At the height of his powers, Irish property tycoon Derek Quinlan was jetting around Europe buying hotels as if skipping across a Monopoly board. His Mayfair-based firm, Quinlan Private, a €10bn (£8.7bn) real estate empire, was vying with Arab sheikhs and US private equity houses to snap up some of the continent's most prized trophy buildings.

Back home in Ireland he was dubbed "King Midas"; politicians, lawyers and celebrities ranging from former chat show host Gay Byrne to U2 band members Bono and The Edge queued up to invest in his deals. In America, the press called him the "European realty tsar".

Renowned for his appreciation of fine wines, Quinlan, the son of an army officer, kept an expansive cellar of vintages at Claridge's – one of three prime Mayfair hotels he co-owned with fellow Irishman and property developer Paddy McKillen and the wealthy Green family from Manchester.

But the halcyon days ended abruptly, or so it seemed, in the wake of the Irish banking crash of 2008. Having built his empire on aggressive borrowing, Quinlan went from poster boy of the Celtic tiger economy to a symbol of Ireland's folly. Many who had placed their savings with him saw their investments wiped out. His venture with McKillen went very sour, leading to a prolonged and bitter court battle that is still not over; hostilities are to be renewed this week.

As the dust settled on Quinlan's collapsing empire after the crash, it became increasingly apparent that, far from being destitute, he was still able to live high on the hog. Even as his investments were crumbling in 2009, he racked up hotel bills of £285,000 at Claridge's and its sister hotels in Mayfair. In May 2009, on the advice of KPMG, he relocated to Switzerland for a period, resigning from Quinlan Private. Some time later he returned to the UK, taking a large villa in Putney, west London.

His children were able to remain at boarding schools despite their father's financial embarrassment. And his wife even bought a new Range Rover, estimated to be worth more than £70,000. Quinlan himself, meanwhile, could be spotted in his favourite Mayfair members' clubs – Annabel's, The George, Harry's Bar and the Dunhill.

Perhaps most surprisingly, two months ago, Quinlan was able to find £50m to participate in a cash call on investors at Coroin, the company behind Claridge's, the Connaught and the Berkeley hotels. Shareholders had been required to inject more capital in order to pay down unsustainable debts of £660m.

Much of Quinlan's opulent lifestyle, it emerged in a court battle last year, had been bankrolled by Sir David and Sir Frederick Barclay, owners of the Ritz hotel and Telegraph newspaper titles. Two advances totalling more than £1m each were made between late 2010 and early 2012. The brothers have since helped fund his take-up of rights at Coroin.

The Barclays, who declined to appear in court, insisted their financial support for the Quinlan family had been provided out of friendship, and was nothing to do with deals struck at around the same time that effectively gave the brothers control of Quinlan's stake in Coroin.

Also at that time, the Barclays bought out the Green family's stake in the hotel group. Together, these moves left McKillen an isolated minority investor. He was said to be fizzing with rage when, in January 2011, he received a text from Quinlan's right-hand man, Gerry Murphy, saying: "Greens are talking to Barclay Twins who have contacted Derek … Seems incredible. Don't blow a gasket on this news." In the welter of acrimony that ensued, Quinlan took care to remove his beloved wine collection from the cellars at Claridge's, underlining his effective detachment from the business.

McKillen claims the Barclay brothers illegally circumvented an agreement between Coroin shareholders in a plot to seize control of the hotels involving side payments to Quinlan. It is a belief that has already cost him more than £25m in legal bills, and Mr Justice David Richards last August handed down a 158-page high court judgment finding that the dealings between the Barclays and Quinlan were – as they had claimed in court – entirely lawful.

All seemed lost for McKillen, as the Observer reported in October. He said he feared, if victorious, that the Barclays would surely attempt to force him out of Coroin by insisting on a costly rights issue that would dilute his interest.

Sure enough the rights issue did come in December last year, but – to the surprise of many – this did not spell the end of the battle for Claridge's. Despite his considerable debts, McKillen too was able to find the necessary £50m to ensure his holding in Coroin shares was not diminished.

The Observer understands that the Al Thani ruling family of Qatar, with whom McKillen hopes to eventually co-own the hotels, helped finance his take-up of rights. And with the Qataris in his corner, McKillen is returning to the courts on Tuesday to appeal against Richards's ruling. As a marker of his determination, he has added the former attorney general, Lord Goldsmith, to his legal team.

So sensitive and unusual is the pact between the Irishman and the emirate over the Mayfair hotels – favoured destinations for many wealthy Middle Eastern visitors – that it required the help of former prime minister Tony Blair to broker it last year.

