Labour leader Andrew Little gives evidence in defamation case

Labour leader Andrew Little was prepared to fund a $100,000 defamation suit settlement by using his family home as collateral on a loan, a court has heard.

Mr Little made the offer in late March - just weeks before a $2.3 million defamation suit brought by the founder of Scenic Hotel was set to get underway in court.

Scenic Hotel founder Earl Hagaman and his wife Lani are seeking a maximum of $2.3 million from Mr Little.

They brought the legal action after Mr Little questioned the nature and timing of a $100,000 donation the couple made to the National Party in 2014 just months before the election.

Day three of the trial is underway at the Wellington High Court on Wednesday.

Around a month after the donation was made, the Hagamans' Scenic Hotels group won a tender to manage the Matavai resort in Niue.

Months later the resort received $7.5 million from the New Zealand government via international development funds.

Under questioning from his defence lawyer John Tizard, Mr Little said he became "frustrated" after trying for months to resolve the proceedings before they went to court.

"Nothing ever seemed to be acceptable," said Mr Little.

Mr Little first offered to pay $26,000 towards legal fees and apologise, but that offer was rejected.

On March 14 this year Mr Little made another offer of $100,000 and again apologised, but that was again rejected.

Mr Little said he and his wife would have funded the six-figure offer by taking out a bank loan against their Island Bay family home.

"It was the most I could offer," Mr Little said. The couple does not own any other property.

The Hagamans, who are multi-millionaires, claimed they had spent $215,000 in legal fees preparing for the case.

But Mr Little described that estimation as "excessive" and it includes fees from a PR firm, which he believed he was not obliged to cover.

A sticking point was in what form the apology should take, said Mr Little. "It was the most bizarre form of negotiation I had ever been in."

Mr Little said he made multiple proposals through his solicitor, but would get back rejection letters which offered scant direction on the way the Hagamans wanted to move forward.

The apologies Mr Little offered did not mention Lani Hagaman personally.

He said he did not apologise to Ms Hagaman as he had not mentioned her by name in his media statements, but during court on Wednesday he offered her an apology as she watched from the public gallery.

"I apologise to her now for any hurt," Mr Little said.

He was asked why he didn't apologise to the Hagamans in the days after story broke, when the couple put out their own statement rejecting the claims.

Mr Little said it would have been "improper" of him "to take the assurance of an interested party" at face value.

"That would be a failure of my duty."

Instead he took the matter to the Auditor General, who eventually cleared the deal.

Earlier on Wednesday Mr Tizard said the Labour leader will have two defences to the defamation case.

The first is that the comments were made under qualified privilege, and the second is that "the words do not mean what the plaintiffs think they mean".

While being questioned by Mr Tizard, Mr Little told the court the timing of the six-figure donation to the National Party was enough to "pique his interest".

The Government had a strong track record that failed to respect conflicts of interest, Mr Little said.

He cited the SkyCity convention centre saga and the Saudia sheep controversy as examples. 

Mr Little said Foreign Affairs Minister Murray McCully's alleged involvement in the resort deal struck a chord, considering Mr McCully's involvement in the Saudi sheep deal.

Mr Little said he first heard the story on Radio NZ on April 18 last year.

After speaking to his staff he decided to write a letter to the Auditor General asking for an investigation.

He then decided to issue a written media release, which in part read: "This looks like the latest in a line of questionable deals from John Key's Government which has seen New Zealand slide down international corruption rankings, says Little".

In the following days Mr Little echoed those comments in five subsequent media appearances.

Mr Tizard said the Labour leader will have two defences to the defamation case.

The first is that the comments were made under qualified privilege, and the second is that "the words do not mean what the plaintiffs think they mean".

Mr Little will later be questioned by the Hagamans' lawyer, Richard Fowler QC.

On Tuesday Lani Hagaman told the court she had no idea why Mr Little linked them to corruption.

"There were just no facts supporting that," Ms Hagaman said when question by Mr Little's lawyer.

"One telephone call to Scenic Hotel group would have given him the facts," she added.