseas five times: in January 2022 for 19 days, in March - April 2022 for 27 days, in April - May 2022 for 14 days, in January 2023 for 19 days and in August 2023 for 22 days. The Briefing Note then continued on the subject of travel:

"32. Mr Gazal was originally born in Lebanon and migrated to Australia around 1990. He still has family members residing in Lebanon, including his sister who AUSTRAC shows he has transferred significant funds to."

43. Under "Background" the Briefing Note recorded that Mr Gazal has previously been imprisoned for financial crimes for 10 months in 2017 and 10 months in 2013 and has been fined $1,100 for failing to furnish an approved form and has previously been declared a bankrupt. Mr Gazal is referred to by his first name throughout the Briefing Note, Nahi.

44. The Briefing Note states throughout that it took into account various provisions of the Practice Statement Law Administration ("PS LA") 2011/18. The Briefing Note then concludes in paragraphs 34 to 39 by reference to PS LA 2011/18 with the following:

"34. In deciding to issue a DPO to Nahi, the following relevant factors have been considered in line with Practice Statement Law Administration ( PS LA ) 2011/18, paragraph 147:

  • * the provenance of Nahi's debt being the fraudulently claimed GST ITCs;
  • * he has significant tax liabilities that should be recovered;
  • * there are information suggesting that he has concealed assets (bank accounts and luxury goods held by other people on his behalf) and he has moved funds as evidenced by the withdrawals from frozen bank accounts and AUSTRAC reports;
  • * funds have been transferred overseas;
  • * Nahi does not have legitimate business interest in Australia
  • * based on his travel pattern, there is indication that he is likely to travel when there is no apparent need for travel. In fact, he has been claiming that he is sick and has produced dubious medical certificates.

Basis of the belief that the Commissioner has reasonable grounds to issue a DPO

35. PS LA 2011/18 provides consideration whether 'reasonable grounds' exist

ATC 28011

for the issuance of a DPO. The following circumstances apply:
  • * There is a tax liability
  • * There is any information to suggest movement of funds (bank statements and AUSTRAC reports)
  • * Funds have been transferred overseas
  • * Nahi has maintained his links to Lebanon [REDACTED]
  • * Based on his travel pattern, he will likely travel overseas soon however, and there is no apparent need for travel. There is an ascribed risk that Nahi may stay in Lebanon [REDACTED] to avoid prosecution action and/or the pressures being put on him by his associates to pay the settlement sum.
  • * He has the means to travel and permanently move overseas having accumulated significant amounts from his fraudulent activities.

Recommendation

36. It is recommended that a DPO be issued against Nahi based on the following:

  • a) Para 141(i) There is a tax liability and whether it can be recovered

    Nahi and his associates who are party to the Deed of settlement are required to pay the settlement sum of $18 million by 1 March 2024. Tracing showed that he depleted the frozen bank accounts in contempt of the Court orders and transferred some of these funds to other entities [REDACTED].There is a possibility that these can still be recovered either directly from the companies that received the benefit or the individual directors/shareholders who are Nahi's accomplices including his ex-wife who he requested to be excluded from any of our previous recovery actions.

  • b) Para 141(ii) known assets are sufficient to pay existing and future tax liabilities and whether those assets are in a readily realisable form

    Nahi has distanced himself from any assets hence there are no identified assets in Australia.

    However, based on intel received from his associates including his son, he has assets that he has not disclosed in his affidavit and have accessed to significant amount of funds. Nahi has also disclosed that the repayment of the settlement sum that he has proposed will be coming from third-party.

  • c) Para 141(iii) recovery proceedings are in course

    The freezing orders against Nahi and his associates are still in place and have not been discharged. The Deed of settlement executed on 1 September 2023 has also not been terminated yet.

  • d) Para 141(vii) the tax debtor has assets overseas adequate to maintain a comfortable lifestyle

    AUSTRAC has shown that Nahi Gazal has made [REDACTED] transfers to his sister based in Lebanon. [REDACTED]

  • e) Para 141 (ix) the tax debtor has significant business interest in Australia

    Nahi has no legitimate business interests in Australia hence, he does not have any reasons to stay in the country. He can just leave and abscond to Lebanon [REDACTED] and start all over again.

