One of the former owners of the Ormonde Hotel, Dublin, yesterday denied a claim that a second company was set up to operate the hotel in the late 1980s to avoid responsibility. Mr Desmond Coffey, a director of Humewood Holdings Ltd, told the Master of the High Court, Mr Harry Hill SC, that when he and his partner purchased the hotel for £395,000 in 1987, they had set up a second company, Killoran Inns Ltd, to operate the hotel.

Two years later, they sold the hotel for £1.925 million but £250,000 of this was a deferred payment due in 1991. It was never paid because the company which purchased the hotel, Dawngate International Ltd, encountered difficulties when its trade collapsed.

He was before the Master on the second day of an examination into the affairs of Fawnside Ltd, of which Mr Coffey was a director. Fawnside leased the Ormonde Hotel during the period 1991/95.

Asked by Ms Grainne Clohessy, counsel for the liquidator of Fawnside, Mr Billy O'Riordan, whether Fawnside had traded while insolvent from 1992 to 1995, Mr Coffey said he never saw it like that.

He acknowledged considerable liabilities were built up during the period 1995/97 but denied trading insolvently during this time.

The case resumes on Thursday.