Linda Reynolds lost the defence portfolio after Labor's political attacks over Brittany Higgins' alleged rape left her seriously injured, Scott Morrison says.
The former prime minister told a defamation trial he feared his former colleague could die following media reports of Ms Higgins' accusations about a political cover-up.
Senator Reynolds is suing her former staffer over a series of social media posts containing alleged mistruths she believes damaged her reputation.
Mr Morrison on Tuesday said the senator was stood down as defence minister "because of the severe injury she suffered as a result of the attacks applied to her over a prolonged period ... that damaged her mental and physical health".
"That is the sole reason that I chose to make a change in those ministerial arrangements," he told the Western Australian Supreme Court via audio-visual link.
Mr Morrison described the political firestorm that followed Ms Higgins' allegations about the senator's mishandling of her rape as "aggressive" and "co-ordinated".
"It was the weaponising of this issue for political purposes to discredit both Senator Reynolds ... and the government and by extension myself," he said.
Asked what was alleged during the attacks, Mr Morrison said: "(That) the government was involved in the cover-up of this issue, which was completely and utterly false, without any foundation".
The former Liberal leader recalled the effect on Senator Reynolds, who he described as a friend for more than 20 years.
"She was quite visibly, physically stressed ... highly fragile emotional state," he said during two hours of testimony.
"I was unaware of her cardiac condition ... that only deepened my concern.
"I remember for a period there we were very fearful for Senator Reynolds this could be a fatal outcome for her."
Mr Morrison defended the senator's handling of Ms Higgins' rape allegation against Bruce Lehrmann.
"I believe that they had done everything they possibly could within the processes they had to support Ms Higgins," he said.
"Ultimately those processes have failed and she felt the way that she felt and that has never been in dispute."
Mr Morrison repeatedly challenged questions from Ms Higgins' lawyer Rachael Young about the official inquiries that followed the former staffer's alleged rape in the senator's office in 2019 before being directed to answer by Justice Paul Tottle.
The retired politician said they examined workplace safety and processes that followed the incident and it wasn't the job of parliament or prime minister's office to investigate Ms Higgins' allegations.
"That was a process for the judicial process and the police," he said.
"Senator Reynolds and others had sought to encourage and provide support to enable the complaint to be made to police.
"Ms Higgins had chosen not to do that and they supported her agency in making that decision."
Mr Morrison said processes were later improved to provide complainants with access to independent and confidential counselling.
"That's where I saw the great weakness in the system ... that obviously let Ms Higgins down ... let down minister Reynolds," he said.
Asked if he was disappointed he wasn't told about the rape allegation until 2021, Mr Morrison said: "Yes, initially I was but as events transpired, Senator Reynolds chose not to do that ... out of respect for the confidence that they'd entered into with Ms Higgins".
"That was a dilemma."
Mr Morrison said he learned about the 2019 incident and the security breach that led to Ms Higgins and Mr Lehrmann being in Senator Reynolds' office on the same day the former staffer's cover-up allegations became public.
He revealed he didn't press the senator for an apology after she called Ms Higgins a "lying cow" while watching her interview on Network Ten's The Project.
"I made it very clear that I completely repudiated that, the minister understood that, and this was out of character for her," he said.
"She was angry, she said it was something she regretted."
Lehrmann denies the rape allegation and his criminal trial was derailed by juror misconduct.
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