37. Based on Nahi's history where he has engaged in financial crimes and been incarcerated as a result, he will continue to engage in serious illegal activities unless actions are taken to prevent this. His record indicates he is unlikely to take responsibility and will attempt to evade his obligations by any means necessary. He demonstrates a repeat pattern of intentionally disregarding the tax law and there is no indication that this behaviour will change which is evidenced in the new audit which is shows more sophisticated approach in defrauding the Commonwealth.

38. Nahi's dishonesty in relation to breaching of freezing order is further evidence of the behaviour involved and there is real risk that the $18 million signed in the deed of settlement will not be collected if he is allowed to leave the country. Nahi has openly and deceitfully claimed various illnesses while concocting another more sophisticated [REDACTED] scheme [REDACTED].

ATC 28012

39. We recommend that the issue of the DPO to Nahi Gazal be approved. His egregious behaviour has demonstrated a significant and blatant disregard of the tax system. He and his accomplices represent a significant risk to revenue; the fraudulent GST refunds they have claimed have been funnelled to multiple accounts, some of which may still be accessible to the Gazal Group. We believe there is likelihood that he would flee to Lebanon [REDACTED] where he maintains close family ties."

45. By this time the Christmas law vacation was approaching. The last day of the law term both in the Federal Court and the Supreme Court of New South Wales was Friday, 15 December 2023. Vacation judges commenced duty the following week.

46. After service of the DPO, negotiations ensued between K & L Gates and Hardinlaw, including in relation to the timing of the payment of amounts due under the Settlement Deed. In the correspondence between Hardinlaw and K & L Gates Mr Hardin represented on behalf of Mr Gazal and that Mr Gazal may have to incur finance fees exceeding US$800,000 to obtain bridging finance to pay the Commissioner's debt before 16 January 2024 and asked for confirmation of the Commissioner's position, including a further three days until 19 January 2024 for any transfers to clear. This was said to be necessary in part because of funds are being remitted from the United States from a third-party source by the name of Mr George Ghazal. Mr Hardin requested a response from the Commissioner before 21 December 2023.

47. Communicated through K & L Gates by email dated 20 December 2023, the Commissioner agreed, despite earlier correspondence to forbear from exercising the Commissioner's rights to terminate the deed until after Friday, 19 January 2024 and gave Mr Gazal until midday that day to pay the Settlement Sum.

48. Then two days later, on Friday, 22 December 2023 at 1.36pm by email Mr Hardin attempted to contact representatives of the Australian Taxation Office (ATO) with the following request:

"Further to my email below and my telephone message left on your voice mail earlier today, I seek your urgent response to permission for my client Nahi Gazal to be able to depart Australia at the end of this month, returning after 16 days abroad, the primary purpose of which is urgent medical (stem cell) treatment, which he has had at various times in the past few years, departing and returning without issue."

49. It is not disputed that this email was the first time the Commissioner had been made aware that Mr Gazal wanted to travel overseas in January 2024 for any purpose including medical treatment.

50. Mr Hardin telephoned the relevant officer at the ATO three times between 11.38am and 3.26pm on Friday, 22 December 2023, as well as sending the above email.

51. It is not surprising there was no response to attempts to contact the relevant ATO officer, commencing from approximately midday on the last working day before the Christmas break. Many Australian workplaces have closed by that time or are on much reduced staff.

52. On Sunday, 24 December 2023 Mr Hardin emailed the relevant ATO Officer, attaching an email chain that gave more information about the stem cell treatment in Slovenia Mr Gazal claimed he needed to leave Australia urgently. This material appeared to show that Mr Gazal was to undergo medical treatment in Slovenia at an institution by the name of Swiss Medica. The medical treatment was for a condition which an email apparently from a Dr Manas at Swiss Medica described as Body Lewy Disease ("LBD"), a disease associated with abnormal deposits of a protein called alpha-synuclein in the brain. The forwarded Swiss Medica email was dated 23 December 2023 and emphasised the "importance of adhering to the scheduled treatment date of January 4, 2024." The letter went on:

"It is crucial not to miss this appointment, as the next available slot is not until April 2024. Delaying the treatment to April could be detrimental to the overall process, as there is a specific timeframe that should not be exceeded between treatments to maintain the therapy's effectiveness."

53.

ATC 28013

The email spoke of pre-treatment assessments scheduled to take place "in the last week of December 2023" and that the entire procedure would take 14 days, commencing with travel to Switzerland for comprehensive tests through to post-treatment care in Slovenia.

