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She also says one of her senior advisers passed the information to other staff members in her office - despite her strictly advising him not to.
Giving evidence in the High Court in Auckland today, the former Social Development Minister said she was not responsible for the information making its way into the media a month before the 2017 general election.
Tolley also had no reason to believe her staff had leaked the information.
She first learned of the issue at a weekly meeting with former Ministry of Social Development chief executive Brendan Boyle on July 31, 2017. They were the only two people in the room when he told her Peters had been overpaid in his pension since 2010, that MSD had been alerted when his partner applied for superannuation in 2017, and that he had paid it back.
After the 10-minute briefing, she said she felt the matter had been resolved.
After the meeting, Tolley briefed her senior adviser, whose name is suppressed, and said the information was strictly confidential and not to be shared. She said she briefed him in order to get advice about whether she should ask for the briefing to be put in writing.
Tolley said she was "surprised" to later learn that her adviser had shared the information with other staff in her office. She said this was "contrary" to her strong urging that it be kept secret.
She also later discovered that a staff member who had been seconded to her office from MSD knew about Peters' overpayments.
"That was expressly against my instructions," she said.
After speaking to National Party chief of staff Wayne Eagleson, Tolley decided to ask for a written briefing about Peters' case, which was placed in a safe in her office by a private secretary and later shredded when the government changed.
When Tolley returned home to Ohope at the end of the week, she said she told her husband about Peters' overpayments and said he had to keep it in absolute confidence. They were the only two people in the house at the time.
Tolley said there was one more occasion where she mentioned the Peters issue to another person.
While Tolley was at a National Party conference in Queenstown in late August, she had lunch with her sister at a cafe.
Her sister praised Peters, and Tolley responded by saying that the New Zealand First leader was "not as great as she thought he was". She then told her sister that he had been wrongly overpaid his pension for seven years. She made the comment in passing and did not provide much detail, she said.
"I sincerely regret my outburst with my sister. I was tired and I was cross," she said during cross-examination.
The details about Peters' superannuation case appeared in media the weekend of that National Party conference.
Tolley said she did not make the anonymous calls to two newsrooms, which alerted media to Peters' overpayments. She did not arrange for the calls to be made, she said.
She said she also had a brief conversation about the case with then-State Services Minister Paula Bennett, who was later briefed about it by her officials. Bennett will give evidence later today.
Peters says his privacy was breached when his pension information made its way into media in August 2017. He has not pointed the blame at one person or organisation, but is jointly accusing the two ministers, public sector bosses and MSD of breaching his privacy.
Peters was overpaid after filling out his application form incorrectly in 2010, which led to him receiving the more generous single person's pension. The error was not picked up until his partner Jan Trotman applied for superannuation in 2017.
Under cross-examination, Peters' lawyer Brian Henry asked Tolley whether she had breached Boyle's confidence by speaking to her senior adviser about Peters' overpayments.
The office handled sensitive information about private individuals and she had no reason not to trust her staff, she said.
When Henry said this was different because the information about a political rival a month out from an election was "dynamite", Tolley said she had no reason to suspect her staff leaked it.