Geoffrey Rush will receive $2.9m in damages from Sydney’s Daily Telegraph after a series of articles accusing the Oscar-winning actor of “inappropriate behaviour” towards a female actor.

On Thursday the federal court heard lawyers for Rush and the Telegraph had agreed the actor would receive $2m for past and future lost earnings after tax, on top of an $850,000 payment ordered by Justice Michael Wigney in his judgment in April.

It means Rush now holds the record for the largest defamation payout to a single person in Australia after the Victorian court of appeal last year slashed the actor Rebel Wilson’s damages payout from $4.5m to $600,000 over defamatory articles in Woman’s Day magazine.

Rush’s barrister, Sue Chrysanthou, said on Thursday Rush had offered in early 2018 to settle in exchange for an apology and $50,000 plus costs, but the publisher did not respond.

In April, Wigney ruled the Telegraph defamed Rush by alleging he “engaged in inappropriate behaviour” towards the actor Eryn Jean Norvill during a theatre production of King Lear.

The Daily Telegraph front-page story, published under the headline “King Leer” in November 2017, reported the Sydney Theatre Company had received the anonymous complaint but provided no further details.

Follow-up articles were published the next day, which Wigney said “doubled down” on the story.

Wigney found the reports were “in all the circumstances, a recklessly irresponsible piece of sensationalist journalism of the worst kind”, estimating that Rush’s earnings as an actor would suffer for as long as two years following the “vindication of his reputation”.

The Sydney newspaper’s publisher, News Corp, is appealing against Wigney’s judgement, saying the judge’s conduct during the case “gave rise to an apprehension of bias”.

That appeal is yet to be heard, but earlier on Thursday News Corp had sought to have Wigney recuse himself from hearing an application made by Rush’s lawyers for an injunction against the Telegraph republishing some of the allegations made against the actor.

Wigney ruled against News Corp, saying he was “not satisfied there is any basis for me to recuse myself and I decline to do”, meaning he continued to hear the injunction application, which continues.

On Thursday the Telegraph’s barrister, Tom Blackburn SC, said the injunction was a “blunt instrument” that would have “a chilling effect on future reporting of an issue which is of enormous significance and importance, which I can conveniently refer to as ‘me too’”.

But Chrysanthou said any issue of free speech was “diminished” by the injunction, “first, because of the extremely narrow compass of the restraint sought, and, second, because of the nature of the unsuccessful defence in these proceedings”.

The injunction, she argued, only related to allegations about Rush’s conduct in relation to the Sydney Theatre Company production King Lear, and did not extend to fair and accurate reporting of the appeal, for example.

“Ultimately, if it is a fair report, it hasn’t breached the order, [but] the respondent [News Corp] has shown disrespect for the court’s decision and cannot be trusted to abide by the court’s ruling as far as the truth of these imputations are concerned,” Chrysanthou said.

Earlier, Blackburn unsuccessfully sought to have Wigney stand aside by outlining what he argued were incidents during the Rush trial that suggested “preferential treatment” by the judge towards the actor.

Telling Wigney it gave him “no pleasure to make the submissions”, Blackburn said comments made by the judge during pre-trial hearings last year gave the impression he believed the Telegraph had “behaved recklessly” before publishing the articles and had “taken a view as to the [Telegraph] and the merits of their case”.

Blackburn said a comment made by Wigney during a pre-trial hearing in March last year that it appeared the Telegraph’s subeditors “simply could not help themselves” in relation to the “King Leer” headline at the centre of the defamation case gave the impression the newspaper was “a hasty and intemperate publisher and, at the outset, a publisher that couldn’t be trusted”.

He also pointed to comments made a month later, in April, when Wigney said the Telegraph’s attempts to amend their defence in the case “threatens to stymie or frustrate” Rush’s desire for the case resolved as quickly as possible.

“It would not be unfair to say that while [News Corp subsidiary] Nationwide and [journalist] Mr [Jonathon] Moran were quick to publish, they have been slow to defend,” Wigney said at the time.

Blackburn said that remark was “unnecessary” and “it gave the impression in our submission that your honour had taken a view as to the respondents and the merits of their case by making that criticism”.

“It conveys, your honour, [an] impression or a suggestion of not simply recklessness … it conveys a more sinister suggestion to a reasonable observer that the respondent had actually intentionally engaged in conduct the aim of which was [to] frustrate and stymie what Mr Rush wanted,” he said.

But Rush’s barrister, Kieran Smark SC, argued Blackburn had not outlined why “the various matters raised by them, whatever force they do or don’t have, would particularly impact upon the aspects that would fall for your honour to decide” in relation to the injunction.

Wigney agreed, refusing to recuse himself from the injunction.