Witnesses say Melissa Price made disparaging remarks and said ‘For the Pacific, it’s always about the cash’

The environment minister, Melissa Price, has been accused of misleading the House over gauche remarks witnesses insist she made to the former president of Kiribati during a chance encounter in a Canberra restaurant.

One witness, the Labor senator Patrick Dodson, wrote to the minister on Wednesday declaring he was “appalled” by her remarks to the visiting Pacific official Anote Tong on Tuesday night.

Dodson says he introduced Price to Tong at the restaurant and she then said: “I know why you are here, it’s for the cash. For the Pacific, it’s always about the cash. I have my cheque book here, how much do you want?”

Dodson’s account is backed by another witness, Phil Glendenning, the director of the Edmund Rice Centre and president of the Refugee Council of Australia. He told Guardian Australia the Labor’s senator’s account of the incident was “150% correct”.

The former Kiribati president was having a meal with Dodson, Glendenning and Simon Bradshaw from Oxfam, and Price and staff were eating in the same venue.

Compounding a scrappy week for the Morrison government ahead of a byelection that could cost the Coalition its one-seat majority, Labor used question time to demand an explanation from Price about the incident.

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The environment minister told the chamber she was “very concerned” if the conversation had caused offence, and she declared she “100% disagreed” with Dodson’s account of their encounter in the restaurant.

Labor also objected to Price’s answer to a separate question about the Great Barrier Reef Foundation provided in question time on Tuesday, when the minister said “a small amount of money” could be spent on administration. She said the costs were capped at 5%.

The manager of opposition business, Tony Burke, said the grant agreement stipulates that up to 10% of the funds can be spent on administration, “meaning the amount could be up to $80m”.

With the new environment minister on the back foot, the opposition moved later in the day to suspend the standing orders in order to move a motion in the House blasting Price for misleading the parliament.

Labor demanded she attend the chamber and correct the record.

Burke said by saying she disagreed “100%” with Dodson’s account of events in the restaurant, the minister had left herself “no room to move”.

He said misleading the House was a sackable offence and “this minister provided false information about what happened last night and false information about what is in black and white in a contract”.

The effort to suspend the standing orders was lost.