Insurance policies

It’s a matter of policy: producing insurance policies for liquidators

The Federal Court of Australia gives guidance on the types of documents that must be produced in a subpoena and when a candidate can recover their costs.

In a recent decision, the Federal Court of Australia considered under what circumstances a subpoena may require the production of a professional indemnity insurance policy against which the company strength have a claim, even in circumstances where the candidate asserts that any potential claim against them was small[1]. Helpful additional guidance has also been provided on when a candidate can recover costs for complying with a subpoena.

Key points to remember

  • Liquidators need only produce evidence sufficient to demonstrate the possibility of a cause of action against a third party to support a subpoena. It’s a relatively low bar to get a subpoena, and there’s no need to prove that the company has a good cause of action against a candidate.
  • The commercial sensitivity of the documents without more is not a reason to refuse to issue a subpoena. Confidentiality issues can be resolved with appropriate covenants that allow a liquidator to use the material and provide reassurance to the candidate.
  • The court may order that an examinee be reimbursed for the costs of searching and producing documents to comply with a subpoena. However, the scope of costs that can be claimed is generally limited.
  • In order for a candidate to claim costs for performing a subpoena, he must produce clear and specific evidence as to the nature of the work undertaken and the time it took. Internal work-in-progress documents may not be sufficient.


The liquidators of Bandiera Holdings Pty Ltd (Company) obtained a subpoena under section 596B of the Corporations Act 2001 (Cth) requiring HLB Mann Judd (SE Qld) Pty Ltd (HLB Mann Judd), consulting firm, to produce the documents relating to any advice given to the Company, and to its manager, concerning a takeover of business by the Company.

HLB Mann Judd substantially complied with the summons, but sought to waive the requirement to produce any professional liability insurance policies held. Specifically, HLB Mann Judd argued that:

  1. The subpoena was not issued for a legitimate purpose and was a “fishing exercise” (Floor 1), and,
  2. Since any potential claim against him was small, the Court should exercise its discretion to refuse production of these documents given their confidential and sensitive nature (Floor 2).

HLB Mann Judd also sought orders to pay his costs for complying with the subpoena. HLB Mann Judd produced 207 documents in the 24 categories mentioned in the subpoena and initially claimed it took 42.2 hours to identify and locate the documents. Using the usual hourly billing rates of affected employees, HLB Mann Judd claimed that the costs incurred were $11,810 plus GST.


Floor 1

The Court recognized that the advice provided by HLB Mann Judd was relevant to matters subject to review by the company, as was the existence and value of any potential claim the company may have against HLB Mann Judd. She also admitted that there was a sufficiently close connection between the director’s alleged misconduct and this advice to warrant an investigation to determine whether HLB Mann Judd was involved in the director’s alleged misconduct. In view of this, the liquidators had determined that there may exist a claim or cause of action against HLB Mann Judd which warrants the production of any relevant assurance.

The Court emphasized that it was not for the Court, when considering issuing a subpoena, to determine whether a company had a good cause of action against the candidate, and that the request should not become a mini- trial of the potential liability of the candidates.

Floor 2

The Court rejected HLB Mann Judd’s argument that the circumstances raised by the liquidators were not strong enough to justify the exercise of the Court’s discretion to compel him to produce his insurance policy at the time. , and that the production could be reconsidered if more solid arguments were to show that it exists in the future.

The Court reiterated that HLB Mann Judd had a sufficiently close connection to the company and the director in relation to the contested transaction. The Court accepted that it may be that no claim will ever be established, but as the evidence raised a real and real possibility that a claim might exist, any insurance policy should be produced as it would be helpful to the liquidators to determine whether to investigate further.

Any concerns about the commercial confidentiality of insurance policies have been sufficiently mitigated by the fact that the liquidators have undertaken that any policy produced will only be accessible to the liquidators, the lawyers and advisers of the liquidators, any funders actual or proposed liquidators (if confidentiality undertakings have been made), any bailiffs and their administrative staff.

Document production costs

The Court declined to make orders for HLB Mann Judd’s costs at this stage, as there was insufficient evidence to support the time and costs claimed by HLB Mann Judd, and it was possible that more documents would be available. required to be produced in the future.

Of the actual costs incurred of $11,810 plus GST, HLB Mann Judd claimed $4,050 plus GST as costs from the liquidators. HLB Mann Judd substantiated its claim in internal work-in-progress documents, which provided only general evidence of the costs claimed by HLB Mann Judd.

The cases confirm that a candidate cannot claim costs for:

  • Familiarize yourself with the documents
  • Speak with their staff, associates or legal advisors
  • Obtain information from others that could be used as evidence in the examination, or
  • An hourly rate that includes a profit margin.

In the end, the Court accepted the liquidators’ argument that the Court did not have the evidence to substantiate the number of hours claimed by HLB Mann Judd. To obtain convictions at his expense, it would have been necessary for HLB Mann Judd to produce more specific and clearer evidence as to the actual amount of work undertaken, including what work was undertaken and the circumstances in which it was carried out. The Court was unwilling to accept ongoing internal documents as sufficient evidence.

Nevertheless, the Court accepted that a new request for costs could be made by HLB Mann Judd in the future.


It is common for applicants to object to the production of insurance policies, particularly when such policies often impose extensive confidentiality undertakings on the insured. The Bandiera Holdings The decision confirms that insurance policies must be produced in public examinations notwithstanding objections to confidentiality. For liquidators, offering appropriate confidentiality undertakings in response to objections is a convenient way to obtain documents, minimize legal claims and improve their position on the costs of those claims.

This case also demonstrates that liquidators need only demonstrate the possibility of a cause of action against a third party to justify a subpoena regarding relevant documents such as insurance policies. Public reviews are investigations and not mini-trials of any potential claim against a candidate.

In order for a candidate to claim costs of performing a subpoena, having regard to the general principles set out above, he must produce clear and specific evidence as to the amount of work undertaken and the time it took to carry out this work, noting that all expenses incurred are reimbursable.