An attempt by the Health Services Union to claw back about $1.3 million allegedly misappropriated by former national secretary Kathy Jackson is on hold amid claims of a rapid deterioration in her finances.
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Ms Jackson said a week ago in a sworn statement she had net assets of $278,683 but on Monday the Federal Court heard she was now an undischarged bankrupt, potentially derailing her trial.
The union is urgently seeking information from Ms Jackson's bankruptcy trustee.
Central to the collapse of Ms Jackson's finances appears to be a property deal with her de facto husband, Fair Work Commission vice-president Michael Lawler.
They pair signed an agreement to transfer Ms Jackson's NSW south coast property, bought for $1.3 million, to Mr Lawler on June 22, 2014.
That was a few days after Ms Jackson was first confronted with serious allegations at the royal commission into union corruption that she had misused hundreds of thousands of dollars.
The agreement between Ms Jackson and Mr Lawler outlined a deal whereby half the property was transferred for free to recognise financial and other support provided by Mr Lawler.
The other half-share was to be valued by the Commonwealth Bank at a later date.
The union recently applied to the court to stop the transfer of the entire property to Mr Lawson.
However, Mr Lawler, in an affidavit to the Federal Court, complained that the union's move had restrained his "lawful right" to complete the purchase.
"Given my office, I am acutely embarrassed to find myself in a position where I am obliged to respond to this [HSU] application."
Mr Lawler complained of attacks in the media and from within the Fair Work tribunal.
"During the second half of 2014, I became quite debilitated with my own mental health difficulties, in which attacks against me within my tribunal have been a major contributing factor."
Mr Lawler said he was admitted to a mental health facility for a short time as a result.
The HSU on Monday told the court it wants to press ahead with its civil claim against Ms Jackson.
Justice Richard Tracey said he wanted a trial to take place immediately if the union's application succeeds. "My present view is the matter be brought on this week," Justice Tracey said.
Ms Jackson shot to prominence as a whistleblower on corruption within the HSU involving former national president Michael Williamson, who is now in jail.
But she has been accused, as part of the HSU lawsuit, of having wrongfully spent HSU funds on personal expenses including designer clothes, overseas holidays, dinners and other indulgences.
In a recent defence statement, Ms Jackson said vouchers supporting each credit card expense were handed over to the union branch bookkeeper and submitted for approval.
