Raelene Hardie, the owner of Club Rawhide sued the Herald and Weekly Times (publisher of the Herald Sun) and associate editor Andrew Rule, over a May 2013 report headed, "Secret Tip-offs. Country cops suspected of sabotaging bikie raids".

Ms Hardie, who drives a car with the licence plate "Rawhide", claimed she had been defamed because the newspaper and online report suggested her club was regularly visited by outlaw motorcycle gang members, and that police used the venue to give secret tip-offs to bikies which hindered police investigations and frustrated search warrants.

Ms Hardie said it had also been suggested Club Rawhide was a brothel and she was a brothel madam nicknamed "Madam Black Mercedes".

After her win she told Fairfax Media "he's virtually destroyed my reputation, my character, and the business."

"And I did not want my kids being left with people saying your mum was a madam. I think there is a big difference between a brothel and a strip club. If I had wanted a brothel I would have built one."

Club Rawhide claims to be the fourth strip club to be licensed in Australia.

Ms Hardie, 63, said the story had damaged her business, which used to be popular with the married men of Shepparton.

"At that stage, lots of women were letting their husbands come to the club, because they knew me and they knew what sort of business I provide," Ms Hardie said.

"I've tried hard to run a straight strip club, and I was very insulted by that."

She was initially awarded $90,000 in damages by the Supreme Court but appealed that decision.

Court of Appeal Justices David Ashley, Pamela Tate and David Beach on Friday set aside the original judgment and awarded Ms Hardie a total of $250,000 - made up $150,000 from the Herald and Weekly Times and $100,000 from Mr Rule.

"The imputations published by the respondents [the Herald and Weekly Times and Mr Rule] were seriously defamatory of the applicant [Ms Hardie]," the appeal judges said.

"To be crystal clear, there was not the slightest suggestion that the applicant was in fact a brothel madam; and there was much evidence which showed that she ran Club Rawhide so as to reduce, so far as possible, prostitution taking place there."

The judges said Ms Hardie had given evidence during the civil trial last year that she was disgusted, upset and gutted by what had been published about her.

"Her evidence was that the suggestion that her venue was a meeting place for corrupt police and bikies had made her feel 'terrible'.

"She also made it clear that she was very upset by the suggestion that she was a brothel madam (indeed, this was her primary concern).

"Other witnesses called on behalf of the applicant confirmed that she was 'totally distraught' and 'terribly upset' by what had been published."

The appeal judges said in their view, "the reference to Club Rawhide being a 'raunchy strip venue … in an industrial estate' coupled with the description of the applicant as Madam Black Mercedes would have conveyed only one meaning to the ordinary reasonable person (not a lawyer) – namely, that the applicant was a brothel madam."

Ms Hardie claimed to have also been defamed on May 17, 2013, when Mr Rule appeared as a guest on the morning radio program, "The Hot Breakfast", with Eddie McGuire, Mick Molloy and Luke Darcy on Triple M.

A transcript of the radio broadcast revealed Mr Rule told the audience: "I had a call yesterday from the proprietor of Club Rawhide, who is a lady. And she was referred to in the story as 'Madam Black Mercedes'.

"I know her actual birth name but I thought Madam Black Mercedes sort of caught the situation because I was told at some point she used to own a black Mercedes."

Mr Rule said Ms Hardie called him to say she was not a madam and he had replied: "'Ma'am, I meant that in a most respectful way, as people do when they talk about the Queen. In no other connotation.' So she swallowed that but she was not that happy."

The appeal judges on Friday said the suggestion this reference to Ms Hardie being Madam Black Mercedes was "akin to the way in the which the Queen is addressed strained credulity".

The Herald and Weekly Times had denied defaming Ms Hardie, relying on truth as a defence and claimed the March 2013 newspaper and online report were reasonable under the circumstances given it was a matter of high public interest and Ms Hardie was not specifically named.