* Court finds Daily Telegraph tabloid defamed Geoffrey Rush
* Rush awarded A$850k in preliminary damages
* Telegraph editor disappointed with decision (Adds detail, background, quotes)
By Tom Westbrook
SYDNEY, April 11 (Reuters) - Oscar-winner Geoffrey Rush won damages of at least A$850,000 ($610,000) on Thursday after a court ruled that the Australian arm of News Corp defamed him by saying he behaved inappropriately toward a co-star in a production of King Lear.
The Federal Court, which found News Corp's Daily Telegraph tabloid in Sydney failed to prove its stories were true, will later determine further damages for economic harm, such as Rush's loss of movie roles and the effect on his career.
"This was in all the circumstances a recklessly irresponsible piece of sensationalist journalism of the worst kind, the very worst kind," Judge Michael Wigney said in a decision read to a crowded courtroom.
Rush, 67, said the articles were hastily compiled because the Telegraph wanted an Australian angle on accusations of sexual assault levelled at U.S. film producer Harvey Weinstein.
Wigney agreed and said the paper failed to properly inquire into the facts before it published.
Daily Telegraph editor Ben English said News was disappointed with the decision and would review the judgment.
Outside the court, Rush said he was pleased to acknowledge the verdict, but added it had been distressing for all involved.
Since the accusations against Weinstein in 2017, scores of powerful men have been accused of sexual harassment or assault in a movement dubbed #MeToo.
Under the headline "KING LEER," and in later articles, the Daily Telegraph said Rush, playing the title role of a 2015 Sydney Theatre Company production of the Shakespeare play, had been accused by a co-star of unspecified inappropriate conduct.
Rush, who won the Best Actor Oscar in 1997 for "Shine" and has since appeared in the "Pirates of the Caribbean" films, said the stories implied he was a major pervert, or guilty of major depravity, and his lawyer sought "very substantial" damages.
Wigney found that readers could have drawn those conclusions, despite the vagueness of the articles, because of the #MeToo climate in which they were published.
The articles did not name the accuser nor detail the conduct, and the actor, Eryn Jean Norvill, did not speak to the newspaper for its story nor want her complaint made public.
Norvill, who played Lear's daughter Cordelia, agreed to testify as part of the paper's defence, and testified that during the production Rush touched her on the breast and humiliated her with sexual innuendo.
On Thursday Justice Wigney questioned her reliability and credibility.
"In my view, Ms Norvill revealed herself to be a witness who was, at times, prone to exaggeration and embellishment," he said. He cited examples of differences between her testimony and that of Rush, who denied behaving inappropriately, and other actors involved in the play, who corroborated Rush's view.
"I stand by everything," Norvill said outside court, reading from a prepared statement.
She and Rush said the case had no winners and had been hurtful.
"It's been extremely distressing for everyone involved," Rush said at the top of the courthouse steps. ($1=1.3965 Australian dollars) (Additional reporting by Sonali Paul in Melbourne; Editing by Clarence Fernandez)