Sir Peter Jackson was so frustrated by a "snake" union official he was unable to think about The Hobbit for three weeks.
Documents released under order by the Ombudsman reveal the award-winning director said Cabinet minister Gerry Brownlee was "played like a fool" by Simon Whipp, a former director of Australian union Media, Entertainment & Arts Alliance (MEAA).
The union was threatening a boycott unless working conditions were improved.
The Government had "engaged with a snake, who now feels quite fearless", Sir Peter said.
"I really can't [take] much more of this toxic nonsense. All I want to do is make films! I haven't been able to think about the movie for 3 weeks."
Sir Peter said yesterday that the papers reflected the "intense stress we, as film-makers, were under finding the future of our films suddenly under threat by unjustified industrial action".
Mr Whipp stood down from the MEAA last year.
Just weeks before law changes were announced to keep the filming of The Hobbit in New Zealand, Mr Brownlee saw no need to change employment laws to protect the film industry.
The documents related to the negotiations in October 2010, when Warner Bros Studios threatened to take the films offshore.
The threat came amid warnings of a union threat to boycott the Hobbit films, prompting claims from film studios that a law change was needed.
However, in a letter written after October 4 but never sent, Mr Brownlee, who was economic development minister, and Attorney-General Chris Finlayson outlined why, despite lobbying from the director, it would be "inappropriate" to change employment law as requested.
Instead, the ministers offered to advise Sir Peter on which competition or employment lawyers to use.
"Early, considered and ongoing advice from such lawyers, ought to be able to minimise any potential employment or competition law risk."
On October 27, Prime Minister John Key announced the law change, together with added tax concessions for Warner Brothers.
"The industrial issues that have arisen in the past several weeks have highlighted a significant set of concerns for the way in which the international film industry operates."
Mr Brownlee said he could not recall what prompted the change of heart, but he was in no hurry to resolve the issue.
"I'd have to go back and look at the sequence of things. It'll be some time away because, frankly, I've got more important things to do."
Labour Party deputy leader Grant Robertson said the Government had given in to pressure to change laws after corporate pressure. "In this case we now know they knew it was wrong to change the law, but they went ahead with it anyway."
Yesterday's release also confirmed Sir Peter told Mr Brownlee that a threat to boycott The Hobbit by a film union was being withdrawn days before Weta companies co-founder Sir Richard Taylor led a protest to Parliament urging that the threat be lifted.
Council of Trade Unions president Helen Kelly has long claimed that the Government knew the threat of boycott was lifted long before it let on, in an attempt to build a sense of crisis.
"They withheld this paragraph because it shows they [the Government and Jackson] knew . . . well before Warners came to town that the boycott was lifted, and they maintained the fiction that it was still on."
Mr Brownlee dismissed the claims yesterday as "ridiculous".
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