Former Conservative Party chief executive Christine Rankin told Colin Craig "you're stuffed", when he finally confessed to sending "flowery" personal messages to his former press secretary.
"If this got out, I thought it would ruin his career," Rankin said.
She has also told the court of Craig's attempts to convince her Rachel MacGregor was mentally ill and as a result has "misinterpreted" his messages as romantic.
And, she has outlined repeated attempts to get Craig to tell her the truth about his relationship with MacGregor.
Rankin is giving evidence in support of Taxpayers' Union executive director Jordan Williams who launched civil proceedings after Craig allegedly defamed him last year at a press conference and again in a leaflet sent to more than 1.6 million households.
Craig claimed Williams and others were liars and had spread false accusations about him following the sudden resignation of his press secretary Rachel MacGregor.
Williams says he did not lie, and that the information he passed on about Craig to other Conservative Party members in the wake of MacGregor's resignation about his sexual harassment of her is genuine and truthful.
Rankin resigned from her position less than a week after Craig resigned, following the scandal around MacGregor's sudden departure.
After she announced her resignation Rankin told Radio New Zealand she felt "just awful" about the way Craig had fronted media over allegations surrounding his relationship with MacGregor.
"I don't think that is the whole story - I think there is more to come," she said at the time.
Today Rankin told the jury that she approached Craig on several occasions before MacGregor's resignation, about rumours of a relationship between the pair.
"I raised the issue with Colin on several occasions where he said to me that nothing was going on," Rankin said in evidence.
"Colin is hugely intelligent. I used to think he was decent and moral. He has a convincing way with words. When I asked him prior to the 2014 election whether he was having an affair with Rachel he said 'oh Christine, how could you think that? I would never do such a thing'.
I now know that there was an affair... an emotional one, and I now who was seeking it.
Rankin said Craig initially convinced her that MacGregor had a "mental illness" and had misinterpreted messages from him as being romantic.
Then Williams, a trusted contact of Rankin's, contacted her and said he had seen letters from Craig to MacGregor that he was extremely concerned about.
"It was more than just rumours - it was direct evidence from someone I trusted implicitly."
Williams begged Rankin not to take any action but she felt she had to confront Craig.
"For the good of the party I could not leave it at that," she explained.
"I phoned Colin and I told him I needed to put some allegations to him. I told Colin there were all kinds of rumours about him. I had always protected him and stood up for him but this time... I told him I had received information that he had sexually harassed Rachel and that he had written poems and letters to Rachel and my source was credible...
Craig told Rankin he often used "flowery" language in messages to his staff.
"He confided he had written letters and cards and may have gotten carried away a bit with his expressions but they were not harassment. He said he'd discussed it with his wife and she said he needed to be more careful. He said he had never written anything untoward to Rachel but she had feelings for him and may have misinterpreted them."
Rankin specifically asked Craig about the message he sent MacGregor that read "I slept well last night because I dreamt I was between your naked legs".
She asked if he wrote the words in a card and Craig replied "absolutely not".
She asked if he wrote it in an email and he said "no".
She asked if he had sent poems to MacGregor and he confessed he had.
I remember saying 'you didn't? You're stuffed.
Craig then swore her to secrecy and confessed further.
"He went on to tell me there had been inappropriate behaviour but it was not sexual harassment."
Craig told her that on the night of the 2011 election he and MacGregor had "kissed".
"He said she was a very willing participant and could not blame that on him, that it was
consensual. Colin said they were very close and that he loved her like she was a sister... he mentioned again Rachel's mental state and that she had misinterpreted what he had written.
"Colin added that Rachel had made an 'indecent proposal' to him just before she resigned. He said he had chosen his wife and he was proud of that, but he was sure that was why Rachel had resigned."
Rankin will continue giving evidence this afternoon.
PLAINTIFF WRAPS UP
Jordan Williams spent a day-and-a-half reading his evidence to the court, wrapping up just after midday today.
He revealed that the court was likely to hear that MacGregor did send Craig a number of text messages and cards that "reciprocated" caring feelings.
However he was not aware of those until well after he had spoken to the members of the Conservative Party.
He contacted MacGregor and was extremely upset she had not disclosed those to him.
The existence of that material did not impact on his case against Craig.
"I did not lie. I did not deliberately mislead," he maintained.
He said Craig's claims that he lied had affected his career, health and his family.
He told the jury that the fact Craig had not filed any defamation action against him in relation to the alleged lies, vindicated him.
"By not suing me, Mr Craig has effectively acknowledged he got it wrong," he said.
He expected Craig to use the court case as a chance to "attack" MacGregor and convince people that any romantic contact was consensual, and there was no sexual harassment.
However he reminded the jury that the defamation trial was not about MacGregor, despite much of the evidence relating to her resignation.
"That [sexual harassment] is not what the case is about. The question here is whether I lied - and I did not lie."
Williams thanked the jury for listening to his marathon session of evidence.
In summing up he said that Craig alleged he shopped around and spread allegations about the then-party leader "in an attempt to destroy him".
He denied that vehemently and reiterated that he only acted out of concern for MacGregor and the reputation of other Conservative Party members connected to Craig.
"I saw the debilitating effect this was having on [Rachel]," he said.
"I took steps. I was concerned with what I believed to be [Craig's] mistruths."
The trial before Justice Sarah Katz and a jury, continues.
It is the first jury trial for a defamation case in the High Court since 2002.