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In the world of Liberal Party politics, they were nicknamed the ''Bamboo House Generals'', a cabal of Peter Costello loyalists who would lunch with the federal Treasurer at the upmarket Chinatown restaurant and plot strategy.

For those inside the Costello camp - one-time best friend Michael Kroger and a group of staffers that included Michael O'Brien, Kelly O'Dwyer, Mitch Fifield, Tony Smith and Scott Ryan - the boozy lunches are remembered fondly.

For those outside the camp, the ramifications could be brutal.

''We would inevitably end up with a running-through of who was on 'the list','' said one occasional guest. ''It was … a list of those people in the party who had crossed Peter in some way.

''By the end of lunch, we would brief out stories to journalists about some of those on 'the list', or to undermine political rivals. Just never while the waiters were in the room. Peter was always careful what was said when the waiters were in the room.''

The tale of the Bamboo House Generals would have been a footnote in Liberal Party folklore, if it had not been for the events of the past two months. The relationship between the Kroger and Costello factions has not only broken down, but spilled over into a bitter turf war over preselection in the blue ribbon Liberal seat of Kew.

It's a battle that has left Premier Denis Napthine embarrassed and a respected minister, Mary Wooldridge, pondering her future. With a state election looming, factional infighting is threatening to tear the party apart.

With Costello and Kroger in the background - now in opposing camps - Kew was always going to be a fight.

In 2005, former Liberal state president Joy Howley provided a rare glimpse into the world of Liberal politics under the Kroger-Costello regime, telling The Age that many in the party were scared to speak their mind in case they were ''punished''. She said there was an element of political ''thuggery'' within the party. ''There are stories of some members receiving foul phone calls … Sometimes I could weep about my party.''

Of Costello, she said: ''It's sad that Peter cannot understand that members can give him strong support while also supporting other people.''

In the modern-day battle, Kroger is now firmly aligned with Prime Minister Tony Abbott and his parliamentary secretary Josh Frydenberg, who was pushing for Tim Smith in Kew.

On the other are some Costello staffers who learned to ply their trade at Bamboo House, and supported Mary Wooldridge's campaign. It's a group that has done well.

O'Brien is now Victoria's Treasurer. O'Dwyer is the member for Costello's old seat of Higgins. Smith is the member for Casey. Fifield and Ryan were the top two names on the Liberal Party's Senate ticket at the last election, ahead of Helen Kroger, Michael Kroger's ex-wife.

As the Liberal Party licks its wounds and debriefs after the Kew debacle, a key question will be what role Senators Ryan and O'Dwyer played in Wooldridge's bid.

According to Tim Smith's camp, the plan to move Wooldridge to Kew was taken to Napthine by state Liberal president Tony Snell, another Costello team member.

That Smith, the former mayor of Stonnington, had spent two years cultivating local networks was deemed ''irrelevant''.

''They thought that Denis, as Premier, could blast Smith out by getting behind Mary and writing a letter of support,'' said one senior party figure. ''Sadly, it didn't work out that way.''

Publicly both Ryan and O'Dwyer have denied being the architects of Wooldridge's campaign for Kew. In private, they dismiss the roles they are alleged to have played as conspiracy theory. To those theorists, the endgame of the Costello faction was to ensure Frydenberg did not have a man he wanted [Tim Smith] installed in his own electorate. ''Instead they wanted Josh looking over his shoulder at someone they had influence over. The problem was they were never, ever going to get the numbers.''

The battle for Kew has also underscored some tensions between the Victorian arm of the Liberal Party and the federal leadership - including the office of the Prime Minister - which is disappointed by the poor electoral performance of the state.

Federally, Victoria lost two seats at the 2010 election, while all other states won seats - a fact that is still blamed in the party for the hung Parliament that cost Abbott power. Last election the Coalition won 16 seats out of 37 in Victoria.

Of particular frustration to Abbott's office was the plan to run a candidate, 29-year-old Chris Crewther, in the seat of Mallee against the Nationals.

In retaliation, the Nationals ran a grass-roots campaign against Sophie Mirabella in Indi, which ultimately cost her that seat.

The Age has been told that in the run-up to last year's election, federal director Brian Loughnane asked to brief the Victorian administrative committee on the campaign implications before it made any decision on Mallee. When Loughnane's office called to book his flights, he was told ''not to bother'' as the decision to run in the Mallee had already been made.

''If you look at what happened in Kew against the backdrop of the election decisions, you can see why so many forces gathered around Tim and not around Mary,'' The Age was told.

The battle between the factions may be damaging for the Premier, but it has not ended yet.