Former Health Services Union boss Kathy Jackson has lost her bid to stop a civil case against her.
Ms Jackson is being sued by the HSU over allegations she acted outside her authority as national secretary and spent $660,000 of union funds on personal expenses.
Her lawyer Mark Robinson applied for a permanent stay of the case on Monday but Federal Court Justice Richard Tracey says he isn't persuaded and has refused the application.
Mr Robinson argued HSU was bringing the case for an improper purpose, saying senior unionists had conspired to crush Ms Jackson and destroy her financially for her role in bringing down disgraced former Labor MP Craig Thomson.
"The purpose of the proceedings was to crush Kathy Jackson ... to embarrass her for having the tenacity to make a claim against a sitting Labor member of parliament," Mr Robinson said.
Thomson had stabilised Labor's "one or two vote majority" and there was evidence senior party figures had told the union to "get" Ms Jackson, the lawyer said.
Mr Robinson said Ms Jackson was not able to fairly defend herself because almost 80 boxes of necessary HSU documents had been lost or destroyed by the union.
But Mark Irving, counsel for the union, said the suggestion was "absurd" and Ms Jackson had never sought a number of documents from HSU.
He said HSU was grateful to her for being a whistleblower, referring to former union boss Michael Williamson.
Williamson was jailed after skimming almost $1 million from the union.
But being a whistleblower did not give her "immunity" from alleged wrongdoing, Mr Irving said.
He said the case against Ms Jackson was a reflection of evidence, not a matter of "get Kathy".
Justice Tracey denied the application for a stay of proceedings.
He said there was not enough evidence to support the suggestion that the union pursued the case to seek Ms Jackson's downfall.
Ms Jackson had not established that the union deliberately hid or destroyed documents to hinder her defence, and it was speculation whether they would be useful anyway, he said.
"I stress at the moment there is no established case of misappropriation," Justice Tracey said.
The matter returns to court on Wednesday, with the parties to discuss an HSU application to freeze Ms Jackson's assets to prevent their sale or transfer.
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