Mark Lundy joked he had finished with a prostitute in Wellington, then driven home to Palmerston North the night his wife and daughter were killed, the High Court in Wellington has been told.
Mrs Lundy, 38, and seven-year-old Amber, were found dead in their Palmerston North home on 30 August 2000. They had been bludgeoned to death.
Husband and father Mark Lundy, 56, has pleaded not guilty to murdering the pair.
Mark Lundy's sister-in-law, Andrea Lundy, today told the court she and husband Craig Lundy had taken Mark Lundy out for dinner a few days after the deaths.
At dinner Mark Lundy told the couple he and his wife had not had sex for three months, and that Christine Lundy "wasn't the sort of woman that you could just tap on the shoulder and say 'come on honey, how about it'", - that she liked affection.
He then asked if they could keep a secret before telling them he had drunk some rum and hired a prostitute the night his family was killed.
"Craig said 'that came out of left field'," Andrea Lundy said.
Mark Lundy told them it was a $140 "cashie" and that the "pretty, not beautiful" woman was with him for an hour.
"Craig said 'I suppose that that's your alibi'," Andrea Lundy said.
Mark Lundy then joked that 'he finished with her and drove back to Palmerston North' but said it in a sarcastic tone, Andrea Lundy said.
Mark Lundy also discussed life insurance with the couple, saying it had been increased only the week before and that he could have upped it from $200,000 to $1 million but had instead gone for $500,000.
"He said 'so there's no motive for money'," Andrea Lundy said.
Craig Lundy earlier told the court Mark Lundy had said during the same conversation he did not believe it would be paid out as he had not paid any premium. However, Craig Lundy told him it would be as long as he had signed the document.
Mark Lundy had raised the matter without prompting, as he had the hiring of a prostitute.
He told them he had used a prostitute four times previously; he had previously told his brother Christine Lundy had gone off sex when the couple found out they could not have any more children.
"It was nothing to go up to three months without having sex," Craig Lundy said his brother had told him.
Earlier, Christine Lundy's former sister-in-law, Maria Norrelle, said Mrs Lundy wanted her husband to give up alcohol and was concerned at the effect their partying lifestyle would have on their daughter.
Ms Norrelle told the court Mrs Lundy was a very private person but had opened up to her a couple of times.
"She wanted to change their lifestyle," Ms Norelle said.
"She had said to me she wanted Mark to give up drinking for three months, just to see if he could."
Mrs Lundy was concerned about the effect their partying lifestyle was having on Amber, she said.
She had also spoken of being "embarrassed" by her husband's behaviour at the races the Christmas before the pair were killed.
Ms Norrelle said Mr Lundy told her not long before his wife and daughter were killed that Mrs Lundy was not sleeping well, in a conversation in which he also used the word "bankruptcy".
However, he said he was not worried about their finances.
The Lundys had recently put their home into a family trust, and joked they no longer had a mortgage; that was held by the trust.
Defence lawyer Ross Burns questioned Ms Norrelle about the Lundys' relationship, asking if they had a close and loving relationship.
"They had been married a long time," she replied.
When he asked whether Amber was the apple of Mr Lundy's eye - as several other witnesses have told the trial - Ms Norelle said: "Most of the time."
Yesterday a former prostitute, whose name has been suppressed, told the court her Lower Hutt agency sent her to a client called "Mark" at the Foreshore Motor Lodge in Petone about 11.45pm on 29 August and she was picked up about an hour later.
He paid her $140 cash up front, and she used his cellphone to call her agency and let them know she was okay.
The man chatted about his business, his wife and his child, even telling her how his wife did the accounts for their kitchen sink business.
There was a three-quarters empty bottle of rum in the room, and the man "stunk" of alcohol.
However, she also agreed with the prosecution that he did not appear to be affected by alcohol, and said he was pleasant the whole time.
Police allege Mr Lundy left the Foreshore Motor Lodge on the night of 29 August - after seeing the prostitute - drove to Palmerston North, killed his wife and daughter, then returned to the motel.
* Clarification - For the avoidance of doubt, please note that Radio New Zealand reporter Sharon Lundy is no relation to Mark Lundy.