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[2026] NSWSC 712
Supreme Court of NSW
2026-06-22
Rees J
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: ReoSteel Pty Ltd v AonAri PT10 Pty Ltd [2026] NSWSC 712
Hearing dates: 23 March 2026; final submissions 25 March 2026
Date of orders: 22 June 2026
Decision date: 22 June 2026
Jurisdiction: Equity - Commercial List
Original judgment source is linked above.
Before: Rees J
Decision: Dismiss Summons with costs.
Catchwords: COMMERCIAL ARBITRATION — dispute between landlord and tenants about outgoings — initial agreed issues for arbitration include conducting an “audit” — given accounting aspects of agreed issues, barrister arbitrator queries whether the arbitral tribunal should appoint an expert — parties agree to leave it to the arbitrator to appoint an expert “as and when required” — parties then agree on a timetable to put on expert evidence themselves — neither party does so — later statement of agreed issues does not refer to an audit — arbitrator does not do an audit — whether arbitral award should be set aside for failure to accord procedural fairness for not informing the parties that he was not going to do an audit — Court will not protect party from own failures or strategic choices in the conduct of arbitration — application to set aside award dismissed.
Legislation Cited: Commercial Arbitration Act 2010 (NSW), ss 18, 19, 26, 34(2)
UNCITRAL Model Law on International Commercial Arbitration 1985, Art 34
Cases Cited: Colin Joss & Co Pty Ltd v Cube Furniture Pty Ltd [2015] NSWSC 735
Lieschke v Lieschke [2023] NSWCA 241
Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2018] QCA 39
TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361; [2014] FCAFC 83
Category: Principal judgment
Parties: ReoSteel Pty Ltd (First Plaintiff)
ReoSteel Holdings Pty Ltd (Second Plaintiff)
AonAri PT10 Pty Ltd (Defendant)
Representation: Counsel:
A Harding SC / FG Di Lizia (Plaintiffs)
SA Wells / H Watson (Defendant)
Solicitors:
Maddison Marcus Law Firm (Plaintiffs)
Lazarus Legal Group (Defendant)
File Number(s): 2025/390719
HER HONOUR: This is an application to set aside an arbitral award under the Commercial Arbitration Act 2010 (NSW) (the Act), for failure to accord procedural fairness.
The plaintiffs, ReoSteel Pty Ltd and ReoSteel Holdings Pty Ltd, are in the business of manufacturing and supplying various types of steel to the building and construction industry, including steel mesh. The companies are owned by Romany Ibrahim.
The defendant, AonAri PT10 Pty Ltd, is the landlord of an industrial complex in Penrith. John Joannou is the director of the company.
ReoSteel entered into three leases with the landlord for Units 22, 33 and 37 of the industrial complex. ReoSteel Holdings entered into two leases with the landlord for Units 7-10 and Unit 32 respectively. The leases were in relevantly the same terms. The leases provided that the landlord would supply an estimate of outgoings for the upcoming year. Each tenant would pay a specified proportion of those outgoings in monthly instalments. At the end of the year, the landlord would give the tenant details of the outgoings incurred, and any adjustment between the outgoings paid and incurred.
The parties fell into dispute about outgoings. In particular, the tenants complained that the landlord had failed to provide invoices and remittances to support the outgoings. They agreed to refer their dispute to arbitration. Anthony Lo Surdo SC was engaged. In May 2024, the parties provided the arbitrator “with an agreed list of issues which the parties seek determination of.” The agreed list of issues for arbitration included:
“1. Conduct an audit of the outgoings that have been charged under each lease to date to determine whether outgoings have been charged in accordance with each respective lease.
- Determine the sum of outgoings the ReoSteel Parties have been liable to pay to AonAri for the duration of the leases for units 7-10, 22, 32, 33, and 37 to date, including by determining the following issues:
(a) the operation of clause 2.10 of each of the leases;
(b) the scope of AonAri’s outgoings (including which underlying invoices fall within the scope and which underlying invoices do not). …”
“… having regard to the accounting aspects of some of the issues, should the arbitral tribunal appoint an appropriate expert to report on specific issues (see s 26 of the Act) or do the parties propose to adduce expert evidence?”
