In the matter of Davina Constructions Pty Ltd

[2025] NSWSC 928

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Davina Constructions Pty Ltd [2025] NSWSC 928

Hearing dates:

7 August 2025

Date of orders:

15 August 2025

Decision date:

15 August 2025

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Dismiss application for substitution in winding up proceedings – any further substituting creditor to be heard as to any further application for substitution

Catchwords:

CORPORATIONS — winding up — application by creditor for substitution as applicant in winding up proceedings against the defendant company — where creditor that was previously substituted in winding up application against company has not proceeded with its winding up application — whether there is a genuine dispute as to the debt claimed by the creditor who now seeks to be substituted — whether substitution order should be made under s 465B of the Corporations Act 2001 (Cth)

Legislation Cited:

- Building and Construction Security of Payment Act 1999 (NSW), s 13(5)

- Corporations Act 2001 (Cth), ss 459P, 465B

- Evidence Act 1995 (NSW), s 136

Cases Cited:

- Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212; [2017] NSWCA 300

- Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; (2019) 136 ACSR 563; [2019] NSWCA 60

- NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842

- Re Advanced Controls Pty Ltd [2018] VSC 639

- Re C2C Investments Pty Ltd [2012] NSWSC 1443

- Re Denham Constructions Pty Ltd [2016] NSWSC 948

- Re Kong and Kong Property Investment Pty Ltd (Supreme Court (NSW), Black J, 23 June 2025, unrep)

- Tokich Holdings v Sheraton Construction (2004) 185 FLR 130; [2004] NSWSC 527

Category:

Procedural rulings

Parties:

City Tiling Co Pty Ltd (Plaintiff)
Davina Constructions Pty Ltd (Defendant)
Carmela Milozzi (Applicant)
Alessandro Milozzi (Applicant)

Representation:

Counsel:
S Scott (Applicants)
ML Rose (Defendant)

Solicitors:
Kardos Scanlan (Applicants)
Bridges Lawyers (Defendant)

File Number(s):

2024/307266

JUDGMENT

Nature of the application and background

1. By Originating Process filed on 20 August 2024, the then Plaintiff, Concrite Pty Ltd, applied for an order winding up Davina Constructions Pty Ltd (“Davina”), in reliance on an unsatisfied creditor’s statutory demand. Concrite did not proceed with that application and four other entities then foreshadowed applications to be substituted as plaintiffs in the proceedings, namely The Workers Compensation Nominal Insurer, City Tiling Co Pty Ltd (“City Tiling”), Metro Finance Pty Ltd and Render Care Pty Ltd. Although City Tiling was then substituted in the winding up application, it also did not proceed with that application. By Interlocutory Process filed on 20 June 2025, Mrs Milozzi and Mr Milozzi now apply to be substituted for City Tiling in the winding up application and press the application that Davina be wound up in insolvency.

Affidavit evidence

2. By her affidavit dated 19 June 2025, Mrs Milozzi refers to the history of the application. She also outlines her and her husband’s entry into a Residential Building Contract (“Contract”) with Davina in respect of a property situated at Hunters Hill and refers to the terms of the Contract and to a claim for liquidated damages under that Contract, which she quantifies as $60,000. Mrs Milozzi also refers to other claims for unliquidated damages against Davina for losses alleged to have been suffered as a result of delays in completion of the project and/or defective works. Ms Scott, who appears for Mrs Milozzi and Mr Milozzi in the application, rightly indicates that those claims are not relied on to found the substitution application and it is not apparent that they could properly have been the subject of a creditor’s statutory demand issued by Mrs Milozzi and Mr Milozzi to Davina. Mrs Milozzi also refers to a notice of termination issued by Mr and Mrs Milozzi to Davina on 20 December 2024 which relied, inter alia, on Davina’s failure to complete the project in time or to pay delay costs to the owner and exhibits other documents which appear to refer to the costs of remedial work on the property.

