Madeleine McCann died in an accident in her family's Algarve holiday apartment and her death was covered up by her parents who then concocted a tale of kidnap, a Portuguese court was told.

Kate and Gerry McCann, both 41, were in court to hear how the detectives leading the investigation into their daughter’s disappearance believed they had lied to hide the truth.

“She died in the apartment as a result of a tragic accident and the parents simulated an abduction after failing to care of their children,” Tavares de Almeida, former chief inspector at Portimao police station during the initial months of the investigation, told the court in Lisbon.

These were the conclusions of a police report signed by me on September 10 2007,” he added.

The allegations against Kate and Gerry McCann, both 41, were presented in court on the first day of a hearing to challenge the publication of a book written by Algarve detective Goncalo Amaral.

Lawyers for the detective, who led the team that made the McCanns arguidos – suspects – in their daughter’s disappearance, called witnesses to support the claims outlined in his book. The McCanns arguido status was lifted after ten months in July 2008 when the Attorney General ruled there was no evidence against them.

The pair, from Rothley, Leics, came face to face with their detractor for the first time since they were officially made argiuidos in September 2007, four months after they daughter vanished days before her fourth birthday.

Mr Amaral, 50, led the initial investigation into Madeleine’s disappearance from a holiday apartment in Praia da Luz on May 3 2007 while her parents dined with friends at a tapas bar nearby. He was sacked from the case, which remains unsolved.

His book, entitled “The Truth of The Lie”, published in July 2008 claims that Madeleine died in the apartment and questions her parents’ account of events that evening.

It became a bestseller in Portugal selling more than 200,000 copies and went on to be published in six languages and made into a documentary film.

After a year long campaign the McCanns succeeded in getting a temporary injunction banning further sales and it was withdrawn from shelves last September. The couple believe that the book is damaging the search for their daughter by asserting that she is already dead and are suing for liable.

They are expected to ask a judge for around £1million in damages which they will use to pay for their own continuing hunt for their daughter, who they believe was kidnapped and could still be alive and being held somewhere.

Mr de Almeida told the court: “We have always spoken of a tragic accidental death – not homicide. The McCanns did not kill her but they concealed the body,”

Mr de Almeida, who worked under Amaral and was also taken off the case in September 2007, said the decision to designate the McCanns 'arguidos' was made by police after sniffer dogs brought to Portugal from England had carried out their searches.

Giving evidence, Mr de Almeida said that the dogs had identified blood and the scent of a human corpse inside the childrens’ bedroom and the dining room of the McCanns’ holiday flat.

The animals also reacted to traces on a piece of cloth in a villa rented by the McCanns after they left the apartment and in the boot of a rental car hired by the family several weeks after Madeleine disappeared.

Mr de Almeida also complained that Portuguese police efforts to investigate the McCanns had been frustrated by their British counterparts. “We were told that the UK would not accept any investigation of the McCanns – there was a lack of cooperation,” he said.

But later he said that the theory that the parents had covered up Madeleine’s death as outlined in Amaral’s book was one reached by British police on the ground in Portugal too.

“This wasn’t something invented by Amaral,” he insisted. “It was a conclusion reached by the team of Portuguese investigators as well as British police.”

Mrs McCann wearing a dark coloured floral dress sat impassively in the front row of the court room beside her husband. The pair held hands and exchanged occasional whispers and nods as they were passed notes by interpreters informing them of court proceedings, which were carried out in Portuguese.

Mr Amaral, dressed in a dark suit and purple tie, was seated at the bench beside his legal team, fifteen feet away from the couple. He spent much of the proceedings with his eyes closed avoiding the direct gaze of the McCanns.

Tuesday’s court hearing in the Portuguese capital was an opportunity by Mr Amaral to have the temporary injunction against publication of his book overturned. Neither he nor the McCanns will be called to give evidence in the hearing which is expected to last a minimum of three days.

A third witness said the turning point of the investigation came following a tearful call from Mrs McCann who, after a dream, told police where to search for her daughter’s body.

Police Inspector Ricardo Paiva, who acted as a liason between the McCanns and Portuguese police in the days following their daughter’s disappearance told the court he had received the phone call in late July 2007.

“Kate called me, she was alone as Gerry was away and she was crying,” he said. “She said she had dreamt that Madeleine was on a hill and that we should search for her there.

“She gave the impression that she thought she was dead – it was a turning point for us.”

The senior detective said the land was searched but nothing was found. “That is when we decided to send the specialist dogs in. British police informed us about how they could detect the scent of death.”

He admitted that the police had been suspicious of the McCanns from the start of the investigation. “They disobeyed our request to keep quiet about the details of their daughter’s disappearance while we conducted our investigation. Instead they turned it into a media circus and that gave rise to some suspicions.”

He said that the McCanns should have faced prosecution for leaving their children alone. “They should have been pursued for neglect. People have been arrested for far less – even in the UK.”

The case continues.