Court rejects ‘half-baked’ legal challenge to Pesutto payment

A Supreme Court judge has rejected as “half-baked” an attempt by Moira Deeming’s supporters to stop party funds being lent to former Liberal leader John Pesutto hours after the money had already been paid.

Justice Michael McDonald was scathing in his assessment on Thursday of an emergency application for injunctive relief by Colleen Harkin, a member of the party’s administrative committee who voted against lending Pesutto $1.55 million to help him avoid bankruptcy.

John Pesutto arrives at the party’s administrative committee meeting last Thursday night to plead his case.Credit: Luis Enrique Ascui

McDonald said it was a “remarkable oversight” that the application had been served on directors of the party entity that made the loan, but not any administrative committee members responsible for last Thursday’s decision. He said he was perplexed about what claim Harkin had now that the money had been transferred into a trust account controlled by Deeming’s lawyers.

The judge also questioned why Harkin had sought an after-hours court hearing, which are reserved for urgent matters.

“My firmly held view is this application does not get off the runway this evening,” McDonald told Harkin’s counsel, Cam Truong, KC. “The moment the monies hit Ms Deeming’s solicitor’s trust account, I didn’t see any basis for this court convening an out-of-hours hearing.”

The judge adjourned the application until July 4.

“A week is plenty of time for you to get the paperwork in order,” he said.

Truong said Deeming neither supported nor opposed the application.

As this masthead reported on Thursday morning, Pesutto has cleared his $2.3 million debt owed to Deeming after her successful defamation claim against him.

The Liberal Party entity Vapold paid Deeming $1.55 million in line with a decision by a majority of the party’s 19-person administrative committee to lend the money to Pesutto, with Pesutto providing the balance from his own fundraising efforts.

Confirmation of the payments did not stop Harkin, a staunch supporter of Deeming, from seeking to challenge the use of party funds in court.

Moira Deeming won her case against John Pesutto.Credit: Luis Enrique Ascui

Harkin applied to the Supreme Court for an interim injunction that, if successful, would have temporarily restrained any transfer of party funds to Pesutto or Deeming.

Harkin believes the loan was made in breach of the party’s constitution, which prohibits using party funds for the benefit of individual members, and that the administrative committee was not provided enough information or time to make a valid decision.

The three named respondents on the application are the directors of Vapold – former state treasurer Alan Stockdale, current party treasurer Karyn Sobels and Christopher Pearce. Counsel for the directors Daryl Williams, KC, was not required to make any submissions.

The administrative committee voted last Thursday to direct Vapold to extend the loan to Pesutto. Although the vote was conducted by a secret ballot to protect its members from recriminations and the margin not disclosed at the meeting, sources on both sides of the question believed it was decided by as little as one or two votes.

Sobels was absent from the meeting and did not vote. Pesutto would have become bankrupt and been forced out of parliament if he had not been able to pay the legal costs he owed Deeming.

Harkin, as part of her legal challenge, sought access to legal advice provided to the party’s state director, Stuart Smith, about whether the proposed loan was permissible under the party’s rules. She has also questioned the unprecedented use of a secret ballot by the administrative committee.

Lawyers acting for Harkin had warned the Vapold directors against rushing to make any payment to head off her legal challenge.

Deeming’s defamation case, in which she successfully sued Pesutto for making the false inference that she associated with neo-Nazis, was funded by NSW property developer Hilton Grugeon.

Credit: Matt Golding

Last week, this masthead revealed that, if not for the intervention of a dozen unidentified party figures and supporters who agreed to personally guarantee $900,000 of the $1.55 million loan, the proposed rescue package would have collapsed.

The last of these supporters agreed to sign as guarantor only hours before the administrative committee met to consider the proposal. Pesutto guaranteed the remainder of the loan with his superannuation savings and other assets.

The money was lent to Pesutto at a commercial rate of interest, understood to be just under 6 per cent, over a nominal 30-year period. To repay his debt to the party, Pesutto will embark on a further round of fundraising.

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