“The parties are content for the arbitrator to appoint appropriate experts as and when required.” (Emphasis added.)
In July 2024, the arbitrator made Procedural Order 1, noting the agreement of the parties to dispense with pleadings, objections to evidence and an oral hearing as they considered that the complexity of the issues did not justify the costs associated with these steps. Further:
the tenants were to serve evidence (including expert evidence) and submissions by 28 August 2024;
the landlord was to serve evidence (including expert evidence) and submissions by 9 October 2024; and
the tenants were to serve evidence and submissions in reply by 30 October 2024.
The fact that the parties now proposed to serve expert evidence suggested that they each intended to support their various positions in respect of the issues for determination by experts retained by each party. The prospect that the arbitrator would be “required” to appoint an expert diminished accordingly.
In August 2024, in accordance with Procedural Order 1, the parties provided the arbitrator with a “Statement of agreed facts and issues”, including:
“Agreed issues
- The parties’ agreed list of issues is set out below:
a. The composition and quantum of outgoings that have been charged under each of the Lease[s] to date.
b. Whether outgoings have been charged in accordance with each of the Leases.
c. The sum of outgoings the ReoSteel Parties have been liable to pay to AonAri for the duration of the leases for units 7-10, 22, 32, 33, and 37 to date, having regard to the following issues:
i. the operation of clause 2.10 of each of the Leases;
ii. the scope of AonAri’s outgoings (including which underlying invoices fall within the scope and which underlying invoices do not).”
This document made no reference to an audit. It would appear that the task assigned to the arbitrator had evolved.
The timeframes in Procedural Order 1 were extended thrice. In September 2024, the tenants served their evidence. Mr Ibrahim made a statement saying that the tenants had not been provided with information requested about outgoings and had been unable to verify the charges. A bundle of material accompanied his statement (some 460 pages). The tenants provided written submissions. The tenants did not serve any expert evidence.
In October 2024, the landlord served its evidence, being a statement by Mr Joannou and an accompanying bundle of material (some 1,365 pages), together with written submissions. The bundle included the invoices supporting the outgoings, which the tenants had apparently been requesting for some time. In addition, Mr Joannou provided a reconciliation of outgoings paid by the tenants and what the landlord contended remained owing. The landlord did not serve any expert evidence either, which is probably unsurprising as there was no expert evidence to respond to.
In his statement, Mr Joannou said that, at the end of each accounting period, the landlord commissioned an external audit of outgoings. The auditor reviewed the invoices charged to the landlord and provided a global figure for all outgoings incurred. Two audit reports were attached by way of example. It is sufficient to set out the audit report for the 2023 financial year, which was prepared by Jayant Gulwadi “FCPA; CA; Registered company auditor” of JAG Business Advisory. According to the five-page report, the auditor had audited a Statement of Outgoings for the industrial complex, as prepared by the managing agent, and confirmed:
“… In our opinion:
i. The attached Statement … present fairly the total amount of actual recoverable outgoings from the lessees … for the year ended 30 June 2023.
ii. The total amount of actual recoverable outgoings as recorded on the Statement were properly payable by the lessees …”
The auditor set out how the audit had been conducted, including by reference to the requirements of relevant Australian Auditing Standards. The auditor noted that this included “examination, on a test basis, of evidence supporting the amounts disclosed” in the Statement of Outgoings for the industrial complex, as prepared by the managing agent.
In December 2024, the tenants served their evidence and submissions in reply, being a statement by Mr Ibrahim and written submissions.
In March 2025, the tenants sought leave to adduce additional evidence in reply. The landlord was amenable to this if it was able to respond to the material. The arbitrator made orders accordingly.
Mr Ibrahim provided a further statement. He expressed concerns about the invoices provided by the landlord, including that some of the invoices were not addressed to the landlord. Where it was said that the landlord had no obligation to pay such invoices, it was said that the tenants had no obligation either. Mr Ibrahim said that a number of invoices appeared to relate to capital improvements of other tenancies or the creation of other tenancies within the complex. A detailed table was provided of some 200 contentious invoices.
