Colin Craig has told a jury that four days before his press secretary Rachel MacGregor resigned she told him "I want to be with you, I want to be more than just your press secretary".
Craig said he was on a flight with MacGregor four days before her resignation when she engaged him in a "whispered" conversation.
She told him things were not going well with her boyfriend and told Craig he was the only one who really knew her.
Finishing giving evidence before a jury this morning, Craig said he was "saddened" that the defamation trial had traversed his relationship with MacGregor and her resignation and allegations of sexual harassment.
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He would have preferred that information to remain out of the public eye.
"I don't want to hurt Rachel and this case is not about her. It's about what Jordan said about me and what I said about him," he said.
He said there was "much" he would not say about MacGregor but wanted to let the jury know that she had made "false allegations" about him.
"I always regarded our relationship as mutually affectionate. It became inappropriate ... I apologised for my role in that."
Craig said MacGregor's sexual harassment complaint, which she made the day she resigned in 2014, "was like a bolt out of the blue".
"She never, ever told me she was feeling threatened or harassed by me."
Craig claims MacGregor had propositioned him and he had rejected her four days before she quit.
He told the court it was a Sunday and the pair were flying home from a campaign trip, engaging in a "warm and caring" conversation about MacGregor's love life.
"She told me 'I want to be with you, I want to be more than just your press secretary'. At that point it was like someone tipped a bucket of water over me.
"A warm and caring conversation suddenly became very serious. I recall saying 'Rachel, don't say that' or 'Rachel, you can't say that'. I did that as firmly as I could to make it clear what she was propositioning was never going to happen, and could never happen.
"How did she think it was going to work? Did she think I was going to leave my wife? I was upset."
Craig said he tried to engage in "small talk" for the rest of the flight but it was uncomfortable and he thought MacGregor must have been feeling "rejected and hurt".
"She resigned four days later," Craig said.
Earlier this week, MacGregor told the jury that the "indecent proposal" never happened.
She vehemently denied having romantic feelings for Craig and said the thought of that "disgusted" her.
'It was a very fond relationship'
Under cross-examination this afternoon Craig spoke further about his relationship with MacGregor and his personal life.
Jordan Williams' lawyer Peter McKnight asked Craig pointedly how he felt about MacGregor.
"Were you besotted with Rachel?" he asked.
Craig responded: "I wouldn't use that word to describe it no ... throughout I've used the word mutually affectionate. I would use the word fond, it was a very fond relationship."
Craig said "the ideal" would have been a relationship akin to a brother and sister but "unfortunately" the pair became too close, which he regretted and said was a mistake.
McKnight also quizzed Craig on how he had found the trial so far and what he thought about his dirty laundry being aired in public.
"I think it's an exhausting experience to be in court and I think slowly but surely we're building up a story about what happened," Craig said.
He said the trial was allowing him to get his version of events out about Williams and the alleged defamation and also the issues around MacGregor.
That is why, he said, despite threatening to sue Williams for defamation when he published his pamphlet he had not taken legal action.
There was no point in taking counter action when he could use Williams' trial to deal with the matters.
Did Craig lie to the Conservative Party?
Much evidence has been given during the trial so far about Craig not telling other party and board members about the allegations brought by MacGregor.
Even when Williams approached board members with the information she had told him, Craig would not speak at length on the issues.
In court today, Craig said he was bound by the confidentiality agreement he had signed with MacGregor, so could not legally speak to his board.
"I accept that I did not discuss fully the details to the board. For reasons of confidentiality the board did not know all of the details. I was not in a position to tell them all of the
Craig then admitted that while he could not tell the board about his situation, he breached the confidentiality agreement 12 times, mainly when speaking to the media.
"I thought at the time Rachel had been involved in the leaking of the confidential information. At the time I thought she had enabled it to happen," he said.
'I'm not religious'
This afternoon Craig also told the court that despite being selected as the leader of a Christian values-based political party, he was not religious.
Craig said he was definitely a Christian and faith had a huge part in his life but he did not consider himself "religious".
"I am not a religious person. That would suggest I had a regular religious observance which I don't," he said.
Craig: 'I think she is wrong'
McKnight asked Craig today if he thought MacGregor's allegation of sexual harassment was a lie.
"I think she's wrong," Craig replied.
"I think in her own mind she believes this. She certainly did not hold these views and express these views at the time ... I think she's looked back at events and come up with a certain narrative, or someone else had suggested the narrative to her ... that was certainly not how she saw it at the time.
"She may genuinely believe it, it's difficult to know, I can't speak for her mental thoughts."
McKnight pressed Craig again.
"Is she being dishonest?" he asked? "Is she lying?"
Craig replied again: "She's wrong."
The defamation trial
Craig is on trial for allegedly defaming Taxpayers' Union director Jordan Williams, a friend of MacGregor's, who resigned suddenly two days before the 2014 general election.
MacGregor later turned to Williams and alleged Craig had sexually harassed her.
She shared letters and poems the politician sent her and Williams then revealed the details 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".
Williams then filed defamation proceedings in the High Court, saying he did not lie about Craig.
The trial is now in its second week before Justice Sarah Katz and a jury.