Lawyers for the commonwealth have argued former Family First senator Bob Day was ineligible to serve in parliament alleging he received an indirect pecuniary interest through a lease agreement.
Stephen Donaghue QC, representing Attorney-General George Brandis, made the case during a High Court hearing in Canberra on Tuesday.
The court, sitting as the Court of Disputed Returns, will determine whether Mr Day had a direct or indirect pecuniary interest in a lease agreement between the owner of his electorate office premises and the federal government.
Under the constitution, such an arrangement would disqualify him from sitting in parliament.
Mr Day, who started his first term in the Senate on July 1 2014, didn't wish to move into the electorate office of his South Australian predecessor Don Farrell, favouring a space in an office building he previously owned.
The senator's company and family trust sold 77 Fullarton Road, Kent Town in Adelaide to Fullarton Investments under an arrangement which B & B Day loaned $2.1 million, the court was told.
There was an understanding Fullarton Investments would receive rent from the commonwealth and make vendor finance payments to the Day trust.
But because the old office previously occupied by Senator Farrell wasn't sub-leased, the commonwealth didn't pay any rent for the Day office.
Mr Donaghue told the court if rent payments were in fact made, money would have flowed directly to Mr Day's bank account.
He outlined correspondence between Mr Day and the government arguing it was unreasonable he was paying rent out of his own salary and seeking back pay.
Mr Day was requested to provide evidence of rent payments.
Mr Donaghue said there was a strong case of indirect pecuniary interest given payments could have ended up back in his account and a special count should take place to replace him.
Mr Day has denied he had an indirect pecuniary interest, arguing in his submissions his legal connection to the lease was at most tenuous and remote.
The hearing continues on Tuesday.
Last week the High Court, sitting again as the Court of Disputed Returns, ruled disqualified senator Rod Culleton was not eligible to have been elected in the first place.
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