Peter Cruddas gave £500,000 just days after being introduced in the Lords (Image: PA)

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Boris Johnson is facing legal action after making a billionaire a Lord against watchdog advice – then taking a £500,000 donation from him days later.

Serial donor Peter Cruddas handed his largest ever sum to the Conservatives in February – just three days after taking up his seat in the upper chamber.

The City tycoon has since denied there was a link between the donation and his peerage, saying: "That would be corruption and that’s definitely not the case."

But the Good Law Project – which has brought a string of judicial review cases against the Government over the award of contracts during the pandemic – now plans to challenge his appointment in the courts.

The GLP's pre-action letter sent to the government on Friday argues the peerage "was unlawful because of apparent bias".

It adds: "A fair-minded and informed observer, presented with the facts of the matter, would conclude there was a real possibility or danger of bias in the defendant's decision-making".

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The letter argues the timing of donations was "of particular significance".

It goes on: "A clear inference is that the past donations and the prospect of future donations were taken into account when the defendant decided to grant the peerage.

"A decision taken in whole or in part on the basis of such a consideration is unlawful."

Lord Cruddas, who founded CMC Markets, is a former Tory Treasurer who with his wife is worth £1.3bn, according to the Sunday Times Rich List.

The House of Lords Appointments Commission said it was unable to support his nomination “after carrying out its vetting”.

But in an unprecedented move, Boris Johnson defied the advice of the independent Commission and appointed Lord Cruddas anyway.

An ethics watchdog had warned Boris Johnson not to appoint Lord Cruddas
(Image: Justin Williams / Rex Features)

The Prime Minister went ahead and appointed Cruddas, pictured, anyway
(Image: REX/Shutterstock)

It’s understood the Commission pointed to court action which followed Lord Cruddas being filmed talking about donations in a Sunday Times newspaper sting in 2012 – when he was Tory Treasurer.

In the transcript of the 2012 meeting, published by the Court of Appeal, Lord Cruddas told the undercover journalists a £250,000 donation would be “premier league” and in that case, “the first thing we wanna do is get you at the Cameron and Osborne dinners”.

The Conservative Party has a publicly-declared 'Leader's Group', in which donors who give at least £50,000 attend private meals with the PM and senior ministers. The party insists it follows electoral law.

The Electoral Commission found in 2012 there was 'no evidence' any rules had been broken, and Lord Cruddas won £180,000 in damages from the Sunday Times in 2013 after he won a High Court claim for libel and malicious falsehood.

Those damages were however reduced to £50,000 when one part of the ruling was overturned by the Court of Appeal in 2015.

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Three Appeal Court judges said the alleged meaning that "in return for cash donations to the Conservative Party, the Claimant [Lord Cruddas] corruptly offered for sale the opportunity to influence government policy and gain unfair advantage through secret meetings with the Prime Minister and other senior ministers" was "substantially true".

While Lord Justice Jackson said Lord Cruddas “was not suggesting any form of criminal offence under the Bribery Act”, he wrote in the 2015 ruling: "On a proper reading of the transcript of a meeting on 15 March 2012, the following is clear.

“Mr Cruddas was effectively saying to the journalists that if they donated large sums to the Conservative Party, they would have an opportunity to influence Government policy and to gain unfair commercial advantage through confidential meetings with the Prime Minister and other senior ministers.

"That was unacceptable, inappropriate and wrong."

Mr Maugham said: "The independent watchdog didn't think Peter Cruddas should be given a peerage. But Boris Johnson ignored their advice and appointed him anyway.

"Just three days after he entered the Lords, he gave the Conservatives half a million quid. I don't think this is lawful.

Lawyer Jo Maugham said: "The independent watchdog didn't think Peter Cruddas should be given a peerage. But Boris Johnson ignored their advice and appointed him anyway"
(Image: Getty Images)

"I think a fair-minded observer, presented with the facts, would conclude there was a real possibility or danger of bias in the Prime Minister's decision-making."

Defending his decision to appoint Lord Cruddas in December, Boris Johnson said: “Firstly, the most serious accusations levelled at the time were found to be untrue and libellous.

"In order to avoid any ongoing concern, Mr Cruddas resigned from his post, and offered an apology for any impression of impropriety, and reflecting his particular concern for integrity in public life.

“An internal Conservative Party investigation subsequently found there had been no intentional wrongdoing on Mr Cruddas’ part.

“The events in question date back eight years, and the Commission has found no suggestion of any matters of concern before or since that time.”

A Downing Street spokesman said: "All individuals are nominated in recognition of their contribution to society and their public and political service.

"Lord Cruddas has a broad range of experiences and insights across the charitable, business and political sectors which allow him to make a hugely valuable contribution to the work of the Lords."

Lord Cruddas declined to comment to the Mirror on his appointment, but later told the Telegraph: "This is a regular donation.

"I’ve given £3.5m to the Conservatives and £1.5m to the Vote Leave campaign. If people are suggesting there’s a linkage between the [donation and my peerage], well I’ve been donating since 2010.

"I donate as the party requires. I helped them fight the local and mayoral elections and if anyone wants to try and link it they can, but it’s definitely not true. That would be corruption and that’s definitely not the case."