‘Half baked, fundamentally flawed’: judge lashes Liberal bid to block John Pesutto bailout

The Pesutto-Deeming crisis engulfing the Victorian Liberal Party will drag into next month after a legal challenge didn’t ‘get off the runway’ on Thursday.

John Pesutto and Moira Deeming.

You can now listen to The Australian's articles. Give us your feedback.

You can now listen to The Australian's articles.

A Victorian Supreme Court judge has lashed a last-minute legal challenge to block the Liberal Party’s $1.55m bailout of John Pesutto as “half baked” and “fundamentally flawed” in scathing comments about the application.

In an outcome that means the crisis engulfing the party will drag into another month, Justice Michael McDonald adjourned the application by Liberal administrative committee member Colleen Harkin to scuttle the deal to save the former opposition leader until July 4.

And in a further blow to Ms Harkin, Justice McDonald awarded costs for Thursday’s brief hearing against her and strongly criticised the drafting of the application, describing the process as “fundamentally flawed”.

On Thursday afternoon, Justice McDonald told Ms Harkin’s lawyer, Cam Truong KC, it was a “remarkable oversight” that members of the Liberal Party’s administrative committee had not been named as defendants to the action.

“You have come to this court half-baked, you’ve failed to name the proper defendants, it doesn’t get much worse,” Justice McDonald said.

“My firm view … is that this application does not get off the runway this evening.”

Justice McDonald said all 19 administrative committee members needed to be served and told Mr Truong there had been “no proper basis” for the convening an urgent out of hours hearing on Thursday afternoon.

“Out of hours hearings are reserved for urgent matters,” Justice McDonald said.

“The moment the monies hit Mrs Deeming’s solicitors’ trust account, I don’t see any basis for this court convening an out of hours hearing.”

The Liberal Party’s investment arm, Vapold Pty Ltd, and a number of senior office holders were named as defendants.

The Supreme Court action – brought by Ms Harkin, an administrative committee member – had sought an injunction and a declaration the party’s $1.55m loan to Mr Pesutto, to enable him to discharge his $2.3m debt to Moira Deeming, was “invalid” or “void”.

The court heard that Mrs Deeming neither “consented” to or “opposed” the application.

Documents lodged with the court state reveal the bailout opponents are seeking an “injunction restraining the defendants from transferring and/or directing the transfer of funds in the amount of $1,550,000.00 belonging to the Liberal Party … to Mr John Pesutto … or to Mrs Moira Deeming,” the document states.

“Declaration that the motions purportedly passed by the Administrative Committee on 19 June concerning Mr Pesutto were invalid and/or void.”

Former Liberal leader Matthew Guy has blasted the Supreme Court action as “stupid”.

“I don’t know why it’s going to the Supreme Court, my understanding is it’s been paid, what are you gonna do injunct something that’s occurred?” he said.

A number of Liberals opposed to the party bankrolling the rescue deal are behind the legal move which threatens to further damage the embattled party.

Earlier on Thursday, Mr Pesutto’s camp said the ex-opposition leader had cleared his debt to Moira Deeming, with $2.3m being transferred to the Liberal MP’s lawyers on Thursday morning.

“Money now all paid to Mrs Deeming’s solicitors,” a member of the Pesutto camp told The Australian. Mrs Deeming has been approached for comment.

In addition to the $1.55m loan, Mr Pesutto has privately raised about $770,000 towards Mrs Deeming’s legal costs after her emphatic defamation case win in the Federal Court. He has already paid her $315,000 in damages.

The Liberal Party’s administrative committee voted in favour of lending Mr Pesutto the $1.55m at a meeting last Thursday.

Mrs Deeming said last week that she was shocked to learn Victorian Liberal Party chiefs used party funds to bail out Mr Pesutto with a $1.55m loan.

In a statement to The Australian, the Liberal MP revealed she had been told senior Liberal MPs and party officials originally backed a peace deal to settle Mr Pesutto’s legal bill without using party funds in exchange for her guaranteed preselection.

The former leader said he was “grateful and humbled” by the loan, which saves him from bankruptcy, a development that would force him to resign from parliament and trigger a by-election in Hawthorn.