David Grierson, 46, and Craig Marshall, 47, were both charged with murdering former Special Operations Group officer Dean McGrath in Mr Grierson's Braeside plumbing premises on May 17.

In a failed bid for bail in the Supreme Court this week, Mr Grierson claimed Mr McGrath came to the Governor Road factory armed with a sawn-off shotgun and demanded money from him, the court heard.

"I didn't know him from a bar of soap," Mr Grierson allegedly told detectives when he handed himself in on May 19.

Mr Grierson claimed Mr McGrath struck him with a piece of timber and thought he was also going to hit him with a heavy statue.

"I thought he was going to drop it on me and kill me," the court heard he told police.

Mr McGrath, a 41-year-old married father-of-two and former boxer, left the police force in 2010 with post-traumatic stress disorder.

He was killed from head injuries caused by blunt force trauma, the court heard, and suffered several blows, mainly to the back of his head.

Police did not find evidence he was armed with a gun.

The court heard Mr McGrath's body was placed inside some plastic in preparation to dispose of him.

"Rather than any action be taken to contact any authorities, attempts were then made to wrap up and conceal the body," Justice Paul Coghlan said in refusing bail on Friday morning.

Earlier in the hearing, prosecutor Daryl Brown said the complete absence of a shotgun was an obstacle to claiming self-defence. Evidence Mr McGrath's wrists were bound either before or after death and the attempt to conceal his body was "completely inconsistent with a self-defence situation", Mr Brown said.

Mr Grierson's barrister George Georgiou SC said Mr McGrath was still a "big man, a former Special Operations Group officer, a former boxer, who has no business being in the premises".

It was not clear why Mr McGrath had gone to the factory. The court heard a witness said Mr McGrath had been conducting surveillance and recovering debt, while his brother told police "Dean hates druggies, that's why he was there".

Tests of Mr McGrath's hair after his death found traces of methamphetamine and cocaine. There were no drugs in his blood system.

Justice Coghlan said despite Mr Grierson's limited prior criminal history, family support and ability to go back to work, the exceptional circumstances required to be shown to obtain bail had not been proven.

Justice Coghlan did not regard the case as weak nor accepted the case could be categorised as manslaughter.

"It's likely a more sensible and complete analysis of the case can be made after the committal [hearing] has been conducted," he said.

Mr Grierson's committal hearing, which will analyse the evidence against him, is set for February.