Heather Mills was accused today of "telling a very unpleasant lie" that she fell out with her nanny because she refused to pay for a boob job.
Speaking at the third day of an employment tribunal brought by Sara Trumble, 26, Ms Mills said they were "very close" but their relationship turned sour when she refused to give her £4,000 to undergo breast enlargement surgery in the spring of 2008.
Ms Mills, who was cross-examined by Ms Trumble's solicitor Nick Fairweather, said: "I had a breast reduction when I was 21 and I couldn't pick anything up for weeks because it was so painful.
"I didn't criticise her wanting to have a breast enlargement, I just felt it would have been wrong of me to help with something that could have been a reaction to her boyfriend or her hormones."
Mr Fairweather accused Ms Mills of making up the issue as a way of explaining why Ms Trumble turned against her.
Disputing the date that Ms Mills said she asked her for the money, he said: "I suggest that your previous comments were to intimidate and bully and belittle her to stop her from going on with this claim.
"I suggest that you're telling a very, very unpleasant lie."
Sitting behind a desk at the front of the tribunal room, Ms Mills answered: "I'm not telling a lie. She asked me for £4,000, how on earth would I have known that amount when I put my statement together?"
Mr Fairweather continued: "If this tribunal finds that you lied about that, would you agree that this is a despicable thing to do?"
Ms Mills said: "I never did it."
Tribunal judge Steven Vowles told Mr Fairweather to move on as he was not asking a proper question, and Ms Mills added: "I think you're panicking."
Ms Trumble, who was employed by Ms Mills and her former husband Sir Paul McCartney as a nanny to their daughter Beatrice, now six, from April 2004, alleges that Ms Mills discriminated against her when she had her own child, relegating her to domestic duties until she was forced to resign.
She has claimed the former model reduced her to tears and made her feel awkward by making her lie to her ex-husband when he came to pick Beatrice up or drop her off after their split.
But when questioned about this, Ms Mills said: "No, I think you'll find that I did everything to make sure that she was not put in the middle and I always said that if he asked her questions just say I don't wish to discuss it.
"She felt uncomfortable from day one when we split and that's why I insisted that Paul get another nanny, Lavinia, to stop her being put in an uncomfortable position." Ms Mills agreed that representing herself during her 2008 divorce battle was a "colossal undertaking".
But she added that the staff working for her at her nine-bedroom house in Robertsbridge, East Sussex, all supported one another and found her to be an understanding boss.
She said: "Our house, even in the most stressful times, was a very supportive environment."
She said of her relationship with Ms Trumble: "Sara and I have never had a cross word.
"I would never raise my voice to her and I have never been bad-tempered to her, ever, ever, ever.
"What was very surprising for me was that we were very close and she told me a lot of personal things and I could not believe that she didn't discuss any personal grievances with me."
Ms Mills told the tribunal in Ashford, Kent, that claims she was worried her new boyfriend Jamie Walker would flirt with the nanny were "ridiculous".
She said: "When it comes to partners, I'm a very confident person and I do not need my friend and child carer to be put in the situation of asking whether my boyfriend was flirting with her, as she said."
And asked about allegations that she made Ms Trumble and her other staff praise her to a film crew she hired to make a documentary about her, Ms Mills said they were happy to do it.
"My sister purposely did the video to protect my character from years of abuse," she said.
"I would be very happy to let the tribunal look at the video. I was very flattered."
Concluding his cross-examination, Mr Fairweather said: "After Sara became pregnant your attitude towards her cooled and you dispensed with her services.
"You thought she was a pushover and would never stand up for herself."
Ms Mills's PA Sonya Webb was called to give evidence and she described her boss of 10 years as a "more than fair employer".
She added: "She expects hard work from her employees but she works so hard herself and she rewards that hard work and dedication very well.
"As you would expect over a 10-year employment relationship, we've had occasional disagreements but Heather is willing to listen to your side, discuss with you and come to a mutual solution to whatever the problem has been."
Mrs Webb broke down in tears as she described how Ms Mills was "emotionally a rock" during her husband's battle with cancer and subsequent death.
Wearing an orange shirt with a blue velvet jacket and black trousers, Ms Mills also shed tears as she listened from the back of the tribunal room as Mrs Webb described how she bought her and her husband a bungalow and also paid for him to have specialist treatment.
Mrs Webb said she first met Ms Trumble at Ms Mills's beach-front home in Hove when they were both tasked to clean it.
She said: "None of the jobs were particularly hard but she always seemed to have an attitude about doing them as if these jobs were below her."
Mrs Webb said Ms Mills was very accommodating when Ms Trumble had her daughter, as she was with her when she herself had a child.
She said: "Heather went out of her way to make sure that Sara was not overworked or stressed during her pregnancy and I believe Heather was overjoyed by Sara's good news.
"Sara states she was discriminated against after she returned from maternity leave but a week after she came back she was granted a week's holiday as she was going on for selective surgery to have a breast enlargement.
"This week over-ran with additional time off plus a sick day. How can she say she was discriminated against when this was approved without hesitation and she received full pay?"
She continued: "In this claim, I feel that Sara is making issues where there really weren't any."
She added that if Ms Trumble had any problems she could have presented them to her other staff.
"Heather will always try to sort things out so that everyone is happy."
As she left the hearing, Ms Mills read out a two-page statement to photographers, repeating much of the evidence she gave in the tribunal.
She said she felt as though she had "been betrayed by someone who I felt was part of the family".
"The only conclusion I can come to, sadly, is that Sara wanted this case to come to open court so that she could make more money from selling her story by adding what some people may believe as irrelevant and sensational claims in her statement, and because I cared for her so much, I find this deeply, deeply distressing."
She claimed that the tribunal was disrupting her charity work, "harming thousands of people's lives along the way".
Ms Mills added: "I only hope that if justice prevails and we win this case, others considering court action will think twice before they invade the privacy and intimacy of family life, that they will consider their actions carefully by trying to expose the vulnerability of families like mine.
"This case is not about money. If I allowed this claim to go uncontested, it would have set a precedent for all families who have domestic help to be held to ransom."