A builder who worked on former prime minister Julia Gillard's house turned up at a union office demanding payment, an inquiry has been told.
Former Australian Workers' Union (AWU) state secretary Bob Smith told the Royal Commission into Trade Union Governance and Corruption that Kon Spyridis, came calling at the AWU's Melbourne office in September, 1995.
Mr Spyridis said: "I want my money for work I did on the union houses", Mr Smith said in his statement.
Mr Spyridis said he had been working on properties in Kerr St and Abbotsford, and that Bruce Wilson, Ms Gillard's one-time boyfriend and the former branch secretary, owed him $17,000.
The commission has heard Mr Wilson bought a house in Kerr St, Fitzroy, using money from a slush fund, while Ms Gillard owned a house in Abbotsford that Mr Spyridis did renovation work on.
Mr Smith said he told Mr Spyridis the union did not own the houses and would not pay.
Soon after he received a call from Ms Gillard about the builder's visit and at a subsequent meeting he asked her: "Why the hell would we be being pursued to pay for renovations on your house?".
Mr Smith said Ms Gillard responded: "It's all a misunderstanding. I am in dispute with Mr Spyridis over the quality of the work and I am not paying him until it is rectified".
Two weeks later, Ms Gillard showed Mr Smith a receipt, saying she had paid Mr Spyridis, he said.
Who paid for the renovations will be a central focus when the former PM takes the witness stand at the Royal Commission into Trade Union Governance and Corruption on Wednesday.
Federal Court judge Bernard Murphy was in the witness box on Tuesday answering questions about his time as Ms Gillard's boss at law firm Slater and Gordon in the 1990s.
Justice Murphy said he became aware of rumours around Slater and Gordon's offices in late 1995 that renovations to Ms Gillard's Melbourne home had been paid for by funds from the Australian Workers Union (AWU).
Ms Gillard was in a relationship with Mr Wilson at the time.
Partners in the firm were also concerned that Ms Gillard had done the legal work incorporating an entity, the Workplace Reform Association (WRA) and been involved in conveyancing work for a house Mr Wilson bought in the Melbourne suburb of Fitzroy.
The WRA was a slush fund used by Mr Wilson.
The commission has heard Ms Gillard did not open a file at Slater and Gordon for the WRA work, and that the Fitzroy property was bought partly using money from the WRA.
Justice Murphy said partner Nick Styant-Brown was very concerned about Ms Gillard being involved in arranging Slater and Gordon to do the conveyancing work, even though lawyers at the firm commonly did free or discounted conveyancing for union officials and the spouses and partners of other lawyers.
"The concern that was voiced was that Julia Gillard had created an association which may have been set up corruptly and may have involved corrupt monies and it involved the firm in a conveyance of those monies," Justice Murphy said.
Justice Murphy said when he asked Ms Gillard about the rumours she told him she had done nothing wrong "and I believed her".
"She said there was nothing in these rumours - they were being circulated by her enemies within the Labor Party," he said.
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