The information Williams is said to have spread was given to him by MacGregor after her resignation.
She alleged that Craig had sexually harassed her and showed Williams "love letters" from her former boss.
Williams was "horrified" and, against MacGregor's wishes, passed the information on to other members of the Conservative Party.
Craig then held a press conference and released a pamphlet claiming Williams and others of spreading false accusations about him.
Williams alleges that was defamatory and filed a civil case.
Mills then went on to explain to the jury what Craig's defence to the defamation claim would be.
"The defences that are being raised here are very standard for a defamation case - truth, what's called honest opinion and privilege," he said.
"If there were untruths said by Mr Williams or a lack of integrity and you can conclude that that's true, it's an absolute defence ... you cannot be liable if what you're speaking is the truth.
"The second concept Mr Craig relies upon is opinion ... provided there are some facts from which that opinion is being taken, then provided you honestly believe those opinions, then you are protected."
He said the final defence relied on by Craig was qualified privilege - the right to defend against an attack.
"If someone punches you, you can punch back - within reason," Mills said.
"He was responding to an attack upon his reputation by the things that the plaintiff (Williams) did and when he published that leaflet and held that press conference he was responding to it ... that will protect him."
Mills said Craig "wanted to set the record straight" and had not taken counter legal action against Williams as the matter was already before the courts.
Craig was "prepared to turn it over to a court" and let a jury decide.
Mills told the jury they would hear from Craig and a number of people in support of his defence including his wife Helen, Family First director Bob McCoskerie, Sensible Sentencing Trust founder Garth McVicar, former members of the Conservative Party, blogger Martyn Bradbury, others involved in the publication of the contentious pamphlet, one of Craig's staffers.
Dirty Politics author Nicky Hagar would also give evidence about how blogs influence the mainstream media.
The trial continues.
The story so far - who has given evidence?
• Jordan Williams, which took two days to deliver
• Former Conservative Party chief executive Christine Rankin
• Former Conservative Party member John Stringer
• Jordan Williams' mother and sister
• Victim advocate Ruth Money
• Craig's former press secretary Rachel MacGregor
• Former Auckland City councillor Aaron Bhatnagar
• Lawyer Stephen Franks
