Background
The Federal Court proceedings, commenced in 2014, challenged tax assessments issued to members of the Obeid family and related entities concerning the tax treatment of trust distributions. They were stayed in 2017 pending criminal proceedings against Edward and Moses Obeid, then resumed in late 2024.
Justice Kennett managed the Court matters together with 26 related Administrative Review Tribunal review proceedings. A 10-day hearing was set to begin on 31 August 2026. Despite repeated timetabling orders, the applicants did not file written submissions, evidence-related notices, or material identifying affidavits and witnesses for cross-examination. They sought an adjournment only shortly before the hearing, while the Commissioner sought dismissal.
The Court’s Holding
Justice Kennett dismissed the Federal Court proceedings and ordered the applicants to pay the Commissioner’s costs. The Court had power to dismiss for non-compliance under r 5.23(1)(b) of the Federal Court Rules 2011 (Cth) and s 37P(5) of the Federal Court of Australia Act 1976 (Cth). Corresponding dismissal orders were also to be made in the related Tribunal proceedings.
The applicants’ asserted lack of funds to retain tax counsel was unsupported by particulars or objective evidence. Although restraining orders in separate New South Wales proceedings may have adversely affected some applicants’ finances, the evidence did not connect those orders to an inability to comply with the Court’s timetable, and the issue had not been raised promptly.
The Court found the applicants’ non-compliance calculated and recalcitrant. Starting the complex tax trial without opening submissions, evidence objections, or advance identification of the evidence and witnesses to be used would not accord with the overarching purpose of civil practice and procedure and would breach the parties’ obligation to facilitate that purpose.
Key Takeaways
- Repeated failure to comply with trial-preparation orders can justify dismissal, even though dismissal is a draconian remedy.
- A late assertion that a party cannot afford counsel requires supporting detail and objective evidence.
- Complex litigation should not be forced to trial without the ordered submissions and evidence-management steps.
Why It Matters
The decision underscores that litigants must promptly disclose genuine obstacles to complying with court orders and seek timely relief. A party cannot simply cease trial preparation, ignore directions, and rely on a last-minute adjournment request.
It also illustrates the Federal Court’s willingness to enforce the statutory overarching purpose in complex taxation litigation, including by dismissing proceedings where non-compliance makes an efficient and fair hearing impracticable.