Dacre refuses to drop accusation that Hugh Grant lied on oath

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The editor-in-chief of the Daily Mail repeatedly refused to withdraw an accusation that Hugh Grant deliberately "lied on oath" to Lord Justice Leveson's public inquiry into media standards and accused the actor of being "obsessed with dragging the Daily Mail into another newspaper's scandal".

In fractious exchanges with David Sherborne, counsel to the News of the World phone-hacking victims at Lord Justice Leveson's inquiry, Paul Dacre angrily declined to drop the Mail's description of Mr Grant's evidence to the inquiry as a "mendacious smear".

Appearing before the inquiry in November, the Four Weddings and a Funeral actor had inferred that a 2007 Mail on Sunday story written about him and making numerous references to telephone conversations could have been obtained only by interception of his voicemails.

In his second session of evidence before the judge, Mr Dacre refused to accept Mr Sherborne's suggestion that the actor had merely "shared his speculation" on the source of the story at the behest of Robert Jay, QC, counsel to the inquiry. The editor said that, following Mr Grant's evidence, he heard a BBC radio report saying that a second newspaper group had been drawn into the phone-hacking scandal. He said he had no choice but to respond. "I felt we had to be as robust as possible and fight fire with fire because it was such a damaging accusation."

Mr Dacre, who has edited the Daily Mail for two decades, painted a colourful description of the circumstances of Mr Grant's accusations on the first day of the Leveson inquiry, saying that the hearing was unprecedented and was "being beamed around the world". He described the actor as the "poster boy for the Hacked Off campaign" against failing media standards. Invited by Mr Sherborne to drop his "mendacious smear" accusation, Mr Dacre said he would do so only "if Mr Grant withdraws his repeated statements about the Daily Mail".

He also referred to claims made by the actor at the House of Lords that Associated Newspapers had been a major client of Glenn Mulcaire, the private eye jailed for phone-hacking on behalf of the News of the World. Mr Dacre told the inquiry that Associated Newspapers had not employed the detective. "We have never paid any payments to Mr Mulcaire," said Mr Dacre. "Our group did not hack phones and I rather resent your continued accusations that we did," he snapped at Mr Sherborne.

At the end of his evidence, Mr Dacre spoke out about the lack of regulation of American-based websites and warned that British news publishers were placed at a disadvantage because they adhered to the Press Complaints Commission's editor's code of practice. There was a "huge demand for British journalism globally", he said.

Asking the judge to take evidence from the editor of Mail Online, Martin Clarke, Mr Dacre quoted the founder of Facebook, Mark Zuckerberg, saying that "people no longer expect privacy in the Internet age" and called on the inquiry to not take a parochial approach that would leave the British media disadvantaged against overseas rivals.

Mills vs Morgan: McCartney's ex tells inquiry she didn't play tapes to Piers

The former wife of Sir Paul McCartney, Heather Mills, told the Leveson Inquiry yesterday she had never played a taped voicemail call to the former Daily Mirror editor, Piers Morgan, and had never given anyone access to her personal voicemails. The account from Ms Mills contradicts the evidence given to the inquiry in December last year by Mr Morgan.

In a video-link from Los Angeles, Mr Morgan implied that Ms Mills, or someone close to her, let him hear the recording of the former Beatle singing a "little ditty" that was part of long apology following an argument between the couple. Mr Morgan wrote about the private call left on Ms Mills' mobile phone in October 2006 in a column in the Daily Mail. Ms Mills told the inquiry yesterday that following the argument with her ex-husband in February 2001, she had woken up the following morning and found 25 "saved" messages – suggesting they had been listened to by someone else.