"The name given to you was [the witness'] formal name, but he is more commonly known by a nickname," Justice Katz told the remaining jurors.
"It occurred to him yesterday that he knows him, to the extent that it probably does raise issues with him continuing to serve on the jury.
"I have discharged him. We will carry on with a jury of 11. It doesn't raise any problems, there is nothing to be concerned about."
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Today is day four of the trial.
Taxpayers' Union executive director Jordan Williams alleges Craig defamed him at a press conference last year, and then again in a pamphlet that he paid to have published and distributed to more than 1.6 million New Zealand households.
Craig claimed Williams was one of a group of "culprits" who were spreading "false accusations" against him in a bid to remove him as the leader of the Conservative Party.
The so-called lies related to Craig's alleged sexual harassment of MacGregor, who left her role suddenly, just before the 2014 general election.
MacGregor turned to Williams in the aftermath, sharing letters Craig had sent her and revealing she had made a sexual harassment case against her former boss to the Human Rights Commission.
Williams, concerned about Craig's behaviour, approached several members of the Conservative Party to "warn" them. He felt it was "the right thing to do" given Craig was leading a party based on Christian family values.
Craig held the press conference soon after.
Williams spent a day and a half giving evidence and is now being cross-examined by Craig's lawyer Stephen Mills QC.
MacGregor is expected to give evidence against Craig tomorrow.