In April 2025, the landlord put on a statement and submissions in reply, including responding to the table of contentious invoices.
On 28 May 2025, the arbitrator provided the parties with a partial award. Mr Lo Surdo SC set out the details of the five leases, the issues for determination and the parties’ evidence and submissions. He construed the relevant provisions of the lease. The arbitrator did not himself undertake an audit. Presumably, this was because the task assigned to him had evolved, as earlier described.
Turning to the invoices, the arbitrator set out Mr Ibrahim’s evidence, noting that his evidence was “in the nature of an assertion, submission or unqualified opinion”, to which the arbitrator attached little or no weight. Mr Joannou’s evidence fell into the same category. But Mr Joannou had also adduced documentary evidence, being invoices, spreadsheets and audit reports, which prima facie established the outgoings levied: partial award at par 164. The arbitrator considered that, where the tenants bore the onus of establishing the facts for which they contended, in particular, that the outgoings were other than as invoiced, then the arbitrator was not so satisfied. Nor did the invoices appear to support the tenants’ contentions. The invoices appeared on their face to relate to outgoings for which the tenants were obliged to contribute. Three examples were given.
The arbitrator found the outgoings were as invoiced. The arbitrator directed the parties to agree on a form of orders to give effect to his reasons. If no agreement was reached, then the parties were to provide submissions in support of the orders for which they contended.
The landlord’s solicitor circulated proposed orders, being that the tenants pay $793,011.90 to the landlord. The tenants’ solicitor disagreed, as the arbitrator was said to have failed to undertake a key task, being to conduct an audit of the outgoings. The landlord’s solicitor disagreed and suggested that the parties provide submissions to the arbitrator on the orders each sought. The landlord proceeded to do so, including proposing that the tenants be “jointly and severally liable” for the outgoings.
For their part, the tenants submitted that the arbitrator should provide an additional award in respect of Issue 1, which was said to have been omitted from the Partial Award. The tenants submitted that the arbitrator’s failure to determine this issue caused substantial prejudice to the tenants. Further:
“(a) An audit of the outgoings was the fundamental reason for the matter to be referred to arbitration. This was the joint purpose of the Arbitration as agreed between the parties.
(b) The dispute in respect of outgoings arose, inter alia, because the ReoSteel Group disputed the outgoings that AonAri purported to charge as outgoings. This dispute required resolution by an auditor (or appropriate expert) reviewing the outgoings that were charged (including a review of all underlying invoices) along with the leases to determine that each outgoing was properly charged in accordance with the Leases. The ReoSteel Group understood the Arbitrator’s instructions (by Issue 1) were to review, or instruct an expert to review, each invoice (in a similar manner to Mr Ibrahim’s review for some of the invoices) to confirm whether each invoice was properly charged to the ReoSteel Group.
(c) The ReoSteel Group’s understanding of this was confirmed by reason of the Arbitrator seeking the parties’ consent to appoint an appropriate expert as and when required.
(d) The ReoSteel Group would have conducted its case differently had it known that Issue 1 would not be determined. For example, it would have instructed its own forensic accountant or auditor to undertake a review and audit the outgoings. In this respect, by the statement of Romany Ibrahim dated 31 March 2025, Mr Ibrahim identified several general and specific concerns with the outgoings charged by AonAri to give some examples of where the issues arose. However, in anticipation of an audit being conducted, Mr Ibrahim did not conduct a full review of the invoices nor did he instruct an expert to do so.”
A statement by the tenants’ solicitors was provided in support of that submission. The tenants’ solicitors said that, had the tenants known that an audit would not be conducted as part of the arbitration process, then they would have instructed a forensic accountant to undertake an audit of the outgoings and addressed the landlord’s audit reports in more detail.
On 16 July 2025, the arbitrator issued a final award, focussing precisely on the task which had been given to him by the parties, both initially and as that task had evolved. In respect of the argument raised by the tenants as to whether he had conducted an “audit”, the arbitrator noted:
“216. Relevantly, the first issue in the [Statement of Agreed Facts and Issues], approximating Issue 1 of the “Agreed list of Issues for Arbitration”, is described in the following terms, “[t]he composition and quantum of outgoings that have been charged under each of the Lease (sic) to date.” It makes no reference to the manner in which that issue was to [be] determined including as to the undertaking of an “audit.”