54. On 24 December Mr Hardin requested a response to his 22 December 2023 email by noon on Wednesday, 27 December 2023. Mr Hardin telephoned the relevant ATO officer on 27 December 2023 without success.

55. Finally, on 28 December 2023 Ms Claudette Gazi of Eden King Lawyers emailed the ATO and K & L Gates, informing them she had instructions to seek a departure authorisation certificate for Mr Gazal. Ms Llorca's evidence for the Commissioner confirms that Mr Gazal has followed through that indication and requested a departure authorisation certificate to be issued to him to enable him to travel to Switzerland and Slovenia by 2 January 2024. Due to the closure of the ATO Offices, the application for the departure authorisation certificate has not yet been considered.

56. On 29 December 2023 Mr Gazal was granted leave by Walton J to file the Summons in these proceedings, which was made returnable before the vacation duty judge on 2 January 2024. Mr Gazal appeared by a tutor.

57. The Court sought to clarify with the parties what material was before the decision-maker, or available to the decision-maker. A substantial affidavit sworn by Mr Chambers, a principal at K & L Gates, on 2 January 2024 and another of the same date sworn by Maria Victoria Llorca, an officer employed by the ATO with involvement in the investigation of Mr Gazal's taxation affairs endeavoured to exhibit the material before the decision-maker. This material was supplemented by materials such as the Briefing Note. The speed at which these proceedings came on for hearing precluded a precise audit of that the material before the decision-maker. But the parties adopted a practical approach to this question conducting the case on the basis that that the Court could assume that anything created before 11 December 2023 was either before the decision-maker, or in accordance with Poletti, could be made available to the Court on the hearing of the appeal with all other relevant material to enable the Court to determine whether the Commissioner's belief was held on reasonable grounds.

58. Both parties advanced evidence of material created after 11 December 2023 and sought to rely upon it in submissions. When the Commissioner put in issue the authenticity of documents from Swiss Medica, Mr Gazal adduced affidavit evidence giving more detailed evidence of his past trips to Slovenia for LBD therapy.

59. The Court is mindful of the cautions recorded in Poletti and Pattenden, that such material will generally be of doubtful relevance and that a s14S appeal is not a hearing de novo. But both parties directed the Court's attention towards such material and the Court has had regard to it for the limited purposes discussed in these reasons.

60. Before the hearing of the appeal Mr Gazal did not seek reasons for the Commissioner's decision to issue the DPO, beyond those expressed in the DPO.

The Parties' Contentions and the Court's Consideration

61. The Court here adopts the convenient framework used in Poletti and Pattenden to consider the merits of this appeal and addresses the following three principal questions: (a) whether Mr Gazal is subject to a tax liability; (b) whether the Commissioner held the belief of which s 14S(1)(b) speaks in making the DPO; and (c) whether reasonable grounds existed for the formation by the Commissioner of the requisite belief.

(a) Is there a tax liability?

62. Mr Gazal conceded there is a tax liability. The Settlement Deed binds him and fixes the combined tax liability of all the Gazal Parties, including him at $44,364,926.26.

(b) Did the Commissioner hold the requisite belief?

63. Submissions. Ms Bateman contested the issue whether the Commissioner held the requisite belief. She submitted that the Briefing Note, at paragraphs 36 and 37 (abbreviated hereafter in these reasons to "BN36 and BN37") demonstrated that the true motivation of the decision-maker was to punish Mr Gazal,

ATC 28014

rather than to fulfil the statutory mandate of s14S. Ms Bateman's submission was in substance one that the decision-maker was motivated by improper purposes, or did not form the requisite belief.

64. Treating BN37 as evidencing the formation of the decision-maker's requisite belief, Ms Bateman submitted that the paragraph shows that the decision-maker was motivated by Mr Gazal's history of being engaged in financial crimes to prevent him from engaging further "in serious illegal activities unless actions are taken to prevent this". She submitted the language of BN 37, referring to Mr Gazal attempting "to evade his obligations by any means necessary" and "a pattern of intentionally disregarding the tax law" and there being no indication that "this behavioural change", all indicate the true motivation for the decision being to punish him for this past conduct and to attempt to limit his capacity to engage in such conduct in future.

