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[2009] VSC 668
procedural. The plaintiff was ordered to pay Mr Brumley's expenses fixed at $4,132.91. The itemised allowances shown in paragraph 20 appear not to reconcile arithmetically with that stated total.
The liquidator required Donald Brumley to attend an examination about a company in liquidation and produce documents. Brumley later asked the Court to cover the expense of complying. The Court applied earlier decisions that distinguish, for expense purposes, between people involved in a company's management and other examinees. It did not decide whether Brumley was a shadow director, but treated him as prima facie an outsider for this application. It allowed some document work, copying and attendance costs, but not preparation time or counsel's fee. The Court ordered payment of $4,132.91. There is an apparent mismatch between that total and the itemised allowances printed in the judgment.
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2,106 words · generated 29/09/2026
Medici Institute Pty Ltd was in liquidation. Its liquidator, Dean Royston McVeigh, obtained a summons under s 596B of the Corporations Act 2001 (Cth), requiring Donald Brumley to attend for examination about the company’s examinable affairs and to produce documents in eight categories [1]. The summons was issued on 20 March 2009.
1 cited instrument linked from this judgment.
The summons was initially listed for 3 April 2009 for document production. No documents were produced on that date, and the matter was adjourned to 15 April. Brumley did not attend on 15 April but was represented by counsel. Some documents were produced, and the examination was adjourned to 9 June. It proceeded that day but did not finish until a further sitting on 9 July [2].
At the conclusion of the examination, Brumley sought payment of expenses associated with complying with the summons. The claim covered production and copying of documents, work before the examination, attendance, and other costs [3]. The parties did not agree on the items recoverable. They did agree that the Court should use the professional-witness hourly range in Appendix B to the Supreme Court (General Civil Procedure) Rules 2005. As Brumley was described as a senior partner of Ernst & Young, the Court selected the maximum rate in that range, $313 per hour [4].
The judgment’s central task was not to determine whether Brumley had breached any duty or was a shadow director. It was to decide which expenses, if any, should be paid for his compliance with the examination process. The Court ultimately ordered the liquidator to pay $4,132.91 [21]. There is, however, an apparent arithmetic discrepancy: the individual allowances listed in paragraph 20 do not seem to total the stated amount. That discrepancy is part of the text and should not be silently resolved by assuming an intended figure.
The Court began with authorities dealing with the expenses of people required to attend corporate examinations. In Re Kempal, an examinee who lived in Victoria was required to travel to Sydney. McLelland J considered that it could be unjust or oppressive to require a person who was not an officer of the company to attend without provision for substantial reasonable travel and accommodation expenses [6]. The examinee was awarded those expenses [7]. The Victorian Court treated that decision as relevant to the question of preventing an examination order from operating unjustly.
The judgment then considered the two Brock decisions. In Brock No. 1, Young J had approved the general approach that an examinee not directly involved in company management could recover attendance and document-gathering costs, but not the costs of their own legal representation [11, 16]. The judgment also drew from Brock No. 1 the proposition that an examinee’s charges should not be calculated as though the examinee had undertaken a new commercial retainer, including overhead and profit. Instead, the Court used a witness-allowance scale for Brumley’s time [4, 11, 16].
Brock No. 1 also informed the treatment of document copying. The judgment notes that, generally, it may be preferable for the liquidator to receive the documents and copy them at the liquidator’s expense. But an examinee may need to handle documents to identify and locate responsive material, and reasonable costs associated with that work can be considered [11, 16]. The decision in this case applied that distinction to the items in Brumley’s claim.
Brock No. 2 addressed time spent preparing for an examination. The Court adopted its distinction between searching for documents and preparing to give evidence. Reasonable compensation may be allowed for document searches in an appropriate case, but the authorities were against paying for time spent conferring with staff, associates, solicitors or counsel, or familiarising oneself with documents in preparation for examination [13, 16]. In Brumley’s itemised claim, the Court therefore disallowed claimed time reviewing documents in preparation for the examination and disallowed counsel’s fee [20].
