Colin Craig's former press secretary Rachel MacGregor has spoken for the first time about her shock resignation in 2014 and allegations of sexual harassment by the former Conservative Party leader.

MacGregor said the sexual harassment "occurred over a long period of time" and she made the decision to resign after Craig repeatedly told her he had dreamed about her.

She revealed that she resigned in Craig's car on the way to an early morning media interview several days out from the election.

"We initially engaged in small talk and I asked him how he had slept the night before. He said something to the effect that he had slept well the night before because he had imagined he was sleeping on my legs," she told the court this morning during day seven of Craig's defamation trial.

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She said she was angry, uncomfortable and upset by Craig's comment.

Colin Craig (R) arrives at the Auckland High Court. Photo / Brett Phibbs
Colin Craig (R) arrives at the Auckland High Court. Photo / Brett Phibbs

"It was not the first time he had mentioned sleeping on my legs - I had told him only two days earlier to stop saying this to me as it made me feel uncomfortable."

As the pair drove to the city MacGregor told Craig she wanted to talk about her pay. They had verbally agreed that she would receive a higher rate of pay during the election period.

However after that MacGregor said Craig repeatedly refused to formally agree on a pay rate, or pay her for her work.

"We argued and I told him if he was not willing to discuss my pay, I was leaving. By that I meant I was resigning," MacGregor told the jury.

Craig told MacGregor it was not the time to discuss such matters.

"I told him I was leaving. I got out of the car, I did not accompany Mr Craig to his radio interview."

Rachel MacGregor arrives at the Auckland High Court. Photo / Brett Phibbs
Rachel MacGregor arrives at the Auckland High Court. Photo / Brett Phibbs

Later that day MacGregor made a complaint to the Human Rights Commission, alleging Craig had sexually harassed her.

News broke of her resignation later that day when members of the media contacted her to arrange interviews with the politician.

During one conversation with Barry Soper from NewstalkZB MacGregor became upset and said Craig "was a manipulative man".

"But I told him that's all I wanted to say. I did not talk to any other reporters about my resignation."

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Craig is on trial for allegedly defaming Taxpayers' Union director Jordan Williams, a friend of MacGregor's to whom she turned after her high-profile shock resignation shortly before the 2014 general election.

Williams said he was "horrified" at MacGregor's claims Craig had sexually harassed her, and after seeing letters and poems the politician sent her, revealed all to other Conservative Party members.

When Craig found out he publicly claimed Williams was part of a group of "culprits" determined to have him removed as party leader through a "campaign" of "false accusations".

At a press conference and in a pamphlet sent to more than 1.6 million households across the country, Craig alleged that Williams was a liar and had "spread false accusations".

Williams then filed defamation proceedings in the High Court, saying he did not lie about Craig.

MacGregor is giving evidence in support of Williams' allegation.

Craig is in court for her evidence. His wife, Helen, who was at the trial last week, is not present today.

MacGregor's evidence continues.