Sir Edward Garnier QC said Lord McAlpine remained extremely hurt and distressed by ITV's This Morning broadcast, in which Phillip Schofield passed Prime Minister David Cameron a card listing names associated with abuse allegations on the internet.
Sir Edward said ITV and Schofield accepted that Lord McAlpine's name appeared on the list, which was briefly visible to viewers.
He said Lord McAlpine considered that Schofield's statements and actions amounted to an encouragement, albeit unintended, to viewers to perform similar internet searches, causing other people to discover the link between the seriously defamatory allegations and himself.
On the same day as the broadcast, both ITV and Schofield publicly apologised, before a public apology was made directly to Lord McAlpine on November 22.
Lord McAlpine's counsel, Sir Edward Garnier QC, said the peer had nothing but sympathy for Newsnight interviewee Steve Messham and for other boys who suffered abuse.
Mr Messham withdrew his allegations and apologised having been shown a photo of the former minister after the infamous programme aired.
Sir Edward Garnier QC, said Lord McAlpine wished it to be known that he generally held the BBC in great esteem. But he said the Newsnight allegations had not only caused him great distress and embarrassment, but had affected him to his soul.
Lord McAlpine's counsel, Sir Edward Garnier QC, confirmed to Mr Justice Tugendhat that the action followed last month's Newsnight broadcast about the alleged sexual abuse of boys at the Bryn Estyn children's home in Wales in the 1970s and 1980s.
Two victims claimed that they suffered abuse "at the hands of a leading Conservative politician from the Thatcher years". The item did not name Lord McAlpine, but the programme-makers intended him to be the target of the allegations, he added.
Unfortunately, in fact disastrously, names had already been named. Throughout the day on November 2, Newsnight's forthcoming report had been widely trailed on the internet. Furthermore, Lord McAlpine's name had been linked to it. In the aftermath of Newsnight's broadcast, Lord McAlpine was widely identified as the subject of Newsnight's allegations.
In short, Newsnight made the most serious of defamatory allegations about Lord McAlpine, tarring him as a paedophile who was guilty of sexually abusing vulnerable young boys living in care. Those allegations are untrue. As the BBC now accepts, they were utterly baseless. These disgraceful allegations should never have been made.