Mr Stoljar said Mr Riordan's version of events was supported by some other officials of the ETU. The union says 11 of the 12 people at the meeting in December 2010 said the loan was discussed.

In his opening statement, Mr Stoljar said the commission would examine whether the loan was entered into without the proper approval of the union council which was required under the ETU rules.

"In particular, was the ETU loan entered into in circumstances in which some officials of the ETU placed themselves in a position in which their own self-interest, or a desire to promote the interests of the ALP, were in conflict with their fiduciary and other obligations to members of the ETU," he said

He said there were two possibilities. The first was that the decision to enter into the loan was made by Mr Riordan ``with no or adequate regard for the ETU rules, not the interests of the members".

The second possibility was that there was discussion of the loan by the executive and approval was given. This version was the thrust of the evidence of witnesses on behalf of the ETU, he said.

Mr Stoljar said the decision for the commission would be whether to accept one of the two possibilities "or to look for some middle ground".

The commission would also look at whether the loan was in the best interests of the ETU.

``The loan was unsecured and made in circumstances where the borrower's financial position would have made a commercial lender uncomfortable, to say the least," he said. ``Was a loan of this nature and on those terms an appropriate use of members' funds?"


The commission would also examine how union members were left ``significantly out of pocket" after the ETU's former Victorian secretary Dean Mighell dropped Federal Court action aimed at recovering $2.3 million in board fees allegedly paid to rival union officials, including Mr Riordan and Mr Sinclair.

Mr Stoljar said Mr Sinclair would give evidence that the legal action by Mr Mighell was instigated in retaliation for Mr Riordan, Mr Sinclair and another official, Neville Betts, not supporting Mr Mighell's bid to become national secretary in 2011.

Mr Riordan and Mr Mighell will give evidence to the commission next week.

On February 22, 2012, the Federal Court action by Mr Mighell was discontinued. Two days later, Mr Riordan was appointed to the Fair Work Commission.

Mr Stoljar said the legal action by Mr Mighell contended that Mr Riordan, Mr Sinclair and Mr Betts owed the union a significant sum of money. If they did owe the money, he said, it was hard to understand why the court proceedings were abandoned, "leaving the members significantly out of pocket".

He said the legal costs incurred by Mr Mighell were ``very substantial"' and incurred at members' expense.

The hearing continues