Former Health Services Union (HSU) national secretary Kathy Jackson set up a slush fund with the proceeds of a union settlement with Melbourne cancer hospital Peter MacCallum, a court has heard.

The union is suing Ms Jackson in the Federal Court and she is accused of misappropriating more than $1.3 million of union funds on personal expenses.

The civil trial is proceeding despite Ms Jackson failing to attend court and her lawyer withdrawing from the case last week after she declared bankruptcy, leaving her without legal counsel.

Ms Jackson denies any wrongdoing.

Lawyers for the HSU outlined to the court an alleged slush fund, called the National Health Development Account (NHDA), they claimed Ms Jackson set up, in order to siphon union money out for her own benefit.

The court heard Ms Jackson claimed that all HSU branches contributed to the fund for research and campaign purposes, but HSU counsel Mark Irving said there was no evidence that occurred, and the claims were false.

Mr Irving said the only source of funds for the account came from Ms Jackson's HSU East branch.

He said Ms Jackson continued to make significant withdrawals from the account after she lost her union authority when administrators moved in to take over the HSU in 2012.

Mr Irving told the court financial records showed Ms Jackson would withdraw several thousand dollars from the fund at a time before depositing the same or a similar amount into her own bank accounts, including a mortgage account, within several days.

He said the withdrawals from the fund were conducted under the guise of union donations, and in some cases, recorded as "loan interest".

He said such actions breached many union rules.

"If you are going to give the money of the union away for nothing ... you need explicit approval," Mr Irving said.

"The money, once it left the union account, arrived in the NHDA ... then it became Ms Jackson's money."

Cash withdrawals, luxury goods and fine dining

Mr Irving cited one example, in which he alleged Ms Jackson took $8,000 out of the account, gave 10 people at a HSU meeting $100 each, and pocketed the rest.

"She offered no explanation," Mr Irving told the court.

He said Ms Jackson claimed she was entitled to $55,000 in entitlements each year when she was national secretary of the HSU, on top of her six-figure salary, but "we say there was no evidence of those things".

"It's not for some union or industrial purpose," Mr Irving said of Ms Jackson's withdrawals.

"It's simply Ms Jackson taking the money for her own personal expenses. That's all that's occurred."

The court also heard details of Ms Jackson's alleged cash withdrawals of $6,500, when she was in the United States.

Cash had been taken out of union accounts in Las Vegas, San Francisco, Washington as well as Heathrow Airport in London, the court heard.

The court heard Ms Jackson is also accused of spending union funds at a gourmet butcher and on luxury leather goods.

She is accused of using union funds to pay for extensive travel, fine dining, food, wine and entertainment in the $2.5 million lawsuit, including a single $14,000 dinner bill for exclusive Melbourne restaurant Fenix.

Ms Jackson was never elected to any of the positions she held in the HSU, and was instead always appointed, the court heard.

Ms Jackson succeeded Craig Thomson as national secretary, when he entered Parliament as a federal Labor MP for the NSW central coast.

Her failure to attend the trial follows the path of Mr Thomson, who did not attend or defend his own civil trial in the court earlier this year.

Ms Jackson is also facing the prospect of potential criminal charges after appearing at the Royal Commission into Trade Union Corruption and Governance.

The royal commission recommended prosecutors investigate her conduct.

The trial continues.