The Court also had to consider whether Brumley should be treated as an insider or outsider. The judgment describes the usual categories as directors, the secretary and employees on the insider side, with other people treated as outsiders, even where they may technically be officers in some contexts [9, 16]. It recognised that the distinction is not a complete test: the information a person is believed to possess may matter more to whether an examination is appropriate, and status is relevant to the balancing of expense and oppression [9].
Here, the liquidator submitted that Brumley should be treated as an insider. One purpose of the examination was to gather material about whether Brumley was a shadow director. Brumley said he had acted as an adviser. The Court declined to determine that question in the expense proceeding, explaining that a decision could embarrass another court required to consider it. It described Brumley as prima facie an outsider for the limited purpose of deciding expenses [17–19]. This was a provisional characterisation, not a finding that he was or was not a shadow director.
The judgment presents its approach as a synthesis of existing authorities, rather than as the creation of a new statutory test. It notes that ss 596A and 596B of the Corporations Act distinguish between certain officers who may be subject to mandatory examination and other people who may be summoned because they may be able to give information about examinable affairs [10]. Brumley’s summons was under s 596B.
The earlier cases discussed in the judgment arose under preceding examination provisions, including s 541 of the Companies (New South Wales) Code and s 597 of the Corporations Law [6, 8, 13]. The Court considered their reasoning relevant despite the later statutory recasting. It also mentioned s 530A, which requires company officers in liquidation to assist and co-operate with the liquidator, as a possible part of the context for the insider/outsider distinction [15].
The judgment’s synthesis appears in paragraph 16. It states that a non-management examinee may recover attendance and document-gathering costs, but not legal representation; that the rate should not include profit; and that document searches may be compensable while preparation and familiarisation time generally are not [16]. The judgment also records the Court’s view that the insider/outsider division had been maintained in the case law, while acknowledging that the rationale for it was not explained [15].
The “after” state that can be established from this judgment is limited. The supplied text records that Re Southland Cole Pty Ltd followed the Brock decisions [14], but that case preceded this 2009 judgment. The judgment extract does not identify later decisions applying or limiting Medici. It therefore supports an account of the authorities the Court relied on, but not a claim about how subsequent courts treated Medici itself.
At paragraph 16, the Court distils the earlier cases into practical categories. In plain English, it treated reasonable document searching and attendance as potentially compensable for an outsider, while excluding legal representation and preparation time. It also said that a claim should reflect the cost of compliance rather than a commercial fee that includes a profit margin [16].
The Court’s treatment of Brumley’s status is particularly important. It said that he “appears to be an outsider” for the expense application, but expressly declined to decide whether he was in fact a shadow director [19]. In plain English, the Court could decide the costs issue without finally resolving a potentially contested question about his role in the company.
The itemised decision illustrates how the principles were applied. The Court allowed some time for locating and identifying documents, reduced certain claimed time, and allowed copying costs. It did not allow time for reviewing documents in preparation for examination, and it disallowed counsel’s fee [20]. It also allowed sums for attendance at the examination [20].
There is a material textual point for anyone relying on the outcome: the allowance recorded for attendance on 9 June is shown as “5 hours at $313.00 = $156.50,” which does not match that multiplication. The 9 July entry is shown as $919 for three hours at $313, which also does not match that multiplication. Further, the visible individual allowances do not appear to add to the final figure of $4,132.91 [20–21]. The judgment nevertheless states the final order as $4,132.91 [21]. The extract provides no correction or explanation.
The reasoning is directed to a person required to participate in a corporate examination and who seeks compensation for expenses caused by compliance. The relevant circumstances include whether the person was directly involved in management, what document work was reasonably required, whether the expense was an out-of-pocket cost or a charge including profit, and whether the claimed time related to compliance or to preparation for giving evidence [11–16].
The distinction between document collection and examination preparation is central. Work identifying, locating and assembling documents responsive to a summons is treated differently from reading documents to become familiar with them for the examination. The judgment recognises that document-handling tasks can involve reasonable costs, while applying the Brock No. 2 approach against compensation for preparation and familiarisation time [13, 16, 20].