65. Ms Bateman contrasted this BN37 language with the oft repeated construction of s 14S, commencing in Dalco, and adopted and applied in Edelstein and Skase, and again most recently in Troughton: that the section requires the Commissioner to believe on reasonable grounds that it is desirable to stop a person leaving Australia because that is necessary to collect the tax that is owed and that discharging the tax liability will be affected by the person going overseas. She submitted that this requisite belief is quite different from the purpose that the Commissioner has expressed for preventing Mr Gazal leaving Australia, namely, to prevent him engaging in illegal activity.

66. Drawing upon the statements in Poletti that a departure prohibition order is "a severe intrusion into a person's liberty, privacy and freedom of movement" Ms Bateman submitted that her argument that the Commissioner did not hold the requisite belief was strengthened by the lack of any evidence available to the Commissioner at the time of the decision that there was any connection between preventing Mr Gazal from going overseas and discharging his tax liability. Her argument was that whether Mr Gazal is inside or outside Australia, he has no money to pay that tax liability. As noted earlier in these reasons Mr Gazal has previously sworn to his lack of assets in the tax recovery proceedings. The Briefing Note confirms his apparent lack of assets. The bank accounts of Belfield, NNG, and NG Sydney are now depleted. So, Ms Bateman argues, if he has no funds to meet the tax liability, preventing him from leaving Australia can make no difference to recovering that liability. She asked rhetorically: how could Mr Gazal being offshore make any difference to the Commissioner's prospect of recovery of the tax liability, if he has no money?

67. She submits a better explanation for the decision to issue the DPO is that the Commissioner is "cranky" that the funds in the three bank accounts have been depleted and there is nothing to be recovered from Mr Gazal. She also submits that at best the DPO can be characterised as an attempt to "put pressure on" Mr Gazal to enable the Commissioner to bankrupt him onshore and Skase indicates that such a purpose is impermissible.

68. Ms Bateman's submission acknowledged that BN36(a) records as a consideration the possibility of seeking to recover assets from Mr Gazal's associates. But she submits even if money to meet the tax liability may be recoverable from Mr Gazal's associates, that does not justify the issuing of the DPO, because recovery from third parties can be attempted whether he is in Australia or elsewhere and attempts at recovery are unlikely to be economically viable because he has so few assets.

69. Finally, Ms Bateman relied upon her later submissions that there were no reasonable grounds for the decision as a basis to infer that the Commissioner did not hold the requisite belief.

70. It is not necessary separately to identify the Commissioner's submissions in reply on this issue. They have been adopted in part in the Court's consideration of this question.

71. Consideration. As Poletti explained, when the Commissioner holding the requisite belief is in question, the bona fides of the decision-maker are being put in issue. The Court raised with the parties whether Ms Bateman wished to cross examine the decision-maker. But given the urgency of the proceedings that appear to be impractical. The

ATC 28015

decision-maker could not be made available at short notice at this time of the year. Cross examination was not pressed, and Mr Gazal's case was conducted based on the written materials including the reasons expressed in the DPO, and the contents of the Briefing Note.

72. Ms Bateman's argument is not persuasive, for several reasons. First, the comparison with Skase is inapt. In Skase the DPO was overturned after the Commissioner conceded in argument that the sole purpose of perusing the DPO was to pressure the taxpayer into filing a debtor's petition for bankruptcy. That is not this case. Here the Commissioner relies upon the broader range of reasons in the DPO.

73. Secondly, the Court agrees with the Commissioner's submission that it is necessary for the DPO to be in place to ensure that the $18 million is paid by 19 January 2024. Mr Gazal is more likely to pay the $18 million on 19 January if he is in the country, because if he does not pay the $18 million the Commissioner will have a wider range of remedies available to pursue recovery of the taxation liability than if he is offshore.

74. More effective remedies in the event of non-payment are likely to create greater pressure for payment of the $18 million on 19 January. And the available remedies in the event of non-payment are formidable. The Commissioner could pursue contempt of Court action in the taxation recovery proceedings, which could result in the imprisonment of Mr Gazal, if the contempt were established. BN12 expressly refers to this option. The Commissioner could serve notices under TAA, Schedule 1, Division 353 seeking to examine the taxpayer to ascertain the whereabouts of assets being held on his behalf. Ms Llorca's evidence on behalf of the Commissioner suggests this is already in contemplation. The Commissioner could bankrupt the taxpayer and seek to have his trustee in bankruptcy examine him under the Bankruptcy Act 1966 (Cth) to ascertain the whereabouts of his assets. These remedies are only available in a practical sense if Mr Gazal is in Australia and able to be served with legal process to initiate them.

