A decision to strike out Colin Craig's defamation case against a former employee has been quashed by the High Court.

The former Conservative Party leader is suing Jacqueline Stiekema, who worked as a trust accounts manager for his company Centurion Management Ltd from 2003 to 2007, for $240,000 in damages.

He alleges Stiekema made three defamatory publications in or around September 2015, including in a Facebook post, an email and in several other publications.

The pair have previously been involved in a dispute, following Stiekema's resignation, which was resolved by the Employment Relations Authority in 2007.

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The defamation claim was originally brought in the High Court, but was later transferred to the District Court.

In July 2017, District Court Judge Gary Harrison struck out Craig's claim in its entirety.

Judge Harrison said it was "because of the extremely limited dissemination of the admitted statements and the unlikelihood that they would have any effect whatsoever on Mr Craig's reputation".

It also said costs associated with a five-day trial were "simply not justified".

However, Craig appealed this in the High Court at Auckland, which quashed the District Court decision.

In her concluding observations, Justice Sally Fitzgerald said the result "is not necessarily a reflection of the merits of the underlying claim".

There were concerns about the cost and time of the proceeding.

However, she said allowing the appeal "reflects the high bar for a strike-out application".

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The defamation case is one of several involving Craig in the past few years.

In September 2016 a jury awarded Taxpayers' Union founder Jordan Williams $1.27 million in damages after he sued Craig for defamation, after the politician had 1.6 million pamphlets critical of Williams sent to homes across the country in 2015.

The total was the largest amount awarded in damages for defamation in New Zealand's legal history.

However, this was found to be "excessive or wrong" by the Court of Appeal earlier this year, and sent back to the High Court.