The case is also relevant where a person’s status is uncertain. Brumley’s possible role as a shadow director was part of the subject matter of the examination, but the Court did not decide it in the costs application [18–19]. The judgment therefore illustrates a procedural distinction: the court deciding expenses may make a provisional assessment for that purpose without determining the underlying status question.
The reasoning does not establish a universal schedule for every examinee. The Court applied the authorities to the specific items and accepted the parties’ agreement to use the professional-witness range in the Victorian court rules [4, 20]. The result should be understood in that procedural and factual setting.
The supplied judgment does not describe any later treatment of Medici Institute Pty Ltd; McVeigh v Brumley. It would therefore be unsupported to say that later courts have adopted, narrowed, distinguished or rejected its reasoning.
The authorities it itself identifies include Re Southland Cole, which it says followed the Brock decisions [14]. That is not later treatment of Medici, because Southland Cole was decided in 2006 and Medici was decided in 2009. The judgment also follows and applies the earlier reasoning in Re Kempal and the Brock cases [6–16]. These relationships show the lineage of the approach adopted, not what happened to Medici after 2009.
For professional research purposes, the text supports the proposition that Gardiner AsJ treated the earlier expense cases as applicable to examination summonses under the Corporations Act provisions then in issue. It does not provide a subsequent appellate history, later statutory amendments, or later judicial interpretation. Those matters cannot be established from the judgment supplied.
The judgment expressly leaves open whether Brumley was a shadow director or otherwise an insider. It says the Court’s role in the examination was to supervise its conduct and ensure procedural fairness and compliance, not to determine that substantive status issue in the expense application [18–19]. The Court’s description of him as prima facie an outsider is limited to that application.
The judgment also acknowledges that the rationale for the insider/outsider distinction is unexplained. It offers possible explanations, including a concern about company assets being used to meet expenses of insiders who may be culpable, but does not decide that this is the basis of the distinction [15]. It notes the statutory obligation of officers under s 530A, but does not determine how that obligation affects expenses in every case [15].
Another open issue is how the principles apply to the precise boundary between necessary document identification and preparation for examination. The judgment states the broad distinction and applies it to the items before it, but does not supply a comprehensive test for every kind of document review or privilege assessment [16, 20]. It also does not resolve how the general approach should operate where an examinee has substantial travel, accommodation or lost-work expenses, beyond referring to the authorities [6–7, 13].
Finally, the arithmetic in the itemised table is unresolved in the text. The final order is stated as $4,132.91, but the displayed allowances appear inconsistent with that sum and some line calculations do not match their stated hours and rates [20–21]. The judgment does not say whether this is a typographical error, a transcription problem, or an unexplained calculation.
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CORPORATIONS - Winding up - public examination of person in connection with the examinable affairs of company in liquidation - Summons issued pursuant to s 596B of the Corporations Act 2001 (Cth) - Whether expenses connected with attendance at examination are recoverable - Difference between "insiders" and "outsiders" on the issue of recoverability of expenses - Categories of expenses recoverable.
1 Donald Brumley was required to attend before the Court to be examined about the examinable affairs of Medici Institute Pty Ltd pursuant to s 597 of the Corporations Act 2001 (Cth) ("the Act") by a summons issued pursuant to s 596B of the Act on 20 March 2009. The summons also required Mr Brumley to produce eight separate categories of documents which were described in the schedule to the summons.
2 The summons was initially returnable on 3 April 2009, which occasion was scheduled for the production of documents. The documents were not produced on that date, and the summons was adjourned to 15 April 2009. On that occasion, Mr Brumley did not attend Court but was represented by Counsel. Certain documents were produced to the Court and the examination was adjourned to 9 June 2009. The examination proceeded on 9 June 2009 but did not conclude and was adjourned until 9 July 2009.
3 At the conclusion of the examination, counsel for Mr Brumley, Mr Truong, made application for Mr Brumley's costs and expenses in complying with the summons, including the production of documents, preparation before the examination, attendance at the examination as well as other expenses such as copying of documents. Normally, the costs and expenses of an examinee would be the subject of agreement between the legal practitioners appearing on behalf of a liquidator and the examinee but this did not occur in this case.
