Victorian balance of power MP Geoff Shaw will plead not guilty to 24 dishonesty charges after a magistrate scuttled an agreement that would have allowed him to avoid conviction and keep his seat.

Magistrate Charles Rozencwajg on Thursday ruled that a diversion program would not be suitable for the Frankston MP, despite Shaw’s lawyers and prosecutors saying the matter was resolved.

Shaw, 46, is accused of using his parliamentary car and fuel card to run his hardware business throughout 2011.

Defence lawyers and prosecutors had agreed that Shaw be put on a diversion program and avoid conviction if he accepted responsibility for a single charge of obtaining financial advantage of deception.

By avoiding a guilty finding, Shaw would have been able to keep his seat.

But Mr Rozencwajg ruled that a diversion program was not suitable.

“I’ve given this matter a great deal of thought and come to the conclusion that diversion is not appropriate in these circumstances,” he said.

Prosecutor Ray Elston QC said the original 23 charges of obtaining financial advantage by deception and one charge of misconduct in public office would be reinstated.

Shaw’s barrister Robert Richter QC told the Melbourne Magistrates Court his client would plead not guilty to all charges.

Mr Richter previously told the court that the consequences of a guilty finding would be disproportionate.

“Were he to be subjected to a non-conviction bond for example, he would still lose his parliamentary seat,” he said on Wednesday.

“This is a matter of huge consequences.”

The Liberal-turned-independent MP holds the balance of power in the lower house.

The 24 charges relate to the alleged misuse of his petrol card and parliamentary car to run his Southern Cross Hardware business between February and December 2011.

He is accused of dishonestly claiming a total of $2096.56 worth of fuel from Melbourne’s southeast, country Victoria and NSW, and in the Adelaide suburb of Elizabeth Vale.

The single representative deception charge, which related only to the use of the fuel card, was struck out.

Shaw has sold his interest in the hardware business and returned his parliamentary car, the court has heard.

The matter will return to court on Monday for a mention with a contest mention hearing to be held on February 17.

Shaw was excused from attending Monday’s hearing.

He made no comment as he left court on Thursday.

If a guilty finding is made against Shaw and the independent MP loses his seat, a by-election will have to be held in Frankston ahead of the statewide poll in November next year.