Labour leader Andrew Little has been threatened with defamation action and given an ultimatum by the owners of Scenic Hotel Group.

Earl Hagaman, the founder of the hotel chain, said Little had a week to retract and apologise for comments he made last month about the management of a resort owned by Matavai Niue Limited.

If he did not, Little would face defamation proceedings.

Little made the comments outside Parliament’s debating chamber, and was therefore not covered by legal privilege.

Little said he was now “considering the issue and taking advice”.

“I will not be restrained from undertaking my constitutional role of calling the government of the day to account.”

On April 18, Labour called for the Auditor General to look into Scenic Hotels Group’s contract to manage the Matavai resort after it was discovered that Hagaman gave a $101,000 donation to National the month before the contract was announced in 2014.

Little said at that time that the close timing of the donation to the awarding of the contract “stinks to high heaven”.

Hagaman and wife Lani Hagaman said that after seeking advice, their solicitor had notified the Labour leader today that defamation proceedings would ensue “unless the position can be properly retrieved.”

Lani said their lawyers had confirmed their view that Little’s allegations were “false and defamatory”.

“We are asking for a full retraction and apology because no one should be verbally attacked and denigrated because they believe in democracy and the right to make their own unsolicited political choice on who they want to give a donation to.

“The decision to make the donation was completely unsolicited and was Earl’s personal decision and nothing to do with the Scenic Hotel business.”

Lani criticised Little’s use of his Parliamentary role to attack their business. She said her and Earl did not “come from power or privilege” and had strived to provide support to regional economies.

“The position Andrew Little holds is one of power and privilege. It should be a privilege to be elected into Parliament and work hard for the people of New Zealand, rather than to cast unjustifiable slurs on people because they have made a donation to the party of his prime political opponent.”

The Matavai is owned by the Niue Tourism Property Trust on behalf of the Government of Niue, which owned the resort before then.