Culve Engineering Pty Ltd v Apollo General Engineering (Aust) Pty Ltd (in liq) [2017] VSCA 182 (7 July 2017): power to make a substitution order, exercise of discretion, Rule 9.09 of the Civil Procedure Rules

July 23, 2017 |

The Victorian Court of Appeal in Culve Engineering Pty Ltd v Apollo General Engineering (Aust) Pty Ltd (in liq) [2017] VSCA 182 considered the scope and operation of Rules to permit a substitution order being made.


The third applicant, Sandra Cerrato, was the executrix of the deceased estate of her father, Rocco Cerrato who . Mr Cerrato died on 14 August 2014 [1]. Prior to and in  2010 Mr Cerrato was a director of the first applicant, Culve Engineering Pty Ltd (‘Culve Engineering’), the second applicant, Tena Denham Nominees Pty Ltd (‘Tena Denham’), and the first respondent, Apollo General Engineering (Aust) Pty Ltd (in liquidation) (‘Apollo’) [2]. Ms Cerrato was joined as a defendant to this proceeding in her capacity as executrix in substitution for her father by an order made by an associate judge on 18 September 2015. She and the other applicants unsuccessfully appealed that decision to a judge in the Trial Division [3].

Prior to 21 April 2010 Apollo carried on a heavy engineering business as trustee of a trust, the sole beneficiary of which was Tena Denham. Tena Denham was trustee of another trust of which Culve Engineering was a beneficiary. On 21 April 2010 Mr Cerrato, the sole director of Apollo, appointed the second respondent, Matthew Jess, and the third respondent, Paul Burness, as administrators of Apollo. On 17 June 2010 the creditors of Apollo resolved to wind the company up and Mr Jess and Mr Burness (‘the liquidators’) were appointed liquidators [4].

Apollo and the liquidators issued this proceeding on 28 March 2013 alleging:

  • that Culve Engineering and Tena Denham received unfair preferences and were the beneficiaries of uncommercial transactions;
  • that Mr Cerrato, as a director of Apollo  contravened s 588G of the Corporations Act 2001 (Cth) by allowing Apollo to trade while insolvent and is is liable to the liquidators pursuant to s 588M(2);
  • that Mr Cerrato breached his statutory duties in causing, permitting, or failing to prevent the payments which are the subject of the claims against Culve Engineering and Tena Denham; and
  • that Mr Cerrato is liable to Apollo as a co-guarantor of a Tena Denham debt and based on subrogation [5].


In May 2011 the liquidators sent letters of demand to Mr Cerrato alleging insolvent trading [9].  On 10 In June 2011 the liquidators commenced two proceedings in the County Court; against Culve Engineering for the recovery of advances and against Apollo’s former bookkeeper, Daniella La Rosa, who is also a daughter of Mr Cerrato [10].   In January 2013 the liquidators published the  insolvency report and in February sought to amend the statement of claim against Culve Engineering and  join Tena Denham and Mr Cerrato as defendants [11].  Because of the unsatisfactory way in which the matter  proceeded, in February 2013 a County Court judge refused Apollo’s application to amend and join additional parties and dismissed the proceeding against Culve Engineering with an order that Apollo pay Culve Engineering’s costs on an indemnity basis [12].  That month Apollo and the liquidators settled the County Court proceeding against Ms La Rosa and Mr Guccione. The settlement included the release of Mr Guccione which, it is alleged had the effect of releasing Mr Cerrato [12].

In March 2013 the liquidators conducted a public examination of Mr Cerrato and this proceeding was issued [13]. Mr Cerrato died in August 2014. Apollo and the liquidators applied under r 9.09 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘the Rules’) for an order substituting Ms Cerrato, as executrix of Mr Cerrato’s estate, for Mr Cerrato. The application relied upon the provisions of both r 9.09 and upon s 29 of the Administration and Probate Act 1958. Ms Cerrato, and Culve Engineering and Tena Denham, resisted the application relying, amongst other things, on provisions of the Civil Procedure Act 2010 [16].


The Court identified the relevant statutory provisions as being:

‘on the death of any person, all causes of action subsisting against or vested in him shall survive against or (as the case may be) for the benefit of his estate’. [17]

  •  Rule 9.09 of the Rules relevantly providing:

(1)Where a party to a proceeding dies, but the cause of action survives, or where a party becomes bankrupt, the proceeding shall not abate by reason of the death or bankruptcy, but may be carried on in accordance with paragraph (2).

(2) Where at any stage of a proceeding the interest or liability of any party is assigned or transmitted to or devolves upon some other person, the Court may order –

a. that the other person be added as a party to the proceeding or made a party in substitution for the original party; and

b. that the proceeding be carried on as so constituted.

(5) Where an order is made without notice to a person on whom the order is served, an application by that person to set aside or vary the order shall be made within 10 days after service. [18]

  • Rule 9.10 provides that where no order is made under r 9.09(2) the Court may, on application, order that unless an order for substitution is made within a specified time the proceeding be dismissed [19].
  •  Section 1 of the Civil Procedure Act sets out the main purposes of the Act,  Section 7 provides that the overarching purpose of the Act and of the Rules is ‘to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute’,  Section 8 requires the Court to give effect to the overarching purpose in the exercise of its powers and in the interpretation of those powers and  Section 9 empowers the Court to further the overarching purpose with regard to a series of specified objects, which include the efficient conduct of the business of the Court and the minimisation of delay, and provides that the Court may have regard to a list of specified matters which include (in summary) the manner in which the parties have conducted the litigation [20].

