A group of Liberals argue the loan to John Pesutto was invalid and made in breach of party rules

In an explosive development in the John Pesutto-Moira Deeming saga, a Supreme Court challenge is being considered to overturn the Liberal Party’s loan.

A breakaway group of Victorian Liberals is seeking to overturn the promised $1.55m loan to John Pesutto in a move that could kill his political career.

In an explosive development the Herald Sun can reveal an urgent Supreme Court challenge is now being considered to stop the party from proceeding with the loan.

The promised $1.55m loan to John Pesutto could be overturned. Picture: Diego Fedele

Just days after the party’s powerful administrative committee voted to provide Mr Pesutto with the money he needs to pay colleague Moira Deeming the $2.3m he owes her, the group of party members says the decision was invalid and made in breach of party rules.

It has trying to convene a special meeting of the party’s State Council to deal with the matter.

In a letter being passed around party members to party president, Phil Davis, and state director, Stuart Smith, the group argues that the party’s “constitution clearly restricts the use of Party income and property to the objectives of the Party and prohibits any use ‘by way of profit or benefits to the Members of the Party’.”

“The Administrative Committee has unilaterally interpreted this provision to justify a substantial financial transaction which confers private benefit on a Party member — an act which is plainly in constitutional doubt.

Moira Deeming was owed $2.3m by John Pesutto. Picture: Andrew Henshaw

“Clause 27.2 requires that such questions of interpretation be referred to the State Council. This process has not been followed.

“As a result of this breach, and in the absence of constitutional compliance, an application is being prepared for an interlocutory injunction in the Supreme Court of Victoria to restrain the Administrative Committee from proceeding with the loan prior to proper constitutional determination.”

Party sources said at least 50 members would have to sign the request for a special meeting of the State Council to be held.

It is understood the letter had not yet been received by Mr Davis or Mr Stuart.

The significant development comes ahead of this Friday’s deadline for Mr Pesutto to pay Mrs Deeming or face an escalation in bankruptcy proceedings that could lead to his expulsion from parliament and trigger a by-election in his seat of Hawthorn.

Mr Davis last week told party members the loan agreement would settle the matter, which has dragged on since March 2023, “once and for all”.

“By ensuring that Mrs Deeming has been paid, there will be no Hawthorn by-election, and the State Parliamentary team can focus on the urgent needs of the Victorian community, particularly campaigning to change the government at the 2026 Election.

“Victorians need a change of government. By ensuring that Mrs Deeming gets paid what she is owed, the Party will be stronger as we head towards November 2026.”

Those sentiments were echoed by Opposition Leader Brad Battin who said over the weekend he could now start focusing on next year’s election.

Mr Pesutto was ordered to pay Mrs Deeming $2.3m in legal costs after she successfully prosecuted a defamation case against him.

It was prompted by his assertions that she had links to neo-Nazis following her attendance at a women’s rights rally on the steps of parliament in March 2023.

Mr Pesutto has already paid Mrs Deeming $315,000 in damages.

The ongoing feud between the pair has plagued the party and intensified factional divisions among MPs and rank and file members.

Originally published as A group of Liberals argue the loan to John Pesutto was invalid and made in breach of party rules