Victoria's opposition leader tarred one of his own MPs with "the Nazi brush" in a "campaign of destruction", the Federal Court has heard during the first morning of a defamation case.

Moira Deeming, a first-term former Liberal MP, is suing Victoria's Opposition Leader John Pesutto for defamation after he linked her appearance at an anti-trans-rights rally to a group of neo-Nazi gate crashers.

"He went on a campaign of destruction against my client," Ms Deeming's barrister, Sue Chrysanthou SC told the court.

The case, which started at the Federal Court in Melbourne this morning before Justice John O'Callaghan, is expected to continue for two weeks and hear from senior Liberal Party members.

In March 2023, just four months after Ms Deeming was elected to an upper house seat, she attended a "Let Women Speak" rally featuring international anti-trans-rights activist Kellie-Jay Keen.

That rally was gatecrashed by neo-Nazis, who marched on the steps of parliament and performed the now-illegal Nazi salute.

Ms Keen vehemently denies any associations with neo-Nazis. Mr Pesutto has since settled a defamation case with Ms Keen and the ABC has issued a clarification.

Mr Pesutto later criticised Ms Deeming's presence at the rally and initially suspended her from the parliamentary Liberal Party for nine months.

She was expelled entirely after she threatened legal action against her party room boss. She now sits in parliament as a crossbencher.

Ms Chrysanthou told the court Ms Deeming had a good reputation before the March 2023 rally.

"Mr Pesutto comes to this court and asks your honour to find, that before he tarred her with the Nazi brush in March last year, she had a bad reputation," Ms Chrysanthou said in her opening statement.

"She would never have been elected by her constituents in 2022 if she did not have a good reputation in the community, she should not have been asked by [Mr Pesutto] … to run for party whip.

"It was with his full and complete support and at his instigation that that occurred."

Both Mr Pesutto and Ms Deeming attended court for the first day of the trial, flanked by their barristers.

The pair are being represented by two of the country's best-known defamation lawyers in Ms Chrysanthou for Ms Deeming and Matthew Collins KC for Mr Pesutto.

Ms Deeming is seeking aggravated damages, alleging she was defamed by Mr Pesutto in media releases, a press conference and broadcast interviews.

In a pre-trial hearing, Ms Deeming's lawyers claimed Mr Pesutto's comments carried 67 defamatory imputations — but Mr Pesutto has rejected the claims, saying he has never called Ms Deeming a neo-Nazi, white supremacist or anything similar.

Mr Pesutto is seeking to rely on the legal defences of honest opinion, contextual truth, public interest defence and qualified privilege.

His legal team has earlier argued Ms Deeming "is likely to have caused damage to her own reputation" by making "false assertions" that she had been branded a Nazi.

This hearings are being broadcast by the Federal Court on YouTube, with Justice O'Callaghan warning the public is permitted to observe, but not participate in the hearing or record the live stream.

The hearing continues.