Is this goodbye for the queen of Hello!?

Even without the drab backdrop of Court 35, the Marquesa de Varela would stand out. Swathed in Dior, one hand a comet trail of diamonds as she waves, then tosses her head, she leaves no doubt she is of a rare breed, one of those exceptional people among whom even Hollywood superstars like Michael Douglas and Catherine Zeta-Jones may not feel quite so special. As the celebrity couple continue their High Court battle to extract £500,000 from Hello! for invasion of privacy, even they may not realise the Marquesa, as the magazine's most prized deal-fixer, grew accustomed to breakfasting in bed on slivers of cod and fillet steak, accompanied by thick, sweet hot chocolate served in a silver pot.

We are talking of someone whose home was a venerable palacio in Madrid's most exclusive enclave, where she beguiled and charmed royalty, superstars and footballers' wives. Crusty old Sir Edward Heath once threw open the windows of his Salisbury house so she could taste the spring air as he sat at his piano to play joyously for her. Aristocrats, tycoons and playboys fell at her feet.

But today the Marquesa sleeps on a pillow embroidered with Madame de Sta묧s celebrated words: "The more I know of men, the more I like my dog."

At the High Court, where Douglas and Zeta-Jones are accusing Hello! of publishing grainy paparazzi shots of their wedding - thereby sabotaging a £1million deal with rival OK! - the Marquesa has denied any part in arranging those photos.

And when she stormed out of the witness box yesterday she was heard to sob: "They have stabbed me in the back." Who precisely was she thinking of ?

Was it Eduardo Sanchez Junco, the Spanish owner of Hello!? He was the person who signed the cheques that fuelled her fabulous lifestyle before they fell out over the Douglas wedding photos. As the Marquesa told the judge: "My whole income depended on my relationship with Hello!. The situation was all the more difficult for me as I support my three children, six grandchildren, an elderly mother and almost 200 dogs..." With her Hello! connections in tatters, what would become of them all? Indeed, what will now become of her?

It is tempting to imagine we know the Marquesa de Varela rather well. She has, after all, lived her life in the dazzle of gossip that is the ethos of Hello!. Many say she created the genre when, in 1988, she launched the British edition with a ground-breaking interview with Princess Anne. The Marquesa, who arranged the meeting through royal contacts, dived straight in with what was to become the Hello! credo. She sat down with the princess in Buckingham Palace and promised: "I'm going to do a nice, positive, happy story." The reply came: "You've come to the wrong place."

From that point the interview went swimmingly - and, for Hello!, profitably: as the Marquesa's scoops mounted, so did circulation. Soon she was synonymous with its success. She was the one able to talk almost anyone into opening their home, their heart, for Hello!'s interviewers and photographers. The secret was her extraordinary energy, tenacity, and a Filofax stuffed with the names and phone numbers of movers and shakers. She was a heady mix of Carmen Miranda and Nicola Horlick, a Latin firebrand with a cool business head.

Her triumphs included Mother Teresa and Darius Guppy, the society entrepreneur jailed for conspiracy to defraud and conspiracy to steal after faking a jewel robbery in a £ 1.8million scam. The Marquesa - always known by her nickname, Neneta - interviewed him in prison. Her first question? "Can you describe your emotions on becoming a father for the first time?" The readers loved it. They didn't want to strip their heroes bare. "No one understood this better than Neneta," a friend and former colleague said. "Once she sat down with them, it was all sweetness and light."

This warmth often masked a ruthless approach to getting the story. To secure exclusive rights to the wedding of Sheryl and Paul Gascoigne, the Marquesa had to befriend the future Mrs Gascoigne's hairdresser and persuade her to use her influence with her client. It worked. The issue shifted more than 600,000 copies - one of its biggest sales.

But her greatest coup was probably the 48-page Duke and Duchess of York special. It came in 1990, when the Yorks were happily ensconced in their controversially styled home on the edge of Windsor Great Park, a large, modern house built to a design which, it was suggested, had already done wonders for Asda supermarkets. The interview was classic Marquesa de Varela. It had been secured through her friendship with Susan Barrantes, the Duchess's mother.

These were the circles in which she moved. To the casual observer, she was a phenomenon, a blur of beautifully-coiffed energy, dashing between her homes in London, Spain and Uruguay, her native country. She lived in rarefied air, it seemed. She was a woman blessed with looks, charm, breeding and - most significantly - the patronage of the man behind Hello!, Eduardo Sanchez Junco.

