The directors of Money Markets International (MMI) Stockbrokers, in liquidation, alleged to have defrauded the company of large sums of money, were ordered by the High Court yesterday to answer questions submitted by the liquidator.

Mr Justice O'Sullivan said the liquidator, Mr Tom Kavanagh, claimed the seven directors had transferred money out of client bank accounts of MMI, relodged these sums giving credit to parties not entitled to such credit, wrongly debiting a further party (a Jersey company, Cater Allen) and recording false transactions in the MMI books.

Mr Kavanagh alleged the wrongful beneficiaries of such transactions were the directors or persons connected with them.

It is also alleged that £200,000 sterling (€323,886) was transferred from an MMI client bank account to a Hambros private bank account for the benefit of an unauthorised party and that Cater Allen was wrongly debited with the amount.

A third major allegation was that almost £500,000 sterling was wrongly transferred from the MMI account with the Bank of Ireland, Kilburn, London, for the benefit of an MMI director. The liquidator also claimed MMI's books were falsely manipulated to cover up these transactions.

Previous court hearings were told that Mr Kavanagh had alleged the MMI directors had misappropriated more than £1.9 million which was said to have been in a Cater Allen account.

Last Monday, Mr Justice O'Sullivan was told Cater Allen's solicitors had sent a letter to the MMI liquidator which stated that the company was satisfied there had been no misappropriation of funds and no fraud.

Yesterday, during his judgment, the judge referred to the contents of this letter. He said the Jersey company claimed it had been requesting documents from the liquidator without success to date and had clarified its position on the £200,000 to the effect that this transaction had been clarified to its client's satisfaction.

Mr Justice O'Sullivan said Cater Allen also made the point that, while its clients alleged mismanagement and gross negligence, "however, our client does not claim that these funds have been misapplied or fraudulently misappropriated". Cater Allen also said its clients had never sought to become involved in the litigation.

The judge said the liquidator had responsibilities to all MMI creditors and not only to Cater Allen. The latter's attitude might well affect the liquidator's conduct of the case but the judge did not agree that the proceedings were necessarily wholly futile, nor was he prepared to infer from the correspondence that the liquidator had misled the court.