One of Britain’s most prominent transgender activists is embroiled in an extraordinary legal battle with the Ministry of Justice, in a landmark discrimination case.

Tara Hudson, a trans woman, was sent to a male prison in 2015, prompting a national outcry with more than 150,000 people signing a petition calling for her to be moved to a women’s jail. Hudson is suing the MoJ for damages, alleging that her status as a woman was ignored when she was imprisoned, that she suffered sexual assault during her incarceration and that she was placed in an atmosphere that was “intimidating, hostile, degrading, humiliating and offensive”.

Her lawyers are also seeking a declaration from the court that Hudson was discriminated against, potentially the first time the MoJ has been found guilty of mistreating a prisoner on the basis of gender reassignment. The case will be heard at the Mayor’s and City of London court in April, but Hudson’s lawyers have expressed outrage at the “transphobic and insulting” language used by the government in its response to the allegations.

In court papers seen by the Observer, the MoJ and government lawyers argue that they do not consider Hudson to be a woman despite the make-up artist reassigning her gender and living as a woman for her adult life. They state Hudson “is as a matter of biological fact a man” and add that the term “transwoman” has no legal significance. They say they have adopted female pronouns when referring to Hudson only “out of respect for her wishes”. In response, Hudson’s legal team accuse government lawyers of adopting “transphobic, unnecessarily abrasive, aggressive and insulting” language towards Hudson, who has breasts and has used hormones for years but does not have a gender recognition certificate.

Hudson spent six weeks in jail in 2015, after she admitted head-butting a barman. She spent seven days in HMP Bristol before being moved to a women’s facility, Eastwood Park, after a storm of national protest. Speaking from Belgium, where she lives with her boyfriend, Hudson said: “I was horrified when I read the defence from the MoJ. It states that I’m a male, which is a complete insult, humiliating and wrong because I’ve been living as a female all my adult life. I’m not a drag act. When I was put in jail I’d been the subject of transphobia and it feels like I’m the subject of transphobia again from the MoJ, which is horrible because it’s my government.”

Her lawyer, Jane Ryan of Bhatt Murphy, says the government is denying her gender identity and that its argument runs counter to the ministry’s published policies on trans prisoners and the 2016 women and equalities committee transgender inquiry, the first ever parliamentary report on such issues. Her case was also instrumental in prompting a national review to examine the treatment of trans prisoners. It concluded it may be appropriate for some trans prisoners to be placed in a prison of their acquired gender, even if they do not have a gender recognition certificate. “According to the review, the MoJ is committed to promoting transgender equality. Yet its decision to defend these proceedings, and the manner in which it is conducting its defence, directly undermines that commitment, compounding the discrimination suffered by my client,” said Ryan.

Last year Theresa May announced she would reform the gender recognition act, allowing people to self-identify and removing the need for medical diagnosis of gender dysphoria before someone can officially change gender.

Government lawyers insist that Hudson is legally a man and that placing her in a male prison did not signify “scant regard for her wellbeing”, deny breaching her human rights and state that all efforts were made to prevent her suffering any abuse or assault from other inmates. Hudson’s allegations include a description of her arrival at HMP Bristol in October 2015, where she says she was met “by a cacophony of noise and verbal abuse” with prisoners shouting: “What is it? Kill it.” During a body search, it is alleged that a male officer “gasped and mumbled ‘fucking hell’”. Hudson also alleges that an inmate groped her breasts and genitals, leaving her “threatened, distressed and humiliated”. Other claims involve Hudson being held in a segregation unit and not initially being offered a transfer to a woman’s prison, again contradicted by the government who claim “she preferred not to be transferred to a female prison”.

Hudson is calling for an apology. “They should accept they mistreated me and move forward rather than aggressively fight me. It’s shameful when really they should be trying to make sure a trans person is not mistreated.”