The Conservatives are fighting a claim that a businessman did not know what he was doing when he left the party £8.3m in his will.
Mr Kostic made his will when Margaret Thatcher was in power
London's High Court heard Branislav Kostic was "deluded and insane" when he willed his money in the 1980s.
His only son Zoran, 50, from Edinburgh, says he is entitled to his father's entire estate in a will made in 1974.
The Conservative Party Association says there were rational reasons why Mr Kostic left his son out of his will.
'Monsters and freaks'
A judge heard on Tuesday that Mr Kostic rejected his family, irrationally believing they were conspiring against him.
He made the will after saying Margaret Thatcher was "the greatest leader of the free world in history" and that she would save the world from the "satanic monsters and freaks".
Mr Kostic, who was born in Belgrade, died in October 2005 at the age of 80.
His son says his father lacked "testamentary capacity" because of his delusional and paranoid mental illness.
Zoran told the court on Wednesday how he grew apart from his father in the mid-1980s.
He said he had worked part-time for his father in 1984 and 1985 at his Transtrade business in London where the two shared a partitioned office.
"During the last months [at his father's office] my father stopped speaking to me completely and would ignore me when he came in the morning," he told the court.
He said he last saw his father in 1985 and could not contact him because he did not know where he was. He said at that time his father was "living like a nomad".
Zoran said that before 1984 his father had been "perfectly normal" but he than began behaving erratically.
He said: "He also began to have paranoid delusions about the female members of his family at this time and slandered my aunt and grandmother, who were both living in Zurich.
"My father was paranoid that the female members of my family were trying to poison him."
Lawyers for the Conservative Party Association earlier told Mr Justice Henderson that Mr Kostic and his son had become estranged and that he was unhappy with his son's career choices.
The party's barrister Andrew Simmonds QC said there was also Mr Kostic's "great and long-standing affection for the Conservative Party and his admiration for Mrs Thatcher".
Mr Kostic set up pharmaceutical and precious metals firm Transtrade UK after being sent to work in London, and became a British national in 1975.
Clare Montgomery QC, representing Mr Kostic's son, said the Conservatives "only benefited because the testator became mentally ill".
Mr Simmonds said that while it was accepted that Mr Kostic had a delusional disorder it was not accepted that this made him incapable of making a proper will.
The hearing continues.