75. And the evidence available both before and after 11 December 2023 allows the Court to infer that there is reason to believe that such remedies may well be productive. As to the evidence before 11 December 2023, it is set out in BN36 and indicates that the funds taken from the bank accounts may be able to be recovered from identified individuals and that intelligence available to the Commissioner indicates that Mr Gazal does have undisclosed assets. And that evidence includes the obvious fact that Mr Gazal is likely to have played a part in diverting $6.2 million from the Belfield, NNG and NG Sydney bank accounts to a presently unknown destination.

76. As to the evidence after 11 December 2023, Mr Gazal can presently summon up assets to be expended for his benefit. If one accepts that Mr Gazal has been seeking medical treatment with Swiss Medica, the treatment is costing between $90,000 and $110,000 per overseas visit, plus business class airfares and accommodation. Also, the available evidence about Mr Gazal's part in organising the payment of the $18 million suggests that Mr Gazal can command the deployment of resources by way of bridging finance of $800,000 and can call upon persons to make available assets to facilitate that payment.

77. Thirdly, the wording of s14S(1) does not support the idea that the Commissioner must give up on issuing a departure prohibition order once a taxpayer provides some evidence that the taxpayer has minimal or no assets. Under s14S the Commissioner must have reasonable grounds to believe that it is desirable to ensure the person does not depart Australia "without … making arrangements satisfactory to the Commissioner for the tax liability to be wholly discharged" (emphasis added). Expressed in the passive voice, that neither says nor implies that the discharge of the tax liability must be met from the taxpayer's own resources.

(c) Did reasonable grounds exist for the requisite belief?

78. Ms Bateman's submissions used the reasons set out in the DPO as the structure for her submissions that the Commissioner lacked reasonable grounds for holding the requisite belief. In 2(a) to (c) the DPO identifies three reasons that there is a risk to revenue to justify the Commissioner's belief that it is desirable to prevent Mr Gazal from leaving

ATC 28016

Australia. Ms Bateman's submissions adopted that structure, and it is used here.

79. 2(a) Transferring Funds Overseas. The DPO identifies as a risk to revenue that Mr Gazal has "previously transferred funds overseas and to other entities and individuals". Ms Bateman submitted that there was little evidence that funds had been transferred offshore and that the best the Commissioner could advance to justify this ground was written submissions at the time that the freezing orders were obtained in December 2020 to the effect that about $88,000 had been transferred overseas. Ms Bateman criticised this as being a very small percentage of Mr Gazal's total tax liability and hardly a basis to justify issuing the DPO.

80. This argument is not persuasive. BN32 and BN36(d) indicated to the Commissioner that there is objective evidence based on AUSTRAC materials that Mr Gazal had been transferring "significant funds" to his sister in Lebanon. Ms Bateman cavilled at the use of the word "significant funds", but this is nevertheless sufficient material to ground the Commissioner's reasons in the DPO, 2(a). It is reasonable to infer that the identification of even limited amounts of funds transferred to associates may be evidence of a pattern of conduct in which far larger sums have been placed with third parties.

81. 2(b) Frequent Travel Overseas. The DPO identifies as a risk to revenue that Mr Gazal has "travelled multiple times overseas for no apparent reason". Ms Bateman submitted that it was unreasonable for the decision-maker to act upon the factual basis that there was "no apparent reason" for the travel. She submitted that all this statement signifies is that the Commissioner did not properly investigate the travel recorded in Mr Gazal's name and that had he done so he would have discovered that Mr Gazal had travelled overseas for stem cell treatment. She points out that Mr Gazal has travelled from Australia and returned to Australia 5 times, since the freezing order was made in late 2020 for that treatment and that the trip in immediate prospect is for the same purpose. She submits that looking at the full picture reaffirms his decades of strong connections with this country and indicates that he is not a flight risk.

82. She also submits that it was unreasonable for the decision-maker to focus on recent overseas trips which could hardly be described as "frequent" when he has lived in Australia for decades. He migrated to Australia from Lebanon in 1990 and is now age 59. He has established family connections in this country including his ex-wife, his two adult children, brother, and wider family, which he does not have in Lebanon.

