A potential new defence witness has emerged in the Geoffrey Rush defamation trial after settlement talks between the parties failed, a court has heard.

Key points: The court heard settlement talks between the parties have failed

The court heard settlement talks between the parties have failed Nationwide News made an application to introduce a new witness

Nationwide News made an application to introduce a new witness The judge said if a new witness is called a new trial will be needed, and it is unlikely to start until well into 2019

The Oscar-winning actor is suing Nationwide News and one of its journalists, Jonathan Moran, over articles in The Daily Telegraph newspaper that claim he behaved inappropriately towards a young female cast member during the production of King Lear.

In the Federal Court on Friday the newspaper made an application to add a new defence witness, who the judge has ruled can only be referred to as "Witness X".

Barrister for Nationwide News, Tom Blackburn SC, told the court settlement talks with Mr Rush had been underway for some time, but had gone nowhere.

He said after the talks failed to resolve anything, the newspaper decided on Tuesday to apply to amend its defence, including adding the new witness.

New witness, big delays

Justice Michael Wigney said amending the defence so late in the trial would mean a new trial would need to be conducted, and it might not be heard until well into 2019.

He said that might be unfair on Mr Rush, who would have to be recalled to give evidence, after already being in the witness box for three days.

The court heard Mr Rush might be disadvantaged personally, commercially and financially by any delays to the case.

At one point Justice Wigney expressed his frustration with the way the publisher had been running its case, telling its legal team:

"Your client published. Maybe they should have made some more inquiries before they published."

The judge has reserved his decision on the publisher's application.

The defamation hearing continues on Monday and the court will hear expert reports about Mr Rush's earning potential.

Mr Rush, 67, alleges The Daily Telegraph articles, published in 2017, portrayed him as a pervert and sexual predator during the Sydney Theatre Company production.

The stories accused him of harassing a younger female cast member — later revealed to be Eryn Jean Norvill, 34, who played Cordelia in the production in which Mr Rush had the lead role.

Ms Norvill, who gave evidence earlier in the week, returned to court for Friday's hearing.