…
- Neither party addressed me in their submissions as to the nature and scope of any audit that I may be required to undertake to determine the “composition and quantum of outgoings that have been charged under each of the Lease (sic) to date.” The evidence and submissions in respect of Issue 1 were limited, in effect, to matters impacting the composition and quantum of outgoings including the proper construction of each of the Leases. That was the issue that I was required to determine in the usual adversarial manner, that is, upon a consideration and assessment of the facts, the applicable law and competing submissions.
- An audit may, at a high level of generality, be considered to entail a systematic and independent examination of an entity's records, accounts, processes, or operations. The primary purpose of an audit is to evaluate and verify whether the information presented or the activities conducted comply with established criteria, standards, regulations, or policies. The process undertaken by me involved an assessment of the composition and quantum of outgoings by reference to the evidence, the competing submissions and the applicable law to determine whether amounts charged to ReoSteel by AonAri as disclosed in its invoices were justified.
…
- [Procedural Order 1] also made provision for each of the parties to adduce evidence, including any expert evidence, upon which each proposed to rely including by way of reply. ReoSteel had ample opportunity to adduce evidence including expert evidence in support of Issue 1 and, in particular, in relation to any “audit”. It did not do so.
- Further, ReoSteel does not articulate how it contends the quantum of outgoings would have been any different had an “audit” been conducted especially having regard to the fact that such audit would have been undertaken by reference to the evidence adduced by the parties in the arbitration.
- I have accordingly not inadvertently or otherwise failed to address any claim so as to enliven the operation of s 33(5) of the [Commercial Arbitration Act]. ReoSteel’s request pursuant to s 33(5) of the [Commercial Arbitration Act] to make an additional award is therefore not justified and it is rejected.”
“1. ReoSteel Pty Ltd and ReoSteel Holdings Pty Limited pay AonAri PT10 Pty Ltd the amount of $659,172.25.
- ReoSteel Pty Ltd and ReoSteel Holdings Pty Limited pay AonAri PT10 Pty Ltd costs of the award in the amount $54,549.
- ReoSteel Pty Ltd and ReoSteel Holdings Pty Limited pay AonAri PT10 Pty Ltd costs of the reference in the amount of $20,000.”
As to the remaining challenge to the arbitral award, the tenants submitted that, by Issue 1 of the agreed list of issues for arbitration, the arbitrator was engaged to “conduct an audit of the outgoings that have been charged under each lease”. It was not possible to complete the task in Item 2(b) without examining each invoice and determining whether it fell within the scope of each lease. Instead, the arbitrator accepted, in a wholesale way, that invoices issued by the landlord were valid and in accordance with the leases: at [158]. The arbitrator did not undertake the exercise of reviewing each invoice individually to determine whether each was valid and in accordance with the leases, nor evaluate whether any of the criticisms Mr Ibrahim made were made out, nor engage an independent expert to assist with these tasks nor raise the issue with the parties and seek that the matter be otherwise addressed, including by the parties themselves adducing expert evidence. In the circumstances, the arbitrator could not resolve the controversy between the parties on the basis that the onus lay on the tenants and have not been discharged. The parties delegated to the arbitrator “the task of going through them all line by line”.
The tenants submitted that the landlord only supplied the invoices in support of the outgoings shortly before the tenants filed evidence in reply. Mr Ibrahim did his best to critique the extensive invoices in the time available. (The tenants accepted that they did not raise with the arbitrator at the time that they wished to put on expert evidence but did not have time to do so, nor sought an alteration in the timetable to enable them to put on expert evidence in reply.) Nor, once the issue had been raised with the arbitrator after he delivered a partial award on 28 May 2025, did the arbitrator afford the plaintiffs an opportunity to address the absence of evidence directed to this issue by either allowing the parties to adduce expert evidence on the topic, or the arbitrator himself appointing an expert.