83. As Poletti explains, the Court can have regard to material such as this which was not before the decision-maker, and which was only in the possession of the taxpayer at the time a departure prohibition order was made.

84. Ms Bateman's argument is not persuasive. The argument suggests that it was unreasonable of the Commissioner to draw any inference that if the DPO was not issued Mr Gazal was unlikely to return to Australia. But such an inference was readily available to the Commissioner from material available before 11 December 2023. That inference has only been strengthened by events occurring since 11 December 2023 for the following reasons.

85. First, on the materials available the Commissioner prior to 11 December he was well justified in forming the opinion expressed in the DPO that Mr Gazal's journeys overseas were "for no apparent reason". Nothing before the Commissioner suggested that the five recent trips were for medical treatment.

86. But the material gathered after 11 December (and placed before the Court on the second day of the hearing after the Commissioner had challenged the authenticity of earlier evidence of the stem cell treatment) does not displace that conclusion. This post 11 December material is variously, of dubious provenance, contradicts objective facts, and often looks improbable. It is sufficient to give just a few examples of the difficulties with this material, much of which was photocopied material affidavits in the nature of medical reports, Swiss Medica invoices and travel documents, said to evidence Mr Gazal's earlier journeys to Switzerland and Slovenia for stem cell treatment and his present condition. Because of the type of problems

ATC 28017

identified below, and even allowing for the compressed timeframe in which the evidence has been gathered, the Court does not place any reliance upon this material and is not prepared to draw the inference that Mr Gazal has in the past or is presently genuinely intending to seek stem cell medical treatment overseas with Swiss Medica in January 2024.

87. There are many other examples. The questionable nature of this material is consistent with the summary offered to the Commissioner in the briefing paper at BN38 that Mr Gazal has in the past "openly and deceitfully claimed illnesses while concocting another more sophisticated [redacted] scheme".

88. Secondly, even if Mr Gazal is travelling to undergo stem cell treatment, the travel being contemplated in January 2024 is unusual in two ways: it is the first time that he has travelled overseas (a) since the Commissioner became aware that money has been taken from the Belfield, NNG and NG Sydney bank accounts and he now knows that the Commissioner knows the money from those accounts is gone and would be keen to recover it, and (b) since he has agreed to satisfy his taxation liabilities to the Commissioner in the sum of $18 million due on 19 January. By s14S(1) the idea that the Commissioner can prevent Mr Gazal departing from Australia without "making arrangements satisfactory to the Commissioner": in this case those "arrangements" include ensuring that the agreed payment of $18 million to the Commissioner takes place on 19 January.

89. Thirdly, the inference that Mr Gazal is unlikely to return to Australia but for the DPO is much strengthened by the chronology of events occurring from September 2023 up until the present time. This chronology is an example of evidence after 11 December 2023 strengthening the inference from the materials that were available before that date.

90. The chronology starts with Mr Gazal not telling the Commissioner before 11 December that he was going overseas and why he was going. Once he receives the DPO on 11 December Mr Gazal negotiated to extend the time for payment from 23 December 2023 to 19 January 2024 and to extend the Commissioner's forbearance against taking any recovery action including for contempt until then. Mr Gazal first raised on 22 December his need to travel for medical reasons and did so not by contacting K&L Gates but the ATO officers directly and without success before commencing these proceedings.

91. If Mr Gazal had a genuine need to get to Slovenia by 4 January for life preserving medical treatment, he knew all he needed to

ATC 28018

know on 12 December to raise the issue with K&L Gates but inexplicably he did nothing for 10 days. The evidence in support of this application does not contain an affidavit from Mr Gazal's general practitioner or treating specialist deposing to Mr Gazal's urgent need for treatment. But the evidence suggests that the solicitors for the plaintiff have been aware of the identity of those doctors since the last week of November 2023.

92. 2(c) Disobeying Supreme Court Freezing Orders. The DPO identifies as a risk to revenue that Mr Gazal has "disobeyed the Supreme Court of NSW's freezing orders" by disposing of the bank balances held in the name of Belfield, NNG and NG Sydney. Ms Bateman submits that such a statement should always have been qualified by the fact that not only were those bank balances gone but Mr Gazal had no other assets and there was no point therefore in issuing the DPO because it would not assist in recovering the tax liability. Ms Bateman's contentions on this ground then largely reproduce her submissions in relation to the challenge to the bona fides of the decision-maker's belief.

