Michael Ovitz, the former Hollywood powerbroker, yesterday said the first cracks appeared in his stormy relationship with Walt Disney chief and former boss Michael Eisner even before his appointment as president of the company was announced in 1995.

Mr Ovitz made the comments as he took the witness stand in a lawsuit brought by Disney shareholders, angry at the $140m (£76.2m) severance package he received after only 14 months in the company.

Investors are complaining that Mr Ovitz should never have been hired and should have been fired without compensation when his tenure as president turned sour.

Mr Ovitz is named as a defendant in the case alongside Mr Eisner and the Disney board.

Shareholders are hoping to recoup as much as $200m. Mr Ovitz said he and Mr Eisner had talked over a period of ten years about the possibility of working together. They eventually agreed that he should join Disney while Mr Eisner was in hospital recovering from heart problems.

The day before the announcement of his appointment, Mr Ovitz attended a meeting at Mr Eisner's house alongside several other senior executives.

"I went there believing he (Mr Eisner) had done what he said he would do," Mr Ovitz testified. As soon as he arrived, though, he said he realised otherwise.

One of the executives present "looked me square in the eye and said 'hello, I am not reporting to you'." According to Mr Ovitz, a second then said: "I'm not either." Mr Ovitz described the meeting as "an interesting way to start my career at the Walt Disney Company."

After a disastrous 14 months marked by repeated clashes with Mr Eisner, Mr Ovitz left with a no-fault termination and one of the biggest payouts in history. The trial has brought Hollywood intrigue to sleepy Delaware, the state that is the in-name-only home to many US corporations because of its benign tax laws. Last week shareholders introduced incendiary company memos that showed Mr Eisner had serious concerns about Mr Ovitz from the moment he hired him. In one memo, Mr Eisner wrote: "He is a psychopath. Doesn't know right from wrong. Cannot tell the truth."

Investors have argued that Mr Ovitz's allegedly extravagant habits and abuse of company funds for personal use, combined with his performance as president, should have been enough to fire him with cause, thus depriving him of his severance package.

Another personal letter written by Mr Eisner to Mr Ovitz the week before he was ousted, read: "When we talked last Friday I told you again that my biggest problem was that you played the angles too much, exaggerated the truth too far, manipulated me and others too much."

Mr Ovitz was hired on a package of $1m in annual salary, 5m stock options worth about $107m and an estimated annual bonus of $7.5m.