4 One aspect that Counsel did agree on was that when fixing an hourly rate for Mr Brumley's time, I should have reference to Appendix B to the Supreme Court (General Civil Procedure) Rules 2005.[1] Item 1 of that appendix prescribes an hourly rate for witness attendance of professional persons as being between $157 and $313. Mr Brumley is the senior partner of the firm Ernest & Young and I agree with Mr Truong's submission that when applying that scale, I should fix Mr Brumley's hourly rate at the maximum rate prescribed.
5 The parties disagree on what items Mr Brumley is entitled to recover on an application of the relevant case law. I shall review that case law before turning to each item claimed.
6 In Re Kempal Pty. Ltd. (receiver and manager appointed, in liq.) (1989) 7 ACLC 1,180 McLelland J considered the case of an examinee who was a Victorian resident and who had sought to be excused from attending an examination in New South Wales unless a sum sufficient to meet his reasonable expenses for travel and accommodation was paid to him in advance. The examination was conducted under a legislative precursor to s 597 of the Act, s 541 of the Companies (New South Wales) Code (1981). The examinee was associated with another company which had dealings with the company the subject of the examination. The examinee was considered to be an "outsider" to the company in liquidation. McLelland J stated, at page 1182:
It would ordinarily be unjust, if not oppressive, to require a person who had not been an officer of a company to attend for examination in relation to the affairs of that company without provision being made in respect of his or her reasonable expenses of such attendance where those expenses would be substantial, as they would undoubtedly be in the case of a person who was required to travel from Melbourne and obtain overnight accommodation in Sydney. The case of an examinee who had been an officer of the company concerned may give rise to different considerations and in such a case much may depend on the particular circumstances both of the company and of that person, and I do not wish to say anything which would be construed as laying down some general rule in the case such as that. But that is not the present case, and in the present case there is nothing in the circumstances before the Court which would operate to prevent injustice arising from the absence of provision for expenses.
7 His Honour ordered payment to the examinee of a sum to meet his reasonable travelling and accommodation expenses incurred by his attendance at the examination.
8 In Re Equiticorp Finance Ltd; Ex parte Brock (1992) ("Brock No. 1"),[2] Young J considered the issue what expenses were recoverable by an auditor of a company which was in liquidation. An examination summons had been issued pursuant to s 597 of the Corporations Law. At page 730, his Honour referred with approval to the decision of McLelland J in Re Kempal.
9 Young J also referred to the decision of Re Spiraflite Ltd,[3] where the liquidator wished to examine the company's auditor, an independent chartered accountant:
"The auditor urged the court that it should not approach the matter in the same way as an application against a director. [In Spiraflite] Megarry J rejected this approach. His Lordship said [counsel for the plaintiff] "also sought to make a distinction between what he called 'insiders' and 'outsiders', and said that if litigation by a liquidator is contemplated, the court is more inclined to make an order under the section against an insider than against an outsider. He defined 'insiders' as being the directors, secretary and employees of the company: and that all others, even if they were technically officers of the company (such as auditors), were outsiders. He admitted he could cite no authority either for his distinction or for his definitions, and he was able to put forward little in the way of reasoning to support either. I see little merit in the argument, which seems closely tailored to the facts of this case. Of course, it may well be in many cases the directors and those from whom the liquidator most needs information, and who are best able to give it; but there may well be many cases in which vital information is in the hands of others. The language of the sections suggest no such distinction ... What seems to me to matter more than status in the company is the information that a person whether 'insider' or 'outsider' is believed to possess.
Accordingly, while one does not make the division of examinees into insiders and outsiders for the purpose of working out whether a person is amenable to an order, that factor is one of the matters one takes into account when doing the balancing exercise and when one is thinking of conditions to impose in order to minimise any oppressiveness."
10 The examination provisions were recast subsequent to the Brock cases. Under the Act, ss 596A and 596B provide for a demarcation between officers of a company (who can be the subject of mandatory examinations under s 596A) and those persons who are not but who, inter alia, "may be able to give information about the examinable affairs of the company" (who can be the subject of a discretionary examination by a summons issued under s 596B, as Mr Brumley was in this case).
