News outlet Crikey was advised being sued by Lachlan Murdoch was the "narrative hook" needed to appeal to a larger audience, a court has heard.
Mr Murdoch's barrister, Sue Chrysanthou SC, told the Federal Court on Monday Crikey gained $1 million from new subscribers and donations after the lawsuit was launched.
The Fox Corporation chief executive alleges a June 2022 article — by political editor Bernard Keane — defamed him in referring to his family as "unindicted co-conspirators" in the US Capitol riots.
He sued Mr Keane, Crikey's editor-in-chief Peter Fray and its parent company Private Media, who deny the article was defamatory and have claimed a new public interest defence for media.
On Monday, Private Media chairman Eric Beecher and chief executive Will Hayward were added as the fourth and fifth respondents after Mr Murdoch successfully applied to amend his case.
Ms Chrysanthou alleged documents obtained in the course of the case shows Crikey's bosses had "contrived" the proceedings and lied to their readers.
The court heard the article was removed on June 30, the day after Mr Murdoch sent a concerns notice, but was republished on August 15.
It heard Mr Hayward sent an email to public relations firm Populares on August 8, saying he believed Mr Murdoch was not going to sue.
"We do now feel it is unlikely that they are going to issue a writ. This concerns me," the court heard he wrote.
Ms Chrysanthou alleged Mr Beecher and Mr Hayward were the "guiding minds" behind a campaign designed to boost Crikey's profile through a "David and Goliath" battle.
The court heard Private Media's lawyer, Michael Bradley, introduced Private Media bosses to Populares on July 26.
"Crikey is about to get itself immersed in a big fight and is looking for expert help in campaign management," Mr Bradley said in the email.
It was the day before they sent Mr Murdoch a "so-called" offer to make amends, Ms Chrysanthou said.
Mr Murdoch's lawyers had argued an article quoting Mr Fray in the Sydney Morning Herald about the legal battle was used as "pretext" to republish Mr Keane's story.
Ms Chrysanthou now alleges email chains show Crikey had already decided to republish its article as part of a "pre-planned and prepared public relations campaign".
"The Herald article had nothing to do with it. The respondents planned [to republish] ... before they even heard of it," she said.
When Mr Keane's story was republished on August 15, a line was added saying it had been done to "clear up recent media reports" after the Herald's story.
In the Herald story, Mr Fray said Crikey was "sick of being intimidated by Lachlan Murdoch".
Ms Chrysanthou, on Monday told the court this was a lie, and that Crikey bosses deliberately tried to "escalate and aggravate the proceedings" when they believed Mr Murdoch had no intention to sue.
The court heard Populares said being sued by Mr Murdoch could position Crikey positively for "a moral victory to grow subscriber numbers".
"Our key analysis is that in order to be successful in this campaign Lachlan Murdoch will need to launch a defamation campaign against the publisher," the court heard it said.
"This will launch the narrative hook to appeal to a larger audience."
Mr Murdoch launched proceedings on August 23, after Private Media paid $50,000 for an ad challenging him to sue was published in The New York Times.
The court was told that Crikey sold 5,000 new subscriptions after the lawsuit — a "windfall of $500,000" — at a discounted "Lachlan Murdoch rate".
More than $500,000 was also donated to a fundraising page for its legal battle against Mr Murdoch.
"The commercial purpose sought to be achieved by the respondents ... in increasing subscriptions, was achieved," Ms Chrysanthou said.
"They have benefited financially from the proceedings."
Michael Hodge KC, for Private Media, argued Mr Murdoch should not be allowed to start a new course of action five months after defamation proceedings began.
Mr Hodge refuted the suggestion Populares' advice was "somehow guiding" Crikey and Private Media's actions as they awaited whether or not Mr Murdoch would sue.
Justice Michael Wigney, however, found in favour of Mr Murdoch to add Mr Beecher and Mr Hayward as respondents in the case.
Earlier, the judge said the documents gave a "new complexion" to the case.
A trial set down for March was vacated and a new date was scheduled for October 9, 2023.
