A Sydney businessman has lost a legal bid to recover an $8 million investment that went to the family of disgraced former Labor minister Eddie Obeid.

Property developer Denis O'Neil sued mining mogul Travers Duncan, a founding investor and former director of mining company Cascade Coal, claiming he was misled about how his November 2010 investment in the company would be spent.

In an action filed in the name of his company, Addenbrooke, Mr O'Neil claimed he was not told his $8 million would be used as part of a $30 million payment to the Obeid family to buy out their interest in a mining joint venture with Cascade.

Details of the Obeids' deal were exposed by the Independent Commission Against Corruption in its high-profile investigation into a coal tenement created on top of the family's farm at Mount Penny in the Bylong Valley.

The corruption watchdog found in 2013 that Mr Duncan and others acted corruptly by concealing the involvement of the Obeids in the coal tenement from public officials. He is seeking to have that finding overturned in court.

On Wednesday, Federal Court justice Lindsay Foster comprehensively dismissed Mr O'Neil's case and ordered his company to pay Mr Duncan's costs.

"I had the distinct impression that [Mr O'Neil] was either feigning or exaggerating his lack of recollection of the events surrounding Addenbrooke's investment in Cascade Coal," Justice Foster said.

He said the businessman was "enthusiastic" about investing in a "hot coal deal" and it would not have made any difference if he had been told about the involvement of the Obeids.

"To my mind, he would have gone ahead any way," Justice Foster said. "The rewards were great and the risks relatively contained."

Prominent stockbroker Peter Gray and his former employer, Southern Cross Equities, who assisted in the share purchase, also successfully defended Mr O'Neil's claims against them. Mr Gray said in a statement that the litigation was "misguided and very costly".

ICAC found Mr Obeid, his middle son Moses, and former Labor mining minister Ian Macdonald entered into a corrupt agreement to create a mining tenement over the Obeids' rural property. Cascade Coal won the exploration licence over the property.

Justice Foster noted Mr Duncan and others had argued Addenbrooke's case was "heavily influenced by hindsight". They argued "the court should be wary of allowing its judgment to be influenced by matters which have, since 2010, become matters of considerable notoriety in the public domain in respect of Eddie Obeid and his family".

"These cautionary remarks are well made," he said.