93. This argument is not persuasive. It is answered by the same arguments that have been analysed above under the heading "Did the Commissioner Hold the Requisite Belief?".

94. For these reasons the challenge to the DPO fails. The Court concludes that the Commissioner had the requisite belief and had reasonable grounds for holding that belief to satisfy s14S.

The Application to Discontinue the Proceedings

95. At the conclusion of the Commissioner's submissions and before commencing reply submissions, Ms Bateman of counsel sought a short adjournment to obtain instructions. Upon resumption Ms Bateman applied under Uniform Civil Procedure Rules 2005 ("UCPR"), r 12.1(1) to discontinue the proceedings by filing a Notice of Discontinuance. UCPR, r 12.1 provides as follows:

"12.1 Discontinuance of proceedings

  • (1) The plaintiff in any proceedings may, by filing a notice of discontinuance, discontinue the proceedings, either as to all claims for relief or as to all claims for relief so far as they concern a particular defendant--
    • (a) with the consent of each other active party in the proceedings, or
    • (b) with the leave of the court.

…"

96. Unless the Court otherwise orders, when proceedings are discontinued by a plaintiff, the result is that the plaintiff shall pay such of the defendant's costs as have been incurred at the date on which the Notice of Discontinuance was filed: UCPR, r 42.19.

97. The only other active party in the proceedings, the Commissioner, did not consent to the discontinuance. Ms Bateman therefore applied for leave from the Court to discontinue the proceedings. The Commissioner opposed the grant of leave.

98. The principles governing the grant of leave to discontinue are well established. The Court will normally allow a plaintiff to discontinue proceedings provided no injustice will be caused to the defendant, as it is not desirable that a plaintiff should be compelled to litigate against his or her will. The Court considers whether the defendant will be deprived of any forensic advantage already gained in the litigation in considering whether to grant leave and may impose terms to protect a forensic advantage that has already been gained by the defendants:
Covell Mathews v French Walls Limited (1977) 1 WLR 876 at 879 and
Visy Board Pty Ltd v Attorney General (Cth) (1984) 2 FCR 113, per Sweeney J at 142-143, per Lockhart J at 161 and per Shephard J at 185.

99. The rules preserve the Court's discretion as to the appropriate costs outcome. This residual discretion means that the rules do not give rise to a formal presumption that the mere fact of discontinuance itself justify a costs order against the discontinuing party:
Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274. The effect of discontinuance of proceedings does not, subject to the terms of any discontinuance, prevent the plaintiff from claiming the same relief in fresh proceedings: UCPR, r 12.3 which provides as follows:

ATC 28019

"12.3 Effect of discontinuance
  • (1) A discontinuance of proceedings with respect to a plaintiff's claim for relief does not prevent the plaintiff from claiming the same relief in fresh proceedings.
  • (2) Subrule (1) is subject to the terms of any consent to the discontinuance or of any leave to discontinue."

100. If a plaintiff is not permitted to discontinue and the proceedings conclude after a determination on the merits, the plaintiff is not entitled to claim relief in respect of the same cause of action in subsequent proceedings: Civil Procedure Act ("CPA") 2005, s 91 and see
Newmont Pty Ltd v Lavington Nickel NL (No.2) (1981) 1 NSWLR 221.

101. Ms Bateman's application for leave was not supported by any fresh evidence. But Ms Bateman submitted that Mr Gazal's medical situation may have permitted greater flexibility than had at first appeared and the application may be able to be brought later, as circumstances developed. Her argument was not elaborated much except to submit discontinuance would free up the Court's limited resources in the vacation duty period to deal with other matters and there was little additional benefit in the Court making a decision on the merits rather than allowing a discontinuance partly because re-agitation of the proceedings is unlikely.

102. The Court is not persuaded it should give Mr Gazal leave to discontinue. The Court indicated that view to Ms Bateman after the application was made and requested that she put her submissions in reply, which she did. The Court indicated it would include in its final reasons its reasons for declining to grant leave to discontinue. This section of these reasons deals with that issue.

103. It is not necessary for the Court to set out the Commissioner's arguments against granting leave to discontinue. Some of those submissions have been adopted as part of the Court's reasons for declining leave. The reasons for so declining are the following.

