Colin Craig says a 29.5 percent interest rate he imposed on a loan to his former press secretary was not aimed at putting pressure on her to drop her sexual harassment claim against him.
Mr Craig is being sued for defamation by Taxpayers' Union head Jordan Williams over a leaflet and a news conference.
At the centre of the case is Mr Craig's relationship with his former press secretary, Rachel MacGregor. Mr Williams has said that Mr Craig's comments suggested Mr Williams had been dishonest and made up allegations about why Ms MacGregor had left her job.
Read about the Colin Craig defamation case in a nutshell here
Speaking about the loan in the High Court in Auckland today, Mr Craig said the interest was imposed because Ms MacGregor went into default on a loan of about $19,000.
The loan had been interest-free and the interest rate was imposed after Ms MacGregor had resigned.
Mr Craig said he did not think she would have been shocked to receive the interest claim.
"She had agreed to the terms, she had signed them after taking advice. Remember it was interest-free and it's only because she went into default and she knew she was in default.
"Again, I hadn't heard from her for months. This is a situation and I don't know how other people would respond but if someone's got 18, 19-grand of your money and they dropped off the face of the earth and left under dramatic circumstances."
Mr Craig said he and his wife, Helen Craig, had helped a lot of people out with interest-free loans to try to help them through difficult times.
He said he was well aware of Ms MacGregor's financial circumstances.
She was on credit card penalty rates that they had consolidated to save her stress and lent to her at zero percent.
He said it was not correct to say he used the penalty interest to put pressure on her to withdraw her sexual harassment claim, but he was hoping that she would get in touch and they would be able to resolve the financial issues.
He said both parties wanted mediation and he paid the airfares of Ms MacGregor and her lawyers to fly to Auckland for the meeting.
Ms MacGregor had earlier told the court that she withdrew her sexual harassment claim as part of a confidential settlement that resolved all the issues between her and Mr Craig.
But Mr Craig said unlike Ms MacGregor he did not believe the confidentiality agreement included the financial matters.
He said Ms MacGregor did not receive any money to withdraw the sexual harassment claim in the settlement but she did receive outstanding money that she had invoiced for.
He said Jordan Williams' allegations that she had received a six-figure sum were wrong.
Mr Craig said he forgave the loan on compassionate grounds.
Helen Craig gives evidence
Mrs Craig later told the court that Ms MacGregor had phoned her and confessed to an emotional relationship with Mr Craig.
She became aware of a close bond developing between Ms MacGregor and her husband soon after she started working for the party, she said.
Ms MacGregor had called her two days before the 2014 election.
"She said she wanted to speak to me as I might hear something in the media," Mrs Craig said.
"On the phone call she confessed to me she had been having emotional affairs with my husband.
"She also admitted she had kissed Colin on election night 2011, and that he had touched her breast."
Mrs Craig said her husband had apologised to her and she has forgiven him.
MacGregor 'very excited' to receive letter
Earlier today, Mr Craig said Ms MacGregor was "very excited" to receive a letter from him in which he listed the ways she was beautiful and wonderful.
Yesterday in court Mr Craig read the letter he had sent to Ms MacGregor in December 2013.
Today Mr Craig said there was a text exchange between the two of them over the letter.
He said Ms MacGregor texted that she was so happy to receive the letter.
Mr Craig said they also had a verbal conversation about the letter and she was "verbally very excited" about it.
Earlier in court, Mr Craig said he hired a man as a moderator who later had an acrimonious falling out with Ms MacGregor.
Mr Craig said he hired Steve Taylor as a moderator to read through his leaflet that was sent out to 1.6 million households.
He said Mr Taylor had been a close friend of Ms MacGregor and the leaflet was published before Ms MacGregor and Mr Taylor fell out over money.
Mr Craig said Mr Taylor had asked Mr Craig to give him her address for debt collectors, but he refused.
He said he was aware that Ms MacGregor had a harassment act order against Mr Taylor, which meant he could not go near her.
- Jordan Williams - The plaintiff in the case and executive director of the Taxpayers' Union. He has accused Colin Craig of defaming him in a leaflet that was sent to 1.6 million households around the country in July 2015.
- Colin Craig - The defendant and former leader of the Conservative Party. He stepped down as leader in mid-2015 amid renewed speculation about his relationship with his former staffer, Rachel MacGregor.
- Rachel MacGregor - The woman at the centre of the allegations and Mr Craig's former press secretary. She alleges she was sexually harassed by Mr Craig over a long period of time. She quit her job two days before the 2014 election over a pay dispute.
- Peter McKnight - Mr Williams' lawyer.
- Stephen Mills - Mr Craig's lawyer. A defamation expert.
- Justice Katz - The High Court judge presiding over the trial.
- Steve Taylor - an associate of Mr Craig who moderated the dirty politics pamphlet.
- John Stringer - Former Conservative Party board member. Gave evidence that there was no smear campaign against Mr Craig. Also said Mr Craig had told board members there was nothing going on with Ms MacGregor.
- Christine Rankin - Former Conservative Party chief executive and candidate for Epsom in the 2014 election. Told the court she had thought Mr Craig was a moral man who could bring integrity into New Zealand politics.
- Megan Williams - Mr Williams' mother. Gave tearful evidence defending her son's reputation.
- Helen Craig - Mr Craig's wife. Expected to give evidence later in the trial for her husband.