Rebekah Brooks, the former head of Rupert Murdoch's British newspaper business, exchanged banter with rival editor Piers Morgan at a dinner party in 2003 about hacking each others' phone messages, a court has heard.
The conversation between the then editor of The Sun and former Daily Mirror editor Morgan - now hosting his own TV chat show in the United States - took place at a steak restaurant in south London, witness Ambi Sitham said.
Sitham told the Old Bailey court that the two editors had been discussing each other's upcoming front pages at the restaurant.
She said Morgan had said to Brooks: "I already know what your cover is because I've been listening to your messages."
The witness said Brooks replied: "Been hacking into my phone again have you, Piers?"
Morgan then said: "Well, you've been looking at my emails," Sitham added.
Sitham, a former solicitor, said that when she offered her number to Brooks later in the evening, Morgan turned to her and said: "Careful - she'll tap your phone."
Former Murdoch confidante Brooks is on trial along with seven other defendants, accused of an array of offences including conspiracy to hack phones and two counts of conspiracy to commit misconduct in a public office. She denies all offences.
Brooks, known as Rebekah Wade before her second marriage in 2009, was editor of the now-defunct Sunday tabloid News of the World, then of its sister daily paper The Sun, before rising to be chief executive of News International, the British newspaper arm of Murdoch's News Corp empire.
Sitham, speaking by videolink from the United States, said she was at the restaurant with her boyfriend to celebrate the birthday of another former News of the World editor, Andy Coulson, who is also a defendant in the trial.
Morgan, who faces no charges, has denied knowledge of phone hacking at his newspaper.