3. Davina reads two affidavits of its sole director, Mr Buono, dated 5 July 2025 and 4 August 2025. By his affidavit dated 5 July 2025, Mr Buono refers to the Contract with Mr and Mrs Milozzi and the history of payments of progress claims and asserts that the amount of $15,682 remains owing by Mr and Mrs Milozzi to Davina in respect of progress claim 3; and gives evidence that, on or about 13 September 2024, Davina issued an invoice to Mr and Mrs Milozzi in the amount of $858,811. His evidence is that no payment schedule was then served by Mr and Mrs Milozzi in accordance with the Building and Construction Security of Payment Act 1999 (NSW) (“SOPA”) and that amount remains due and payable to Davina. Mr Buono also refers to the issue by Davina of additional invoices on or about 16 September 2024 in respect of claimed variations totalling in excess of $56,000 and contends that no payment schedule was served by Mr and Mrs Milozzi in respect of those variations. He also addresses correspondence between the solicitors for the parties, which establishes that there was a dispute between the parties as to the payment claims, although it does not establish that that dispute was a genuine dispute in the relevant sense. He also refers, in evidence largely admitted with a limiting order under s 136 of the Evidence Act 1995 (NSW) as submission, to Mr and Mrs Milozzi’s termination (or purported termination) of the Contract and to the dispute as to whether general damages are recoverable by them, which it is not necessary to determine in respect of this application.

4. By a second affidavit dated 25 July 2025 in reply, Mrs Milozzi responds to Mr Buono’s affidavit dated 5 July 2025, on which Davina relies in opposition to the substitution application. She there responds to Davina’s contention that an amount of $15,682 is owing by Mr and Mrs Milozzi to Davina in respect of progress claim 3 issued by Davina and also refers to correspondence relating to that progress claim. She also addresses a claim as to incomplete work in respect of the project, on which Mr and Mrs Milozzi have now engaged another builder to complete the work and again refers to termination of the Contract in respect of the property in December 2024.

5. By his second affidavit dated 4 August 2025, Mr Buono responded to Mrs Milozzi’s affidavit in reply and led evidence that substitute invoices had been issued in September 2024, splitting the payments due by Mr and Mrs Milozzi into two amounts, because of their difficulties in paying the larger amount due, and addressed further disputes in respect of the termination of the contract. No objection was taken to that affidavit being read, although it was not properly evidence in reply, and was not served a reasonable time before the hearing or in accordance with the Court’s directions, possibly because Mr and Mrs Milozzi had also not complied with the Court’s directions in respect of the service of evidence or submissions.

6. Davina also tendered a Statement of Claim in proceedings which it had filed in the District Court of New South Wales on 4 August 2025 (Ex D1), long after Mr and Mrs Milozzi sought to be substituted in these proceedings and only shortly before this hearing, in which Davina claimed judgment in respect of payment claims under SOPA. I give little weight to that document, where it is plain enough that it was filed at the last moment, presumably to seek to support a contention that the claims made in it had a genuine character. Those claims were no more and no less genuine, by reason that Davina brought proceedings asserting them immediately before the commencement of this hearing.

Applicable principles

7. Section 465B of the Corporations Act 2001 (Cth) (“Act”) provides that the Court may, by order, substitute, as applicant, in an application under, relevantly, s 459P of the Act for a company to be wound up, a person or persons who might otherwise have applied for the company to be wound up. The Court may only make such an order if it thinks it appropriate to do so because the application is not being proceeded with diligently enough or for some other reason. That latter requirement would plainly be satisfied here, so far as the application is now not being proceeded with by City Tiling.

8. I have previously set out the applicable principles in a substitution application in my judgment in Re C2C Investments Pty Ltd [2012] NSWSC 1443 at [22]ff (“C2C”) and again in Re Denham Constructions Pty Ltd [2016] NSWSC 948. In Re Kong and Kong Property Investment Pty Ltd (Supreme Court (NSW), Black J, 23 June 2025, unrep), I again summarised those principles as follows:

“[Counsel] draws attention to my judgment in Re C2C Investments Pty Ltd [2012] NSWSC 1443 at [22]ff, which has subsequently been adopted in other cases, including Re DCA Capital Pty Ltd [2024] NSWSC 427. I there noted that it was well established that the Court should decline substitution if it finds that the applicant's debt was the subject of a bona fide dispute upon substantial grounds, and referred to the case law which established that proposition. I also there referred to the case law concerning the concept of "genuine dispute" used in s 459H of the Act, which turned upon whether a dispute exists in good faith and whether that dispute exists upon grounds that have some substance, in that it is not "plainly vexatious or frivolous", or involves "a plausible contention requiring investigation". That test has, of course, been applied many times in subsequent years, and I have recently reviewed, and adopt without repeating, its content in Re Charter Law Legal Pty Ltd [2025] NSWSC 297 at [14] ff. Importantly, a determination whether a genuine dispute exists does not involve the Court in determining the merits of that dispute; once the Court can see that a dispute exists, which truly exists in fact and is not spurious, hypothetical, illusory or misconceived, then the Court will set aside a creditor's statutory demand. That is relevant here because, if a creditor's statutory demand issued by [the applicant for substitution] would have been set aside, then [that applicant] would also not be permitted to substitute in a winding up, so as to proceed with a winding up when he would not have been so permitted to proceed based on his own application to wind up the [c]ompany.

I also bear in mind the important observation of White J in Tokich Holdings v Sheraton Construction (2004) 185 FLR 130; [2004] NSWSC 527 [“Tokich”] that, notwithstanding that the Court may consider it desirable to wind up a company which is insolvent, if its continuing trading may adversely affect the public, it has no power to do so if the applicant has no standing in the application, and, by extension, the applicant has no such standing if its debt is genuinely disputed.”

9. I also recognise the well-established principle that the Court will not generally decide contested issues of fact or complex issues of law in order to decide whether a genuine dispute exists and will exercise restraint where a question of construction has any element of rational controversy to it: Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212; [2017] NSWCA 300 at [20]–[29]; Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; (2019) 136 ACSR 563; [2019] NSWCA 60 at [90]. Ms Scott in turn draws attention to Re Advanced Controls Pty Ltd [2018] VSC 639, where Matthews JR held that a genuine dispute can arise where there is a genuine dispute on substantial grounds as to whether the SOPA applies in the first place, which could not be resolved in a summary procedure. That decision does not provide any basis for the Court here to determine questions of the proper operation of the SOPA and associated factual disputes between the parties in order to find there was no genuine dispute and order Mr and Mrs Milozzi’s substitution in the winding up application.

The parties’ submissions, determination and orders

10. I must therefore determine whether the debt asserted by Mr and Mrs Milozzi of $60,000 referrable to a liquidated claim for delay, on which they rely for their application for substitution, is bona fide disputed on grounds that have some substance, drawing on the concept of “genuine dispute” under s 459H of the Act. It is common ground between the parties that Davina could only establish a genuine dispute as to that debt if it has a genuinely arguable claim for a greater amount, by reason of its payment claims against Mr and Mrs Milozzi under the SOPA.

11. In submissions in chief, Ms Scott acknowledges, with reference to Tokich, that a party which seeks to be substituted as a plaintiff in a winding up application must be a creditor of the debtor company at the time the application was filed and also refers to my summary of the applicable principles in C2C. She submits that Mr and Mrs Milozzi have standing to seek to be substituted as plaintiffs in the winding up, where they claim liquidated damages for delay, unless Davina can establish a seriously arguable case in respect of its claims against Mr and Mrs Milozzi. Ms Scott refers to cl 7 of the Contract which specifies the contract period, cl 12 which deals with progress payments and cl 13 which deals with variations; Ms Scott also points to the matters which support Mr and Mrs Milozzi’s claim for liquidated damages. I did not understand the basis of that claim to be disputed, where Davina instead relies on its claims against Mr and Mrs Milozzi to establish a genuine dispute as to the amount claimed against it as liquidated damages.

12. Ms Scott contends that the amount claimed by Mr and Mrs Milozzi is not genuinely disputed, because Davina’s claim by reference to partial payment of payment claim 3 is not a genuine dispute. Ms Scott there points to a suggested reversal of position by Davina in respect of the alleged underpayment of $15,682 in respect of progress payment 3; however, there is a factual dispute as to that matter, where Davina’s position is not obviously implausible, and that is sufficient to establish a genuine dispute as to that amount.

