Claims that $7 million went missing from Bermuda Fire & Marine accounts were yesterday dismissed in Supreme Court.

Lawyer for accountants Cooper & Lines Ian Croxford told the court that the indication in yesterday's Royal Gazette that cash was missing was far from the truth.

Clare Montgomery, lawyer for liquidators Ernst & Young, said on Wednesday Bermuda Fire's liabilities fell by $7 million to $40 million during the six months from December 30, 1990.

But Mr. Croxford said the loss could be accounted for because Cooper & Lines had not considered reinsurance recoveries the company was entitled to. "The asset of their reinsurance receivable did not just disappear,'' he said.

The explanation came after John Patterson, the company's former chief accountant and secretary during the reorganisation, said again yesterday morning he couldn't account for the drop in liability. And Mr. Croxford said the discrepancy was not important in the case.

"The plaintiffs have not pleaded this particular error,'' said Mr. Croxford.

"Miss Montgomery must confine herself to the pleaded case. She is seeking to develop a problem that has never been developed before.'' Bermuda Fire was reorganised in 1991 when the company's profitable domestic business was separated from the failing international business.

On Wednesday Mr. Patterson testified that he understood the purpose of the reorganisation was to give Bermuda Fire a more "modern structure''.

In 1993, the international business went into liquidation with some $450 million in debt to international creditors. The liquidators allege that the split was an illegal transaction because the five former directors, their auditors and legal advisor knew or suspected that Bermuda Fire was insolvent.

On Monday, Michael Owner, reinsurance consultant at Bermuda Fire, takes the stand.