11 Nonetheless, the discussion in Brock No. 1 is appropriate for consideration in deciding who is an "insider" and who is an "outsider" in relation to a company. At page 733, the discussion turned to the subject of the costs of the auditor in meeting the summons. Young J stated:
The only matter involved in this motion is what should be done with respect to the cost to the auditors of assembling the information and attending on the hearing. The affidavit tendered on behalf of the auditors suggests that it will be necessary for extensive photocopying to take place of voluminous documents which would cost thousands of dollars. There would then need to be searches for an identification of material and reading through the material to ensure that confidential details of other clients outside the scope of the enquiry were excised and to ensure that all relevant documents had been produced. The evidence suggests that this would involve a partner for 10 hours, managers for 45 hours and an assistant for 30 hours which at $350 an hour for a partner and lesser rates for other persons, would amount to some $16,525. If one adds to that $2,500 for photocopying, one gets $19,000. The auditors suggest that this $19,000 should not be borne by them.
Mr Conte relies on Re Kempal supra, and says that where the examinee is not a person involved in the management of the company then an order should be made to ensure he is not out of pocket by complying with the liquidator's demand.
No cases were cited to McLelland J during Kempal's case. His Honour concluded that the provisions of what is now s 597(3) of the Corporations Law that the court may attach such conditions to the operation of an order under the section as it may consider necessary to prevent the order operating in an oppressive or unjust fashion. There may have been cases dealing with application for costs under earlier versions of section 597. In general the view appears to be taken but the witness, at least if he is not directly concerned in the management of the company, is entitled to the costs of attendance at the examination and in gathering together the documents, but not costs for his own legal representation; see eg Re Appleton, French & Scrafton Ltd [1905] 1 Ch 749; Re Morton Joinery Pty Ltd [1975] Qd R121 and Re Kusmenko (1976) 14 ALR 673.
...In my view the auditors are entitled to be paid for their out-of-pockets in a reasonable search for material and in attending but not at the same rate as they would charge for new work.
I note that during closing addresses counsel for the liquidator offered to photostat the papers which the auditors produced so as to minimise costs. The offer was not accepted on the basis that work would have to be done in perusing these papers and blanking out matters which were sensitive to other parties before photostating. I am not convinced that this is necessary. Probably the truth is that it is necessary only in a relatively small number of cases. It would seem to me that generally the procedure of the liquidator being given the papers to photostat at his own expense would be a preferable one to adopt, though with the documents in the class I have mentioned, the auditors may need to deal with the documents and charge the photocopying and expense for looking for the documents at a cost in due course (emphasis added).
12 His Honour encouraged the parties to come to an arrangement in accordance with the spirit of his reasons.
13 It appears that the parties were not able to come to an agreement in this regard and in the subsequent decision of Re Equiticorp Finance Ltd; Ex parte Brock (No. 2) ("Brock No. 2")[4] his Honour considered the matter further. The auditor the subject of the examination sought an order that he was entitled to be compensated for the time spent on preparation for the examination, including conferences with his staff, familiarisation with documents, costs of briefing by solicitors and costs of conferring with counsel. The liquidator submitted that compensation for such expenses was not allowable. At page 18 his Honour stated:
In my view, the general principle is that a person is required by law to come before court and give evidence as an obligation as a citizen to comply, and is not entitled to any compensation at all... However, it is possible for the court to make a condition of an order for examination under section 597 of the Corporations Law to make an order for expenses, if justice so requires. As far as I can see, no case exits where expenses have been allowed outside the third of the situations I outlined at the commencement of these reasons; that is a case where the witness is out of pocket for travelling, accommodation and through missing work in attending the examination. I would think it would be reasonable in the appropriate case and, indeed, I have already done it in this case, to allow compensation for searching for documents but it seems to me that the public interest generally is against making a provision for a witness to confer at the liquidator's expense with his or her staff or associates, or with solicitors and counsel, or otherwise obtaining information from others which might be used in his or her evidence on the examination.
Accordingly, I think that the appropriate direction is that when making her report as to what are reasonable costs and allowances for the examinee, the referee should allow no sum at all for the examinee conferring with subordinates, employees or solicitor and counsel, or otherwise in time spent familiarising himself with documents in order to prepare for his examination"(emphasis added).
