Instead, the agency abolished the victim's position and then created a similar job, which was advertised while she was on leave.

Documents filed in the Federal Court show an inquiry authorised under the Public Service Act last year found the Professional Services Review's executive officer, Alison Leonard, breached the bureaucracy's code of conduct by harassing and bullying one of her directors, Anne Selvidge.

Ms Leonard was reprimanded but kept her leadership role in the small agency, which investigates fraud and misuse of Medicare funds. But Ms Selvidge was forced to leave the organisation after her position was declared ''excess''.

She is now suing the Commonwealth for potentially hundreds of thousands of dollars in lost income and damages, and has filed a case to return to her job.

Ms Selvidge, who was an executive level-2 officer earning about $120,000 a year, says in a statement of claim that Ms Leonard began to bully and harass her shortly after she became her boss in January 2007.

Ms Selvidge alleges Ms Leonard, the agency's only senior executive service officer, denied her the resources to do her job and forced her to work more than 60 hours a week over an extended period.

''Also around this time, [Ms Leonard] began treating the applicant in an insulting, humiliating, dismissive and aggressive manner, including in front of staff,'' the statement says.

Ms Selvidge asked in June 2008 that Ms Leonard's behaviour be referred to the Public Service Commission for investigation. But the commission said it received the request more than a year later.

The subsequent investigation found Ms Leonard breached the Public Service Act, under which bureaucrats must ''treat everybody with respect and courtesy and without harassment''.

For more on this story, see the print edition of today's Canberra Times.