Judge takes ‘draconian step’ of quashing Obeid farm tax appeal

The dismissal concludes a case that began over a decade ago and is linked to the broader controversy involving Eddie Obeid and his relatives, land known as Cherrydale Park, and the Mount Penny coal exploration area in the Bylong Valley near Mudgee. 

In related criminal proceedings, it was alleged that Eddie Obeid, Moses Obeid, and former NSW minister for mineral resources, Ian Macdonald, misused his public office to grant a coal exploration licence at Mount Penny in a way that would favour the Obeids’ financial interests. 

In 2013, the Independent Commission Against Corruption found that they and other associates engaged in corrupt conduct.

This latest related tax dispute involves the sale of Cherrydale Park to the coal company, where the 11 relatives of Eddie Obeid – including his wife Judith and his son Edward Jr – were appealing a Tax Office decision that said they owed tax on the $30 million sale of the park. 

The tax commissioner treated distributions or benefits received through the Obeid family’s trust structures as taxable and imposed tax penalties. However, the 11 relatives disputed this treatment in their appeal, including whether relevant profits qualified as ordinary income.

In 2017, the court proceedings were stayed because of pending criminal proceedings against Edward and Moses Obeid, before resuming in late 2024.

The latest court order did not make a finding on the tax treatment of the sale of the property or whether profits from the sale constituted ordinary income. 

Instead, the judge was concerned about the applicants' conduct during the appeals process, including their repeated failure to abide by court orders.

What the judge found

In his judgment in the case of Obeid v Commissioner of Taxation (No 2), Justice Geoffrey Kennett said that based on the evidence before him, the applicants “have been calculated and recalcitrant” in their non-compliance with the court orders.

For several reasons laid out in the judgment, Justice Kennett said he came to the view that the “draconian step of dismissing the proceedings is warranted”.

Firstly, on 11 July 2025, Justice Kennett listed the appeal proceedings for hearing on 31 August, with an estimated timeline of around 10 days. He also made timetabling orders for filing an electronic court book, written submissions, a list of objections to evidence, and a hearing timetable. 

In addition, he said he made orders requiring the parties to notify each other of any witnesses required for cross-examination. The applicants were to file their submissions by 22 June 2026 and the respondent by 20 July 2026.

In July this year, the applicants’ solicitor notified the court that he would no longer act in the proceedings, and he was replaced by Michael Bowe. Bowe had acted in criminal proceedings for some of the applicants but informed the court that he had no experience in tax law or familiarity with the proceedings.

“At the case management hearing on 4 August 2026, Bowe foreshadowed an application to vacate the trial dates,” Justice Kennett wrote in his judgment.

“In addition to varying the timetabling orders as outlined earlier (so that submissions and other material could be filed in time for the hearing date to be maintained), I made orders for any adjournment application and evidence in support to be filed by 4 pm on 6 August 2026 and for any such application to be heard on 13 August 2026. No interlocutory application was filed.”

In August, his chambers received a request from the Tax Commissioner’s solicitors to list the proceedings urgently so that an application could be made to dismiss them based on the applicants’ default.

The applicants then filed an interlocutory application asking for the hearing dates to be vacated, together with a supporting affidavit sworn by Bowe. 

The respondent’s solicitors then filed an interlocutory application to dismiss the proceedings, along with a supporting affidavit by their solicitor, Jeremy Geale.

“Logically, the first issue that I should deal with is whether the proceedings should be dismissed as proposed by the [the Commissioner of Taxation],” Justice Kennett wrote.

“The question whether the trial should be adjourned only arises if I am not persuaded that the time has already come when the proceedings should be dismissed.”

In his affidavit filed in support of the applicants’ adjournment application, Bowe said he believed that the applicants did not have sufficient resources to retain counsel for the trial of the proceedings without providing any details or objective evidence of this stance or whether any effort had been made to engage counsel on “a speculative basis”.

The judge’s associates emailed three times in June and July asking for an update on the applicants’ progress on the submissions, but the only response they received was from the former solicitor stating that he would no longer be acting for them.

Senior counsel, who appeared pro bono for the applicants, suggested that the trial could begin on 31 August 2026 without written opening submissions, notice of objections to evidence, or prior notice of which affidavits were relied upon or which witnesses were required for cross-examination.

While acknowledging this to be true, Justice Kennett wrote that this approach is inappropriate for complex litigation, and for anyone to put the court in a position where it has to act in a way that would be a breach of the party’s obligation.

Furthermore, the judge wrote that before making any application to adjourn the trial, they informed the respondent through their solicitor that they would not be filing submissions and were not preparing for the hearing.

For these reasons, Justice Kennett said it was appropriate for him to take the “draconian step” of dismissing the proceedings.