The tenants submitted that the procedure or method which the arbitrator adopted did not comprise an audit of each alleged outgoing, including through engagement of an independent expert. The arbitrator did not disclose the method or procedure or approach to doing an “audit” before issuing his partial award of 28 May 2025. This is the warning to the parties that was lacking. The arbitrator was at cross-purposes with the plaintiffs in the method that was to be adopted in dealing with Issue 1. The arbitrator’s understanding and position, as first exposed in the partial award, was that Issue 1 simply required him to effectively evaluate competing evidence put on by the parties. If the arbitrator was not going to conduct a “systematic and independent examination”, he should have warned the parties so that they had a practical opportunity to deal with how the arbitrator was going to approach the matter. After the arbitrator was notified that the tenants had not apprehended that he would approach his task in the way he did, he should have allowed the tenants an opportunity to address that approach, especially after the tenants made clear that the partial award was the first time that they apprehended the arbitrator was going to interpret his task of conducting an “audit” the way he did. This could have been done in various ways; the arbitrator had the ability to appoint an independent expert himself, but the tenants’ solicitor stated that the tenants would have appointed a forensic accountant themselves. This statement by the tenants came before the arbitral award and could have been acceded to but was not.
The landlord submitted that it was clear from the witness statements and submissions made by the tenants that they were given a reasonable opportunity of presenting their case within the meaning of s18 of the Act. Nor had the tenants demonstrated real unfairness or real practical injustice. The Court should not find that the award was contrary to public policy. The scope of the arbitration was to determine the quantum of the invoices and the amount owed; that was a matter within scope. Conducting an audit in the usual sense would usually require inspection of a sample of invoices, not each and every invoice. Reference to “audit” was not included in the statement of agreed facts and issues but in the preceding agreed list of issues. It was clear from the arbitral award that the arbitrator undertook the required task in respect of the invoices. Looking at the invoices in the way that the arbitrator did was clearly within the scope of the arbitration. While the arbitrator was required to engage an expert if required, it was obvious that he determined that it was not required.
The landlord submitted that the arbitrator’s ‘audit of outgoings’ was based on a finding that the tenants had the evidential onus of proving the outgoings were otherwise than as invoiced by the landlord, and that they had not met that hurdle. He thus found that the composition and quantum of outgoings was as evidenced by the invoices issued by the landlord. The arbitrator was not required to conduct an audit of “each alleged outgoing”. The arbitrator was entitled to engage appropriate experts “as and when required”. The parties were on notice of the fact that no independent expert had been engaged, by virtue of the fact that they had not approved the engagement of one. The parties were not prevented from providing an expert report. The tenants were provided with the relevant invoices on 30 October 2024, and elected to respond only with the lay statements of Mr Ibrahim on 6 December 2024 and 31 March 2025. The tenants were afforded the opportunity to engage an expert, and yet they did not engage an expert, nor have they demonstrated that they were not given an opportunity of presenting their case.
An arbitral award may be set aside by the Court only if:
(a) the party making the application furnishes proof that:
…
(ii) the party making the application … was … unable to present the party's case, or
…
(b) the Court finds that:
…
(ii) the award is in conflict with the public policy of this State.
…
(Emphasis added.)
There was no dispute as to the legal principles. The test for s 34(2)(a)(ii) is to demonstrate “real unfairness or real practical injustice”: TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361; [2014] FCAFC 83 at [55] (Allsop CJ, Middleton and Foster JJ); Colin Joss & Co Pty Ltd v Cube Furniture Pty Ltd [2015] NSWSC 735 at [45] (Hammerschlag J, as his Honour then was). This injustice is “to be expressed, and demonstrated, with tolerable clarity and expedition”: TCL at [55].
Section 34(2)(a)(ii) is not to be used as a basis to undertake a merits review of the arbitral tribunal’s substantive decision: Lieschke v Lieschke [2023] NSWCA 241 at [25] (Beech-Jones JA, Leeming and Payne JJA agreeing). Nor is it intended “to protect a party from its own failures or strategic choices”: Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2018] QCA 39 at [83] (Morrison JA, Fraser and McMurdo JJA agreeing), referenced with approval in Lieschke v Leischke at [25].
