The former Victorian Liberal leader John Pesutto has paid $2.3m in legal costs owed to his colleague Moira Deeming, stifling a last-ditch effort by a fellow party member to block the payment.
The payment, confirmed to Guardian Australia by a source not authorised to speak publicly about the matter, was made with the assistance of a $1.5m loan from the Victorian Liberal party.
It means Pesutto will avoid bankruptcy and be able to remain in state parliament as the member for Hawthorn.
According to the source, two separate payments were made to Deeming on Thursday morning: one by the Liberal party’s investment vehicle, Vapold, and another by Pesutto personally.
Last month, the federal court ordered Pesutto to pay $2,308,873 of Deeming’s legal costs after it found in December that he repeatedly defamed the upper house MP by falsely implying she sympathised with neo-Nazis and white supremacists.
The costs were in addition to $300,000 in damages and $15,000 in interest Pesutto paid after the federal court judgment, after which he lost the leadership of the party.
Pesutto launched a fundraising campaign to help pay the bill but had to rely on the $1.5m Vapold loan, which was approved by the Victorian Liberal party’s administrative committee last Thursday.
The loan, which has several strict conditions, will see Pesutto repay about $10,000 a month and could reap the party $1m in interest by the time it is repaid.
After the loan’s approval, Pesutto’s successor as opposition leader, Brad Battin, said it would “avoid further financial and reputational damage” for the party and also declared the matter – which has dragged on since March 2023 – resolved.
But earlier this week, lawyers acting on behalf of a member of the administrative committee flagged plans to take legal action to stop Vapold from providing the loan.
In a letter sent on Wednesday to Vapold’s directors, seen by Guardian Australia, the lawyers argued the loan breached the Liberal party’s constitution and claimed committee members were not given adequate notice or sufficient details about it, either before or during last Thursday’s meeting where a vote to approve it occurred.
The letter requested a meeting of the state council be convened “as soon as practicable”, and asked for confirmation by 9am Thursday that “no payment of Liberal party funds has been or will be made” to Pesutto unless agreed by the state council or ordered by a court.
“In the event you fail or are unwilling to provide the undertaking required, we hold instructions to immediately make an application for injunctive relief,” the letter stated, adding that the matter would be brought urgently before the supreme court.
Several Liberal party sources said they believe there is no prospect of a court challenge now that the costs have been paid.
However, the matter is still listed to be heard in the supreme court at 4.15pm on Thursday. It is unclear whether an injunction application will still go ahead or whether it is possible after the costs payment.
The New South Wales property developer Hilton Grugeon, who loaned Deeming funds to pursue her defamation action, urged it to continue.
“I would be disappointed for the people of Victoria and the Liberal party if those responsible for this whole fiasco were not be brought to account,” he told Guardian Australia.
“[Pesutto’s] bankruptcy would trigger them being brought to account for having supported him and his activities.”
Grugeon said as of midday Thursday he had not personally received the money he is owed.
The payment of Pesutto’s debt comes a day before there was expected to be an escalation in bankruptcy proceedings against him, which were initiated by Deeming earlier this month.
Bankruptcy would have disqualified Pesutto from parliament and triggered a byelection in his seat of Hawthorn, which the Liberals hold by a slim margin of 1.74%.
Avoiding a costly byelection and potential loss of the seat was a key reason many within the party backed the move to bail the MP out with a loan.