104. First, this application comes very late in the proceedings. The case commenced with the reading of evidence and preliminary argument on the afternoon of 2 January. As the Court was sitting in both Equity and Common Law to administer the vacation list, these proceedings were interrupted on a number of occasions. They resumed on 3 January 2024, but did not commence in an uninterrupted fashion until shortly before lunchtime that day. By the time the application to discontinue was made it was a little after 4pm. The only procedural act then remaining to be performed was for Ms Bateman to reply to Ms Scott's submissions and for the Court to reserve judgment. When the Court declined leave Ms Bateman's submissions in reply took less than 5 minutes and the Court reserved judgment. There is no cost saving or financial efficiency or advantage that would be served by discontinuance at such a late stage. There would be virtually no difference between a costs order following a discontinuance against Mr Gazal and any costs order that would flow from him failing in the proceedings. Costs efficiencies therefore do not favour a grant of leave.

105. Secondly, the late application also means that the usual consideration that a plaintiff should not be forced to litigate against his will, does not favour a grant of leave. Mr Gazal has already litigated to the practical end of the hearing. The only steps that he would be required to take against his will at this point would be to put submissions in reply, which imposed no further practical burden upon him.

106. Thirdly, the forensic landscape of the proceedings has now been established. The available evidence has been led and submissions put on both sides. As these reasons show Mr Gazal brought these proceedings urgently gathering such evidence as he could. Some of this evidence is adequate but some of it is of doubtful integrity. The strength or weakness of his case depends in part upon the quality of the evidence that has been available. The Commissioner perceives, correctly, as it turns out, this has resulted in the gaining through the course of argument of various forensic advantages that the Commissioner does not wish to abandon by reason of a discontinuance and a potential re-litigation of the proceedings.

107. Fourthly, if the Court gives a determination rather than disposing of the

ATC 28020

proceedings by allowing a discontinuance, the Court will be eliminating the opportunity to re-litigate issues about the DPO on a future occasion. That too is consistent with the objectives of CPA, Part 6. Ms Bateman submits re-agitation is unlikely. But it is possible and cannot be ruled out in a case with the zig-zag course of this one.

108. Finally, there is a public interest in the taxation laws of the Commonwealth being administered with efficiency and certainty. Mr Gazal has other avenues of challenge to the effect of the DPO, notably through TAA, s 14U, in the Administrative Review Tribunal. He may wish to pursue his existing application for a departure authorisation certificate. Determining the validity of the DPO now will reduce the scope for collateral issues to be argued in future s 14U applications and will create greater certainty for future administrative decision makers who may be required to assume the validity of the DPO.

Conclusion and Orders

109. The parties agreed at the conclusion of oral submissions that the party which was successful would be entitled to an order for costs on the ordinary basis. Neither party indicated that any other costs issues would arise. Therefore, it is not necessary for the Court to allow any further time for submissions in relation to costs. The Commissioner has been successful, and costs should follow the event. The Court will order Mr Gazal to pay the Commissioner's costs of these proceedings.

110. Mr Gazal has few assets in his own name. The Court's jurisdiction under Civil Procedure Act 2005 s98(4)(c) is therefore attracted. The Court can make an order fixing a specified gross sum instead of requiring the Commissioner to expend resources on a full costs assessment, costs which are unlikely to be recovered:
Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21] (per Giles JA). The Commissioner will be given liberty to apply in chambers and should do so after the law term commences on 29 January 2024 but by no later than Friday, 9 February 2024.

111. For these reasons the Court makes the following orders and directions:

 

Disclaimer and notice of copyright applicable to materials provided by CCH Australia Limited

CCH Australia Limited ("CCH") believes that all information which it has provided in this site is accurate and reliable, but gives no warranty of accuracy or reliability of such information to the reader or any third party. The information provided by CCH is not legal or professional advice. To the extent permitted by law, no responsibility for damages or loss arising in any way out of or in connection with or incidental to any errors or omissions in any information provided is accepted by CCH or by persons involved in the preparation and provision of the information, whether arising from negligence or otherwise, from the use of or results obtained from information supplied by CCH.

The information provided by CCH includes history notes and other value-added features which are subject to CCH copyright. No CCH material may be copied, reproduced, republished, uploaded, posted, transmitted, or distributed in any way, except that you may download one copy for your personal use only, provided you keep intact all copyright and other proprietary notices. In particular, the reproduction of any part of the information for sale or incorporation in any product intended for sale is prohibited without CCH's prior consent.