Piers Morgan described to Jeremy Paxman how to hack into a mobile phone at a lunch held at the headquarters of the Daily Mirror publisher, the BBC presenter has told the Leveson inquiry.

Paxman said on Wednesday afternoon that at the same lunch he attended Morgan also teased TV presenter Ulrika Jonsson about the details of private conversations she had had with Sven-Göran Eriksson, at the time the England football manager.

The presenter of Newsnight told the Leveson inquiry how he went to a lunch hosted by Sir Victor Blank, the then chairman of Trinity Mirror, held on 20 September 2002, where the subject of phone hacking came up.

Paxman said he was seated beside Morgan – now a New York-based CNN talkshow presenter – with Jonsson, Blank and Sir Philip Green, the Top Shop billionaire sitting nearby.

The BBC journalist said: "And Morgan said, teasing Ulrika, that he knew what had happened in the conversations between her and Sven-Göran Eriksson and he went into this mock Swedish accent."

Earlier that year, the Mirror had revealed that Jonsson had an affair with the then England football coach.

Choosing his words carefully, Paxman continued: "Now, I don't know whether he was repeating a conversation that he had heard or he was imagining this conversation. In fact, to be fair to him, I think we should accept both possibilities, because he probably was imagining it. It was a rather bad parody.

"I was quite struck by it because I'm rather wet behind the ears in many of these things. I didn't know that that sort of thing went on."

Paxman said that Morgan also turned to him at the lunch and explained how phone hacking worked.

"He then turned to me and said 'Have you got a mobile phone?', I said 'Yes', and he said 'Have you got a security setting on the message bit of it'," he added. "I don't think it was called voicemail in those days, I didn't know what he was talking about. He then explained that the way to get access to people's message was to go to the factory default setting and press either 0000 or 1234 and that if you didn't put on your own code … his words: 'your're a fool'."

He added: "I don't know whether he was making this up, making up the conversation, but it was clearly something that he was familiar with and I wasn't ... I didn't know that this went on."

Morgan told the Leveson inquiry in December that he did not listen to any of Jonsson's voicemails in relation to Eriksson.

He was also asked specifically if he had invited her to lunch that day and had her advised her to change her voicemail settings – but the former tabloid editor said he could not recall the episode.

Morgan later tweeted: "Right – that's the last time I'm inviting Jeremy Paxman to lunch. Ungrateful little wretch."

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