The Court of Appeal reviewed the authorities noting:

  • the use of facultative language, such as the word ‘may’, can, depending upon the proper construction of the relevant provisions, operate operate so as to provide for a discretion which is fettered only by the requirement that it must be exercised properly for the purpose for which it is bestowed taking into account only matters properly relevant for that purpose [39] or to impose a duty to exercise the relevant power when prescribed preconditions are met [40];
  • where there is something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the conditions under which it is to be done, something in the title of the person or persons for whose benefit the power is to be exercised which may couple the power with a duty, and make it the duty of the person in whom the power is reposed, to exercise that power when called upon to do so [41];
  • where, notwithstanding the use of the facultative word ‘may’, on a proper construction of the statute, there was a duty to exercise the power once a prescribed precondition was met  [43];
  • there is a third alternative. Notwithstanding the use of facultative language, a legislative provision properly construed may provide for a power which is to be exercised in a manner consistent with, or so as to give effect to, a person’s entitlement. The existence of that entitlement means that the discretion conferred is not merely confined by the requirement to act bona fide and for a proper purpose, but should be exercised so as to give effect to the entitlement unless ‘disentitling’ circumstances exist [47].


The applicants submitted that:

  • the trial judge in finding that the exercise of the power under r 9.09 was mandatory and that the Civil Procedure Act did not apply was in error. It was submitted that the power is discretionary and that the Civil Procedure Act always applies to any exercise of the Court’s powers, as the provisions of that Act itself make clear. The difficulties presented by the inability to call Mr Cerrato to give evidence, combined with delay in instituting and prosecuting the relevant proceedings, were grounds for exercising the discretion to refuse an order for substitution. These were ‘disentitling circumstances’ even if the discretion provided for in r 9.09 was a narrow one [50].
  •  the High Court in CSR v ACN, and in particular the judgment of Bell and Gordon JJ, did not support a conclusion that the relevant power in r 9.09 was mandatory. In analysing the legislative context here regard must be had to the Civil Procedure Act as well as to s 29 of the Administration and Probate Act & that to the extent that there is tension between the two, s 8(2) of the Civil Procedure Act requires that furtherance of the overarching purpose provided for in the Civil Procedure Act must prevail [54].

The respondents submitted that:

  • the rule was ‘procedural’ which was made clear by r 9.10, and by r 9.09(5) which envisaged a substitution order being made ex parte.
  • there was an ‘entitlement’ to continue the action provided for by s 29 of the Administration and Probate Act,that entitlement must, absent relevant disentitling circumstances, be given effect to when an application is made under r 9.09.
  • a circumstance where an order might not be made could be where there had been inordinate delay in making the application.
  • the power to order substitution was mandatory in the sense that there was no discretion the exercise of which would undermine the entitlement provided for by s 29 of the Administration and Probate Act. It was submitted that, in substance, the trial judge had adopted this approach [51].
  • they could still have issued a fresh proceeding without risk of being met by a limitation defence [52].
  • in the circumstances of the application here, such discretion as existed was required to be exercised by the making of a substitution order. Alternatively, it was submitted that there was an entitlement to a substitution order which could only be displaced by relevant ‘disentitling circumstances’ which did not exist here.

The Court found that:

  • by virtue of the provisions of s 29 of the Administration and Probate Act the respondents were entitled to continue the proceeding they had issued against Mr Cerrato’s estate. This was an entitlement of the kind referred to by Mason CJ in Royal Insurance, adopted by Bell and Gordon JJ in CSR v ACN [57].
  • Rule 9.09 provides for the means whereby that entitlement could be given effect to, and whereby the proceeding could be regularised after Mr Cerrato’s death [58].
  • the power in r 9.09 to make a substitution order is a power which has to be exercised consistently with the entitlement provided for by s 29 of the Administration and Probate Act. Absent ‘disentitling circumstances’, a substitution order should be made [59]
  • disentitling circumstances cannot be constituted by matters which are a consequence of the death, such as the inability to call evidence from the deceased. This is because s 29 of the Administration and Probate Act has already addressed that issue and has provided that the action survives [60].
  • disentitling circumstances might be constituted by matters arising under the Civil Procedure Act, such as if  there were some inexcusable delay causing prejudice in the making of the application itself,  where a continuation of the proceeding would contravene or be inconsistent with the Civil Procedure Act, or would be an abuse of process, for reasons unrelated to the consequences of the death [61].

The Court found there were no disentitling circumstances. There has been no delay in making the application. Such delays as there have been in the proceeding to date do not warrant what would amount to summary dismissal of the claim [62]


The appeal  was comprehensively dismissed as the court had regard to the operation of the Administration of Probate Act which entitled a substitution to take place and Rule 9.09 which provided the means to effect such a substitution.  The Court was not impressed by the Appellants reliance on the Civil Procedure Act and the admittedly lamentable procedural history in this matter.  The Civil Procedure Act is a key piece of legislation which forms an intrinsic part of the managing civil procedure in Victoria.  But it is not a magic bullet and Courts are wary of it being relied upon to displace the operation of other legislation designed to deal with specific situations, such as the substitution of one party for another upon the death of a party to an action.  While there has been delay and interlocutory applications the court will not regard those matters giving rise to a disentitling circumstance.  The nature of the delay must give rise to some form of prejudice or an abuse of process.  The facts here fell far short of that.







One Response to “Culve Engineering Pty Ltd v Apollo General Engineering (Aust) Pty Ltd (in liq) [2017] VSCA 182 (7 July 2017): power to make a substitution order, exercise of discretion, Rule 9.09 of the Civil Procedure Rules”

  1. Culve Engineering Pty Ltd v Apollo General Engineering (Aust) Pty Ltd (in liq) [2017] VSCA 182 (7 July 2017): power to make a substitution order, exercise of discretion, Rule 9.09 of the Civil Procedure Rules | Australian Law Blogs

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