A long-running legal feud, between two former high-profile Liberals and both the prime minister and Canada's ambassador to the U.S., has ended with a secret settlement.

The Liberals issued a statement on Friday saying the lawsuit brought by Tony Ianno, a former Liberal MP, and his wife Christine Innes claiming defamation has been settled "by mutual agreement of the parties."

"The Liberal Party of Canada acknowledges the many years of public service and deep and valued contribution that Ms. Innes and the Honourable Tony Ianno have made to public affairs and the people of Canada," the statement reads.

"The Liberal Party of Canada regrets the circumstances that led to this lawsuit. The parties are pleased to have resolved this litigation and will not be making further comment."

The parties agreed to keep terms of the settlement confidential, the release said.

Ianno, a former junior minister in then-Prime Minister Paul Martin's cabinet, joined the defamation suit launched by Innes after she was barred from running for the Liberals in a byelection for the former Toronto-area riding of Trinity–Spadina, and prohibited from seeking any Liberal nomination for the 2015 general election.

Innes had filed the April 2014 suit against Justin Trudeau, then the Liberal party leader, and MacNaughton, who was the co-chair of his Ontario campaign team, claiming $1.5 million in damages to her reputation. 

'Bullying and intimidation' claims

MacNaughton, who is now Canada's top diplomat in Washington, informed her of the decision by email, alleging "bullying and intimidation" tactics used by her campaign team.

Ianno sought another $1.5 million for damage to his reputation, lost business opportunities and emotional suffering, suing MacNaughton but not Trudeau.

Innes was blocked from running after complaints from several young Liberal volunteers, who alleged they were bullied and pressured by Ianno. They claimed he warned them they would have little future in the party if they didn't support Innes.

There were also allegations Ianno bad-mouthed both Trudeau and Chrystia Freeland, then the Liberal MP for the neighbouring riding of Toronto Centre.

Ianno maintained the allegations of bullying were concocted to disguise the real reason Innes' candidacy was blocked — that the Trudeau team wanted to ensure she would not challenge Freeland for the nomination in the new riding of University–Rosedale, contrary to Trudeau's pledge to hold open nominations in every riding.

"MacNaughton deliberately sacrificed Ianno's reputation in order to create a smokescreen to shield Trudeau from public outcry for breaching his public vow of non-interference in local riding nominations," Ianno says in his statement of claim.

In a statement of defence responding to Innes' lawsuit, Trudeau and MacNaughton said their comments about the blocked candidacy were fair, truthful and a matter of public interest.