14 The Brock decisions were followed by Austin J in Re Southland Cole Pty Ltd (recs and mgrs apptd (in liq)).[5]
15 The rationale for maintaining the demarcation between "insiders" and "outsiders" in the context of compensation of an examinee's costs is not explained. It may have its basis in the notion that an "insider" of an insolvent company is in some way culpable for the company's predicament and the remaining assets of the company should not be applied to meeting such person's expenses. An "outsider" is perhaps something of an innocent party and should not be out of pocket for expenses incurred in complying with a summons. Section 530A of the Act requires each officer of a company that is in liquidation to assist and cooperate with the liquidator in the winding up. Whatever the reason, the division in this regard has been maintained in the case law.
16 It seems the following can be distilled from the above authorities:
17 Mr McLean, Counsel for the liquidator, submitted that Mr Brumley should be classified as an insider for the purposes of considering whether it was appropriate that he be awarded costs of the type allowed in the Brock cases. Mr Brumley was the subject of a summons for a discretionary examination under s 596B of the Act, that is, he was said to be a person who may be able to give information about the examinable affairs of the company.
18 The definition of "officer" in section 9 of the Act provides an exclusion for the circumstance where a person, who might otherwise be regarded as an officer, provides advice "in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors of the corporation". In the present case, one of the purposes of conducting the examination was to enable the liquidator to assemble material in regard to the issue of whether Mr Brumley was a shadow director of the company and whether he crossed the line in that regard. There was the added factor that an entity associated with him was a shareholder in the subject company but in the authorities referred to above, shareholders per se are not classified as insiders.
19 My role in this examination is not to ultimately determine that question but rather to supervise the conduct of the examination to ensure procedural fairness and compliance with the examination procedures. Mr Truong contends that his client had no such position in the company but rather was an advisor to it. I do not consider that it is appropriate to express a view one way or another in this regard save that, prima facie, in the context of this application for expenses, he appears to be an outsider. To go further has the potential to embarrass another court which is required to consider the question.
20 Mr Truong has prepared a table of the claim for costs. In the course of submissions Mr Truong properly conceded after argument that certain categories were not claimable on an application of the relevant case law. That table, annotated with the amount I will allow to Mr Brumley, is as follows:
Considering subpoena, arranging and considering file list, liaising with archives for recovery of files
Reviewing documents for scope of potential privilege and arranging documents to be copied
$1252 (on the basis that this involved identification of documents in order to comply with the summons)
Identifying, locating, reviewing and arranging printing of electronic documents
Reviewing documents retrieved from archives for scope and potential privilege and arranging for documents to be copied
Reviewing independence policy and arranging copying and production
21 In the circumstances I will order that the Plaintiff pay Mr Brumley's expenses fixed in the sum of $4,132.91.
[1] Witness Expenses and Interpreters Allowances.
[6] See also Re Spedley Securities Ltd (1991) 9 ACLC 492 at 495 where it is suggested, relying on the Federal Court decision of Fuelxpress Limited v L.M.Ericsson Pty Ltd (1987) 75 ALR 284, in relation to costs of compliance with a subpoena, that an examinee may recover legal fees for advice on privilege issues incurred in complying with an order for production of documents.
Re Medici Institute Pty Ltd (in liq); McVeigh
Brumley & Anor [2009] VSC 668
(1976) 14 ALR 673
(1987) 75 ALR 284
The plaintiff was ordered to pay Mr Brumley's expenses fixed at $4,132.91. The itemised allowances shown in paragraph 20 appear not to reconcile arithmetically with that stated total.
However, the costs claimed by the auditors appear to me to include a margin of profit. The material before does not satisfy me that $350 an hour for a partner's time is a proper measure for the actual loss occurred (sic) by the partner having to obey the court's orders.
A witness who is examined is not entitled to treat the exercise as if it was another retainer in which not only would his bill cover overheads but also would include a profit margin**. A surer scale would appear to be the court scale of allowances to witness in Sch G to the rules under which accountants are entitled to a maximum of $160 per day plus out-of-pockets. Non-professional persons would receive a lower rate**.