But even in her heyday as Hello!'s jet-setting "co-ordinator", demons were gnawing at Neneta. The journalist Lynn Barber once wrote: "There is something thrillingly greedy about her." It was written after a lunch at which the Marquesa had attacked a voluptuous helping of linguine, but no one believed Barber was talking about food. Indeed, the Marquesa had acquired a reputation for high spending. The great scoops were expensive affairs. The Yorks, it has been claimed, were paid £240,000 for their exclusive "at home". Hundreds of thousands of pounds were handed over for the big interviews, the entrees to weddings, christenings or engagement parties.

The Marquesa received a percentage, possibly as much as 10 per cent, it has been claimed. The details of her remuneration have never been revealed, but former colleagues believe she was paid a retainer of more than £200,000 a year plus her performance bonus and very generous expenses. In a good year she could make £500,000, it was said. At one point, reportedly, there was a furious row with the magazine over her telephone bill, which hit £2,000 a week.

The magazine editors were aghast at her alleged profligacy. Neneta said: "Eduardo [Sanchez], who loves me, understands." And for a very long time, he did. To the exasperation of the magazine's executives, the Marquesa used her close friendship with the owner and his family to cut a swathe through the usual constraints.

To see her in the High Court, an elegant, bejewelled and dazzling Latina, it might be thought she is one of those people whose spending dictates that there will never be enough money. There is far more to it than that. She was born Maria Julia Marin, the daughter of a cattle baron who owned a vast estate in Uruguay. She once recalled that, as a teenager, she asked her father to lend her $3,500 so she could open a jewellery shop. It was a good business proposition, she said, but he refused. "If you want money," he said, "marry a rich man."

It was advice she followed to the letter. At 19, against her father's wishes, she ran away to New York. She met a rich Italian aristocrat, Julius Cesar Montenegro, and, aged 23, married.

Montenegro was wealthy when they met, but, she told friends, he was addicted to gambling. "He would gamble all night," she said. "Once in Monte Carlo he woke me up in bed and said, 'I lost everything. You must give me your jewels.'"

He sold the 120,000-acre farm her father gave her as a 20th birthday present and when they split she was broke, with two daughters, Natalia and Valeria, to care for. The search for another rich husband took her to Europe and, eventually, Marques Enrico de Varela. He was everything she was looking for, she said later: intelligent, handsome, charming, rich, aristocratic. Her life in his family's Madrid palace was beyond even the dreams of Hello! readers.

But De Varela broke her heart. Ten years ago when she was asked, innocently enough, what was her worst evening out, she said: "With my husband. We were out to a dinner party in Marbella. There was another woman there who kept looking at him. She was married to one of the richest men in Europe. She was stunning, elegant, beautiful, younger, she was everything. And I saw in his eyes, he really, really liked her. I felt like a little South American who should creep home. I realised love was finished." She walked away from the marriage and took nothing except her title. Technically, under Spanish law, the Marques could have asked for it back. Why didn't he? "He wouldn't dare!" the Marquesa hissed.

The marriage with Hello! came next. By the late Eighties she needed money badly. Financially, her daughters and her son Bruno entirely relied on her - they now live in Spain, where she has a home in Sotogrande. Her mother, now 92, lives on the family farm an hour outside Montevideo.

The Marquesa recently swopped her fine Victorian house in Parsons Green for a smaller one. It was said she made a handsome profit on the £1.6million deal. She needed to. On the farm in Uruguay the Marquesa has close to 200 stray dogs, roaming in special compounds where a large staff feed and care for them. Her greatest joy is to have her favourite horse saddled so she can ride over the pampas with her canine horde in gleeful pursuit.

"It costs her a fortune," a woman friend in London said. "She pays enormous amounts of money to keep her family and her dogs going. She might give the impression of being quite tough, but the thought of animals suffering hurts her very deeply. She once passed this farm where they had starving dogs tied up. She recruited an accomplice, stole back in the dead of night, cut them free and took them home. They are still there. People think she is hungry for money but she doesn't spend it on herself.

"I picked her up from San Lorenzo after lunch one day and she was wearing a Thierry Mugler suit that fitted perfectly. It was green and radiated that quality - that's one of her favourite words - that only real couture clothes have. I said it must have cost a fortune. She took me straight to the shop where she bought it: a secondhand designer outlet in Chelsea. She buys nearly all her clothes secondhand in London and New York."

Roger Kasper, former deputy editor at Hello!, said: "She's vulnerable. She needs to know where the next cheque is coming from. A deal she had been working on went wrong and when she realised she'd be getting nothing she broke down in tears. She had been counting on the money and I think she needed it."

The rupture with Hello! and, finally, Eduardo, has hit hard. The Marquesa said more than 10 years ago she was "around 48", though this made some friends smile. She once said the magazine had no room for older people. Will the events in Court 35 prove her absolutely right?