UPDATED 5.35PM Colin Craig has told a jury that he "regrets" taking his relationship with his former press secretary Rachel MacGregor "too far".

The former Conservative Party leader is giving evidence this afternoon at his defamation trial in the High Court at Auckland.

LISTEN ABOVE: NZ Herald police reporter Anna Leask speaks with Larry Williams

He told the jury that after he employed MacGregor they "worked together really closely".

"Our relationship became close and affectionate," he said.

"I considered Rachel to be like a sister to me ... I accept my affection went too far ... my behaviour was inappropriate, I regret that."

Craig said he went to his wife Helen and told her about the relationship becoming too close, and she forgave him.

"I am grateful for the wonderful love and support," he said of his wife.

Craig said after MacGregor resigned he got an email asking for her pay, and an amount for severance.

He claims he tried to contact her a number of times but "it was like she had disappeared off the earth".

Months later he got an email from MacGregor advising him she had laid a complaint of sexual harassment with the Human Rights Commission.

"It was an absolute bolt out of the blue," he said.

"It was a huge shock to me and very upsetting ... I never thought that the affection between us was just on my side."

He said MacGregor's complaint was "unbelievable".

"Most of the time we had a great relationship ... there were times where boundaries were overstepped."

Craig told the jury that he attended a mediation with MacGregor and they settled their issues.

He said he paid what he owed her and she "dropped the sexual harassment complaint".

The pair agreed to keep the matter confidential and signed an agreement.

"My understanding was that was it, it was sorted and we could all move on," he said.

"Over the next 20 days everything changed."

Soon after the mediation, Craig was contacted by then-Conservative Party chief executive Christine Rankin.

She had been contacted by an anonymous informant claiming Craig had sent MacGregor a sex text that stated he had dreamt he slept on the secretary's "naked legs" and demanded answers about his relationship with the younger woman.

"I had never sent this or any other sexually explicit text," Craig said he told Rankin and repeated to the jury.

Craig said over the next few weeks he had "incredible problems" as people were obtaining confidential information about him and MacGregor, and he was unable to discuss them due to the HRC orders.

He suspected the anonymous informant was Taxpayers' Union director Jordan Williams and attempted to organise a meeting with him to "attempt to tell him how he had got it wrong".

Williams refused, Craig said.

Craig went on to explain why he discussed MacGregor's resignation and their relationship in the media.

"Declining to comment always look suspicious," he said.

MacGregor then emailed Craig several times to accuse him of breaching the HRC confidentiality agreement.

Craig revealed he then received a text message referring to him as "creative Colin", something he had called himself in a private letter to MacGregor.

The text was threatening and suggested he should resign as leader, he told the court.

Craig alleged the sender threatened to reveal information about his adopted child's biological mother and ended with "do the Christian thing and protect your family".

The MacGregor rumours and an 'avalanche' of media

Craig told the jury that he was coming under increasing pressure from the media, probing him for comment on MacGregor.

He was asked specifically about a sexual harassment claim and financial settlement.

The Conservative Party board were also pressing him for answers about "very serious allegations" that had been made about him.

Craig said he was extremely concerned and the media attention was "harrowing" with journalists "chasing the story hard".

Rankin then told Craig that she had seen his "texts, letters and poems" and "so would the rest of the board".

Craig said he still had no idea who the informant was or what information was being shared about him.

There were "factions" among the party and it was decided Craig should step down as party leader so the allegations against him could be investigated.

A press conference was held to announce the stand down and soon after that a poem Craig had written and sent to MacGregor was published on the blog Whale Oil.

Craig said the blog post that accompanied the poem made a number of inaccurate claims about him and his relationship with MacGregor and the reason he had stepped aside as leader.

A "media firestorm" then kicked off.

Craig met with the party board and they put a number of allegations to him including that he had sexually harassed MacGregor and pressured her to have an affair with him.

"I was stunned to think these allegations had been made," he said.

"It was very different to what Rachel had alleged in her complaint to the HRC. I had made mistakes in my relationship with Rachel, but these allegations were far more serious."

Craig left the board meeting and went and sat in his car, reeling from the allegations.

"I spent some time in the car thinking. I now understood that any hope that this matter (with MacGregor) would not go public was a fool's hope," he recalled.

Craig said he was angry at the "scale of deceit" and felt his reputation "had been ruined".

By then, he said, he knew that Williams was the anonymous informant.

Over the next few days Craig came under increasing scrutiny from the media, with numerous articles and reports being published about the allegations and speculation around MacGregor's resignation.

He listed more than 20 of those in court today, describing them as "part of the avalanche of media".

Craig said he, and often his wife, found the articles "distressing". 

"They kept ramping up the story by adding information," he said.