Nevertheless, lawyers for the Barclays have ridiculed McKillen's insistence that he remains a man of independent wealth, suggesting it is a case of "the emperor's new clothes". Moreover, they claimed in court, the Irishman had himself been seeking side deals for personal gain from his Qatari backers should he deliver them a big stake in Coroin.

McKillen explained to Richards that these proposed side deals had been for genuine work managing the hotels. But lawyers for the Barclays said the multimillion-pound terms that had been discussed with the Qataris would "make avarice itself blush".

As Britain's most expensive barristers gear up for an another fee-earning bonanza this week, and Quinlan and McKillen continue to enjoy the support of their respective backers, the picture remains grim back in Dublin.

Some years ago Quinlan told Nama, Ireland's state-owned toxic loan management operation, that he would never be able to repay the millions he owes. One top Nama official told the high court in London last year he was sceptical about assertions that advances from the Barclays to the Quinlans were made because the brothers saw a friend in need.

Several of Quinlan's investments have been seized by creditors, leading to a string of fire sales – among them a yacht, a villa on the Riviera at Cap Ferrat and one of Andy Warhol's dollar sign paintings. Yet these have registered little impact – visible to the outsider, at least – on the lifestyle of the Quinlans.

Meanwhile, with Irish banks being nationalised, Nama has taken over the worst of their bad loans to Quinlan and others. Facing state bankruptcy in 2010, Ireland itself sought loans from Europe and the International Monetary Fund.

In the witness box, Quinlan was confronted over the appropriateness of his lavish lifestyle. "Extravagant is a relative term," he said. "What may be extravagant to somebody is not extravagant to somebody else."

Richard Boyd Barrett, a leftwing member of the Dáil, said: "[It is] utterly unacceptable that somebody who has helped bankrupt this country and who owes us hundreds of millions should be living the high life in London."

A spokesman for Quinlan said: "[He] continues to work on paying down his Nama debts. His overall debts have now been reduced by €2.3bn since September 2009. He continues to co-operate fully with Nama to maximise recovery for creditors."

In September 2010, Pat Kenny, a well-known Irish TV presenter and a former investor with Quinlan, reflected on how the banking and property crash had hit him. "My pension, like everyone else's, has been devastated," he said. "There is virtually no one who has not lost out." He downplayed his involvement in Quinlan's investments, claiming he owned only "a drainpipe in Budapest" – a reference to the Four Seasons Gresham Palace, a five-star hotel in Hungary.

Other prominent figures to invest in Quinlan deals included Dermot Gleeson, a former attorney general and ex-chairman of Allied Irish Banks; Riverdance creators Moya Doherty and John McColgan; and U2 manager Paul McGuinness.

Quinlan has also left behind several soured loans with UK banks, including taxpayer-controlled Royal Bank of Scotland. RBS has been forced to take over 42 Marriott hotel properties once part-owned by a Quinlan company and is also engaged in painful debt refinancing negotiations over Jurys Inn Hotels, another Quinlan venture.

Before the crash, his empire in London also included big stakes in Citigroup's skyscraper HQ in Canary Wharf, the shopping parade between Harrods and Harvey Nichols in Knightsbridge, Audley Square car park in Mayfair and The Glebe luxury apartment block off the King's Road in Chelsea.

With McKillen, Quinlan had co-owned the Asprey building on Bond Streetand the Barclays Wealth branch next door to Claridge's.

One of the worst deals of the Quinlan years was the purchase of a 25-acre site on which once operated the Irish Glass Bottle Company in Ringsend, just over a mile south of Dublin city centre. Acquired for €411m in 2006, it was apparently ripe for residential development. But the site's value is now estimated at only €40m, and it is expected to be rented for around €675,000 a year for container storage, fenced off and monitored by CCTV.

Ciarán Lynch, the chair of the Irish parliament's committee on finance, public expenditure and reform, is keen to know more about how taxpayers' interests were being looked after in the Quinlan case and others, saying that cases in which Nama has set out a "roadmap" for specific individuals … "would be something which will be addressed when Nama come before the committee".

However, when questioned by the Observer on the progress of Quinlan's debt repayments, and on why bankruptcy proceedings have not been pursued, Nama refused to elaborate. "The agency cannot comment on individual debtors," a spokesman said.

But one possible explanation was offered in testimony last year by Quinlan's right-hand man, Murphy. "Mr Quinlan … took the view that in order to maximise the value of his various interests it was vital that he did not look like a distressed seller," he said. "On that basis it was clear that style was as important as substance and it was vital that Mr Quinlan maintained his lifestyle as a successful investor."