The NSW Premier, Barry O’Farrell, says his government will seek to pass urgent legislation to ensure an administrator can be appointed to the NSW branch of the Health Services Union after doubts were raised about the Federal Court’s jurisdiction to make orders relating to a state union.

But the Federal Minister for Employment and Workplaces Relations, Bill Shorten, said the proposed legislation could prolong the factional dispute plaguing the HSU East branch, which is haemorrhaging hundreds of members a day.

As the state and federal government argued today over how to handle the scandal-plagued union, the Commonwealth Director of Public Prosecutions announced it would forward a report from Fair Work Australia into financial impropriety in the HSU’s national office to police.

Mr Shorten has asked the Federal Court to appoint an administrator to take over the day-to-day functions of the HSU East and to declare all offices vacant.

He said he has received legal advice that the offices of the NSW Union would be similarly vacated.

However, Federal Court judge Geoffrey Flick questioned the jurisdiction of the court to take action regarding a NSW organisation.

During a hearing this morning Justice Flick said a federal minister had not made such an application “in 100 years”.

Under the leadership of the HSU acting national president, Chris Brown, six branches of the HSU have also applied for an administrator to be appointed to the HSU East branch.

The court heard the jurisdictional issue could be resolved by the minister intervening in this application, rather than initiating his own.

Mark Irving, for Mr Brown, said the branch had ceased to function effectively, evidenced by the mass resignations and harassment and intimidation of members and the disruption of meetings.

Shortly after the hearing was adjourned, Mr O’Farrell told the NSW Parliament he did not want a “legal technicality to stop the appointment of an administration to a union that so desperately and badly needs one”.

In question time, Mr O’Farrell said the government would introduce urgent legislation to allow “an administrator proposed by the NSW government under NSW law to a NSW-registered union”.

The NSW Finance Minister, Greg Pearce, criticised Mr Shorten for not consulting him before “significantly intrud[ing] into the NSW industrial relations jurisdiction”.

In response, Mr Shorten said he welcomed Mr O’Farrell’s “belated support” for an administrator but stood by his decision to launch action in the Federal Court.

Justice Flick ordered the parties enter into mediation. If an agreement on an administration scheme is not reached, he will preside over a three-week hearing beginning on June 5.

He said the dispute should be heard as quickly as possible, given the damage being done to the union.

Earlier, the acting national secretary of the HSU, Chris Brown, said the branches had told the court that the East branch, covering NSW and parts of Victoria, was “dysfunctional”.

Outside the court, Mr Brown said if the application failed, he feared the other branches would withdraw from the HSU, which would spell the end of the union.

“If the application doesn’t work there will be so much reputational damage that it’s probably impossible to recover.

“If this fails, we’re probably pretty close to saying game over.”

An administrator would run the union from day to day in matters including finances. All elected positions would be declared vacant.

Justice Flick is also hearing a legal challenge by the National Secretary of the HSU, Kathy Jackson, to the voting entitlements of salaried members of HSU East.

She alleges up to 20 of the 70 members of the HSU East branch are not entitled to vote at union council meetings.

Justice Flick said he feared that hearing could become futile if the HSU East branch was placed into administration.

He said he was inclined to defer Ms Jackson’s case until the question of administration was heard.

Outside the court, Ms Jackson said she would not enter mediation with Mr Brown, despite the court order.

– with AAP