Colleen Harkin, a member of the Victorian branch's administrative committee, in June launched the Supreme Court challenge against the loan handed to John Pesutto.
Mr Pesutto had been ordered to pay $2.3 million in legal costs to MP Moira Deeming after the Federal Court found he defamed her by implying she was associated with neo-Nazis.
He paid $315,000 in damages and raised about $750,000 through wealthy backers and a GoFundMe campaign, with the remaining $1.55 million in costs leaving him facing bankruptcy.
The Victorian Liberals' administrative committee in a June 19 meeting agreed to loan Mr Pesutto the $1.55 million, but Ms Harkin and four other committee members challenged the decision.
On Thursday, lawyers representing the group told the Victorian Supreme Court the parties had agreed to undergo mediation by October 31.
"If we could resolve the entirety of the dispute ... that would be ideal," barrister Cam Truong KC told the court.
"If not, we bat on."
Barrister Joel Silver, representing most of the defendants, told the court state party president Philip Davis and Karyn Sobels, chair of party entity Vapold, would attend the mediation.
Alan Stockdale and Christopher Pearce, also connected to Vapold, could come in person as well if needed, Mr Silver said.
Mr Truong pushed for all 18 defendants - including current Victorian Liberal leader Brad Battin and federal Liberal MP Dan Tehan - to appear for the mediation.
"There would be the best prospects of resolution if everyone is there and everyone could hear from the prospective sides," he told the court.
"The mediator could do their thing to try and nut out a deal."
Justice Andrew Keogh said that could mean the mediation is delayed further, so he instead allowed for only some of the defendants to appear.
He said the parties could contact his chambers for any changes to the orders if it was going to push back the proceedings.
"The bottom line is mediation needs to occur - it's in everyone's best interests," Justice Keogh said.
The judge flagged that if mediation was unsuccessful, the case could go to trial early in the new year.
Mr Truong told the court a five-day hearing would be needed to resolve the issue if mediation failed.
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