The Liberals sent a lawyer's letter to Conservative Leader Stephen Harper's office, after the Tory Leader refused to say sorry for linking the Grits to organized crime.
On Friday morning, Prime Minister Paul Martin demanded an apology from Harper for using the words "corruption" and "organized crime" in describing the Liberals in the House of Commons on Thursday.
"Yesterday in the House of Commons, Mr. Harper made a statement concerning organized crime which is false,'' Martin said, from Kelowna, B.C.
"Canadians deserve better. They want to see a national debate. They do not want to see a repetition of the kinds of acts and activities that we have seen during question period in the House of Commons over the course of the last year and a half.''
But Harper refused to retract his allegation, saying it's the Liberals who should apologize for bilking millions from taxpayers in the sponsorship scandal.
Harper can't be sued for the remarks made in the House of Commons, which is protected from defamation laws.
But that didn't stop the Liberal party from sending Harper a legal warning shot in the form of a letter through the Blake, Cassels and Graydon law firm.
"Mr. Harper (was informed) in writing of our intention to defend the party vigorously against any false smears such as those he uttered (in the Commons) under the protection of privilege," the prime minister's spokesperson Scott Reid told the Canadian Press.
"Mr. Harper has a chance to show leadership by admitting he went too far. He should simply do the right thing.
"At minimum, he should know the party will not tolerate false smears from he and his surrogates."
Harper made his comments while he was tabling a motion of non-confidence in the House on Thursday. It is to be voted on Monday, and will likely bring down Martin's minority government.
The Conservative leader said that Martin and the Liberals had lost the moral authority to govern, even though Justice John Gomery's report on the sponsorship program had exonerated the PM.
"If I belonged to an organization and led an organization that was found to have been involved in a massive corruption ring using organized crime to defraud taxpayers, I cannot understand why anyone found in that position would want to be associated with that organization," Harper said.
A nasty campaign
With just days left before a crucial vote that could spark a winter election, the language from the Tories and the Liberals has been particularly nasty, setting the tone for what could be a foul few weeks of campaigning.
In an exchange in the House of Commons on Friday, Conservative MP John Reynolds refused calls from Finance Minister Ralph Goodale for an apology over Harper's comments.
Reynolds then quoted a backroom Liberal as saying the government is spending money like 100 monkeys on drugs.
Reynolds also made comments on Thursday that made the papers. He called Immigration Minister Joe Volpe a "sleazebag" -- after Volpe accused Conservatives of being anti-immigrant for voting down one of his bills.
"Mr. Volpe is a sleazebag,'' said Reynolds."I imagine that's the kind of campaign he'll want to run in Ontario but we'll fight back very hard.''
Volpe, who has come under fire for $56,000 in office expenses that included some very expensive pizza dinners, fired back, accusing Reynolds of running up his own expenses.
"He spent $138,000 last year travelling," Volpe said. "What did he do? Travelling by luxury jet everywhere, drink champagne, slug down a little bit of caviar."
Meanwhile, Scott Reid, Martin's communications director, told The Globe and Mail that the Liberals will get the transcripts of all comments made outside the House, and could take legal action.
"We will not allow them to campaign on the basis of falsehoods and smears and if they need to get a lawyer's letter to mind, then they will," Reid said.
If the non-confidence motion passes on Monday, the prime minister is widely expected to ask Gov. Gen. Michaelle Jean to dissolve Parliament on Tuesday, leading to an election on Jan. 16 or 23.
