The Old Bailey heard allegations that Rebekah Brooks and Piers Morgan exchanged banter at a dinner party about phone hacking.
American media lawyer Ambi Sitham said she overheard the conversation at a steak restaurant in 2003 where some 20 media professionals were celebrating Andy Coulson's birthday.
Speaking by videolink from the United States, Ms Sitham told the court that Brooks had asked Morgan if he had been "hacking into her phone again".
Brooks denies all of the charges against her. The trial continues.