The NSW Court of Appeal on Tuesday rejected a legal challenge fronted by Sydney businessman Matthew Camenzuli, who sought to have the "purported" preselection of the MPs declared invalid.
If he succeeded, Prime Minister Scott Morrison faced the prospect of losing ministers Sussan Ley and Alex Hawke and backbencher Trent Zimmerman, as well as candidates in nine other seats, on the eve of next month's election.
The panel of three NSW Appeal Court judges ruled the dispute over preselection processes was not something they had the jurisdiction to intervene in.
"The nomination and endorsement provisions do not confer statutory rights upon candidates at the anterior stage of preselection," Justice John Basten said on Tuesday.
"The dispute is not justiciable."
Even if the court did have jurisdiction, the federal division did not exceed the "broad power of intervention" conferred to it under its constitution, and the challenge would have been rejected, they found.
The candidates' preselections were upheld, in a major win for the prime minister, and Mr Camenzuli - a NSW party executive - was on Wednesday expelled for instigating the legal challenge.
It is understood the NSW Liberal director used "campaign powers" to remove Mr Camenzuli, fearing further court action.
But within hours Mr Camenzuli had lodged an application for leave to appeal Tuesday's decision in the High Court.
The application argues the Appeal Court erred in its finding it had no jurisdiction, citing a recent Victorian Courts of Appeal decision on Labor preselections.
The court in that case did consider it had the power to step in despite it involving an internal party dispute.
"The applicant seeks special leave to appeal with a view to this court resolving this difference of opinion between the NSW and Victorian courts of appeal," the application reads.
The constitution of the Liberal Party has also been misinterpreted by the appeal court judges, Mr Camenzuli's lawyers said, when they found the federal division's powers were broad enough for it to intervene.
The legal action was prompted when the federal Liberal party division intervened and temporarily took over the NSW branch in March, after extensive delays in selecting candidates in key seats.
A panel - consisting of Mr Morrison, NSW Premier Dominic Perrottet and former federal party president Chris McDiven - were appointed to finalise the last batch of candidates.
The appeal application again casts doubts over those candidates, but Mr Morrison on Wednesday said the prospect of the matter proceeding to the High Court won't impact his considerations on when to call the election.
The latest an election can be called is April 18, for a May 21 poll.
