The Speaker, Peter Slipper, and his former staffer, James Ashby, have been ordered to appear in person at a Sydney court tomorrow.
Mr Slipper and Mr Ashby, will sit down face-to-face in front of a court-appointed mediator in an attempt to resolve their bitter legal dispute.
In the Federal Court today, Justice Steven Rares also ordered the federal government to send a representative with the authority to make decisions to the mediation after it failed to get a settlement negotiated with Mr Ashby last week over the line today.
The mediation will deal with all the issues in dispute between the parties, including Mr Slipper's application that the sexual harassment suit bought by Mr Ashby should be thrown as an abuse of process, Mr Ashby's defence to that allegation, the original sexual harassment case and the deed of settlement between the Commonwealth and Mr Ashby.
"At the moment there is a possibility that it can all be resolved by people being forced to go and talk to one another," Justice Rares said.
If the mediation fails, the parties will return to court on Thursday so the hearing of the abuse of process application, which is part-heard, can continue.
Justice Rares told the parties they may have to compromise, including withdrawing allegations made against each other, to achieve a resolution.
But Michael Lee, SC, for Mr Ashby, said today's hearing should be allowed to continue because Mr Ashby and his legal team had been subjected to very serious allegations and "we are entitled to be vindicated".
Mr Ashby "has been more demonised than the Exorcist", Mr Lee said.
He also criticised the Attorney-General, Nicola Roxon, for her comments last Friday following news the Commonwealth had negotiated a settlement with Mr Ashby.
Ms Roxon said: "The case should now be dropped against Mr Slipper as well and the whole matter should be brought to a speedy conclusion in coming days."
Mr Lee said her comments were "unprecedented" and "undermines, we say, legitimate public confidence in the judiciary for there to be a suggestion that my client should be made somehow to drop his case".
Earlier today, Mr Lee said the settlement, under which the Commonwealth would pay Mr Ashby $50,000, had hit a hurdle, with the government now requesting that Mr Ashby sign a deed acknowledging that the government does not have any ongoing liability.
"[These requirements] simply aren't in the express terms of the agreement reached on September 27," Mr Lee said.
"Your honour should make an order in accordance with that agreement."
But Justice Rares said this appeared to simply be a lack of "consensus on the wording".
He also said that even if the allegations were proven they would not demand a damages payout even close to the maximum $110,000 sum allowed under law.
"This case cannot come within a bull's roar of that," he said. "We’re not talking about something that has gone on that would generate a large liability - we’re not talking about a huge amount of money."
Julian Burnside, QC, for the Commonwealth, said the government did not withdraw its allegations that Mr Ashby's lawsuit is vexatious and bought for an improper purpose.
"The reason for the settlement is that in a no-cost jurisdition it was going to cost a lot of money to get no result," he said.
Mr Burnside also argued that, as Mr Ashby had agreed to settle with the Commonwealth, there should be no other case to pursue against Mr Slipper.
"If there’s any life left in this case for any reason it should be sent to mediation without wasting any more of the court’s time."
The Commonwealth, not Mr Slipper, is Mr Ashby's employer.
Slipper infuriates judge with no-show
Justice Rares sternly rebuked Mr Slipper for failing to attend today's hearing, either in person or through legal representation.
"He's not a man in penury, he's the Speaker of the House of Representatives and I'm sure he gets paid for it," Justice Rares said.
"He has a responsibility to the public to be here and there are clear consequences for litigants who don't turn up, which I would have thought he would be aware of.
"I'll order him to attend personally ... there's absolutely no reason why he's not here today."
Mr Burnside said that it had been a "difficult time" for Mr Slipper and that he may have stayed away from court to avoid being pursued by the media.
He also said that the Speaker's failure to have legal representation at the hearing was related to "financial considerations".
But Justice Rares said that the court had received a letter over the long weekend in which Mr Slipper had indicated that it was not convenient for him to attend the hearing, and asking the judge to direct Mr Ashby to undertake mediation if he wished to pursue the matter further.
"But it doesn’t mean he can simply tell the court that he happens to find it inconvenient to be here," he said.
Mr Slipper has yet to hire new lawyers after recently parting company with the Melbourne-based solicitor Josh Bornstein, of the firm Maurice Blackburn.
The stood-aside Speaker is believed to be in Canberra today on Business.
Mr Burnside said Mr Slipper would attend court tomorrow, and Mr Lee gave the same assurance on behalf of Mr Ashby.