13. Ms Scott also contends that Davina’s claim for the non-payment by Mr and Mrs Milozzi of payment claim 6 is not a genuine dispute, because Davina withdrew that claim with the consent of Mr and Mrs Milozzi and cannot now rely on that claim 6 to support the relevant claim under SOPA. She here refers to the issue of the lesser invoice in the amount of $458,000 which, on Davina’s case, is one of two invoices that were issued totalling the same amount as the first and larger claim, so as to accommodate Mr and Mrs Milozzi’s difficulty in paying the larger claim. Ms Scott then relies on s 13(5) of SOPA to contend that Davina can only issue one payment claim in any given month and submits that service of a payment claim that complies with s 13 of SOPA is an essential requirement for a valid adjudication determination.

14. Mr Rose, who appears for Davina, initially sought to establish that Mr and Mrs Milozzi’s position as to s 13(5) of SOPA was incorrect and that s 13(5) of SOPA did not prevent Davina issuing a substituted claim with the same reference date, relying on the decision of Hammerschlag J (as the Chief Judge in Equity then was) in NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842. As Mr Rose acknowledged in oral submissions, it is not necessary for Davina to establish that matter, nor should the Court determine that matter, where all that is necessary for Davina to resist the application for substitution is that there is a genuine dispute as to the application of s 13(5) of SOPA in that respect.

15. I do not accept Ms Scott’s submission that Davina does not have a genuinely arguable claim under SOPA to amounts exceeding the liquidated damages claimed by Mr and Mrs Milozzi, so as to establish a genuine dispute as to that claim and prevent an order for substitution. First, it seems to me that there is a genuine dispute as to whether the factual premise of Mr and Mrs Milozzi’s submission is correct, and Davina can properly be said to have withdrawn its first payment claim where, on Mr Buono’s evidence of the relevant facts, that payment claim was split into two payment claims of the same total amount with the same reference date, to accommodate Mr and Mrs Milozzi’s difficulties with paying the total amount. I reach no factual finding as to whether that evidence is correct or incorrect, where the question in an application of this kind is not its substantive correctness, but whether that proposition is genuinely arguable, and it seems to me to be plainly genuinely arguable on the evidence as it now stands. Second, there seems to me to be a genuine dispute as to whether s 13(5) of SOPA has the effect asserted by Ms Scott, where the contention put by Mr Rose, which I have noted above, is a plausible one which should be determined on its merits in substantive proceedings. I put aside the further possibility that it is not necessary for Davina to establish that it could have obtained a valid adjudication determination in order to establish a genuine dispute, where there are more fundamental difficulties with Mr and Mrs Milozzi’s position.

16. Although this is not necessary to dismissal of the substitution application, I also accept that it is genuinely arguable that s 13(5) of SOPA does not prevent the issue of the September variation claims, at least on the basis that that subsection preserves the ability to serve additional payment claims as provided by the Contract, and cl 12(b) of the Contract allows the issue of weekly claims for variation, which may or may not be limited to work performed in that week by way of variation.

17. Fo these reasons, I am satisfied that there is a genuine dispute as to the amount claimed by Mr and Mrs Milozzi against Davina, at least on the basis that Davina has genuinely arguable claims that exceed that amount, and that is a sufficient basis to dismiss the application for substitution having regard to the case law to which I referred above. I should add that Mr and Mrs Milozzi may well ultimately establish, including in the District Court proceedings commenced by Davina, that they in fact have claims against Davina, both by way of liquidated damages for delay and unliquidated damages for defects, which substantially exceed any entitlement by Davina to payment of additional amounts under the Contract. However, that does not assist Mr and Mrs Milozzi in this application, where the Court can only make an order for substitution in respect of a debt that is not genuinely disputed, and the claims to which I have referred are properly determined in substantive proceedings rather than in a summary application for substation in a winding up. I therefore order that the Interlocutory Process filed on 20 June 2025 by Mr and Mrs Milozzi be dismissed with costs.

18. On 13 August 2025, after the hearing of Mr and Mrs Milozzi’s application for substitution and prior to the delivery of this judgment, a further supporting creditor, DBS Scaffolding Pty Ltd, filed a notice of appearance in the winding up proceedings, and it will now be necessary to make directions in any application for substitution that it may make.

**********

Decision last updated: 18 August 2025