Health Services Union (HSU) figure Kathy Jackson is too mentally unwell to defend herself against claims she misappropriated union funds, the Federal Court in Melbourne has heard.

The HSU is pursuing Ms Jackson for almost $1.4 million for allegedly misusing the funds of members.

The case is proceeding to trial, but the union recently asked the court to make a summary judgement that would order Ms Jackson to repay the money immediately.

Ms Jackson had been due to respond and the parties returned to court today.

Appearing from Sydney via video-link, Ms Jackson’s lawyer Philip Beazley told the court his client had been admitted to hospital since appearing before the Royal Commission into Trade Union Corruption and Governance in August.

Mr Beazley said Ms Jackson was too ill to give him "rational" instructions and would not be in a position to defend herself properly until February next year.

Ms Jackson has been on extended leave from the union and the court heard she had recently lodged a WorkCover claim.

But HSU lawyer Mark Irving said he was only told of her illness late on Monday, despite her lawyer knowing about it for some time.

"Having a medical report in one's back pocket for the best part of a fortnight and dropping it upon us ... it's quite extraordinary and disgraceful behaviour," Mr Irving said.

Mr Irving said Ms Jackson had a history of not complying with the court.

"Things get worse for people who are being sued for significant amounts of money," he said.

"What the report seems to say is she is not capable of providing rational instructions to her lawyer ... the nub of it is things will get worse if she does so.

"At the very least courtesy and decency would have required Mr Beazley to notify us of any change. As it was, there was nothing but resounding silence."

Union seeking 'draconian order' for money

Justice Richard Tracey told Mr Irving he was "conscious of the many inexcusable failures to comply with the court orders".

"It’s a matter I take very seriously," Justice Tracey said.

But he said the union’s application was for a "very considerable amount of money".

"We now know the respondent is not in a position to give instructions," Justice Tracey said.

"What you’re seeking is really a draconian order."

Justice Tracey declined to set the case back until next year, but allowed a three-week adjournment.

Ms Jackson’s lawyers were ordered to provide her medical reports to the court.

The parties will return on November 5.

Alleged spending outlined in court documents

Documents tendered to the court allege how Ms Jackson spent the union's money.

Alleged spending $249,000 of union cheques cashed

$249,000 of union cheques cashed $131,919 spent on travel

$131,919 spent on travel $77,984 in retail spending

$77,984 in retail spending $13,373 spent on food and alcohol

$13,373 spent on food and alcohol $29,869 spent on entertainment

$29,869 spent on entertainment $5,237 spent on health and fitness

Over $131,000 was allegedly spent on union credit cards by Ms Jackson, including holidays to New Zealand, the United States and China.

Airfares for her daughter to travel to France totalled $4,920.

It is alleged Ms Jackson's retail expenses totalled $77,984 including $16,838 spent at Myer and David Jones stores in Melbourne and Sydney.

Food and alcohol spending totalled $13,373, including a bill for $361 from specialty cake store Brunetti in Carlton.

It is also alleged Ms Jackson spent $14,000 at Fenix Restaurant in Richmond, which was almost half of the $29,869 spent on entertainment.