The public policy exception in s 34(2)(b)(ii) is narrow. A party seeking to invoke it bears the heavy burden of demonstrating real unfairness or real practical injustice: Colin Joss & Co v Cube Furniture at [45] (Hammerschlag J). In most, if not all, cases, a party should be able to demonstrate that it has suffered such unfairness or injustice without a detailed re-examination of the facts, “Unfairness or practical injustice in the conduct of international commercial arbitration should, if it exists, be able to be expressed shortly and, likewise, demonstrated tolerably shortly”: TCL at [113].
The tenants accepted that their application largely turned on the scope of the arbitrator’s task, and whether he completed that task. The tenants’ evidence on this application, as to what they apprehended the arbitrator would do and what they would have done differently if the arbitrator had told them that he was going to proceed otherwise, does not accord with how the parties actually tasked the arbitrator, how that task was refined, and how the parties agreed to put forward their respective cases to the arbitrator for his consideration.
When choosing their arbitrator, the parties selected a barrister, not an accountant or auditor. This might have been thought slightly odd, where the “agreed list of issues” initially provided to Mr Lo Surdo SC asked the arbitrator to conduct an “audit”. The arbitrator obviously thought so too, checking with the parties as to how they wished him to proceed in respect of the accounting aspects of the issues, including whether the arbitral tribunal should appoint an expert under s 26 of the Act. The parties agreed that the arbitrator could appoint an expert “as and when required”.
The arbitrator obviously formed the view that it was not necessary to appoint an expert to assist him. The parties had agreed to leave this decision to the arbitrator. As the landlord submitted, it must have been obvious to the tenants that the arbitrator was not going to appoint an expert, as the parties were not consulted in respect of the retainer of such an expert and the payment of that expert’s fees.
As the arbitration continued, the arbitrator made procedural orders which envisaged that the parties would serve expert evidence, but they did not. The requirement for the arbitrator to conduct an audit disappeared from the “Statement of Agreed Facts and Issues”. Unsurprisingly, the arbitrator did not do an audit but proceeded to determine the issues on the basis of the material submitted by the parties. All of this might be thought unremarkable, where s 19(1) of the Act provides that “the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.” Here, the parties had agreed to provide evidence (including expert evidence) to the arbitrator and for him to decide the matter ‘on the papers’.
As s 19(3) of the Act also provides, “The power conferred on the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.” It is apparent from the award that the arbitrator reviewed the business records for himself, including the annual audit report prepared by JAG Business Advisory and what the invoices said on their face. Where that material appeared satisfactory to the arbitrator, and there was no reliable evidence adduced by the tenants to the contrary, he accepted that the outgoings levied were correct.
Nor do I accept that the task as originally framed required the arbitrator to go through all invoices “line by line”: see [5]. The task in Item 1 – to “audit” outgoings that had been charged – suggested checking sufficient of the charges to be satisfied that the process being adopted by the landlord in respect of outgoings was sound, rather than individually checking each and every outgoing. The task in Issue 2 involved an interpretative task, construing the relevant provisions of the lease and, apparently, which categories of outgoings fell within the arbitrator’s construction of the clause. The tenants accepted that the arbitrator may well be able to undertake that task by categories of invoices. That is, this task did not necessarily involve examining each and every “underlying invoice” either.
The factual premise of the challenge to the arbitral award does not bear close scrutiny. The tenants had ample opportunity to put forward expert evidence, if they wished, to support their case that the outgoings were not properly charged in accordance with the terms of the lease. The tenants did not avail themselves of that opportunity. While the Court may set aside an arbitral award under the Act if a party is unable to present their case, the Court will not protect a party from its own failures or strategic choices in the conduct of the arbitration. There was no failure to accord procedural fairness.
For these reasons I make the following orders:
NOTE the parties’ agreement that Order 1 made by the arbitrator on 16 July 2025 is to be corrected as follows:
Reosteel Pty Ltd pay AonAri PT10 Pty Ltd the amount of $217,439.99 and Reosteel Holdings Pty Ltd pay AonAri PT10 Pty Ltd the amount of $441,732.25.
**********
ReoSteel Pty Ltd
AonAri PT10 Pty Ltd