A father confessed to sexually abusing his daughter but said it was an issue which they'd one day address together, Belfast Crown Court has heard.
Adams (58) of Bearnagh Drive in west Belfast, denies 10 counts of rape, indecent assault and gross indecency against his daughter Aine Dahlstrom from when she was four-years-old until she was nine, between 1977 and 1983.
The court heard that in 2002, Aine's younger sister, Sinead Rosbotham had challenged her father about the allegations in the west Belfast home of her aunt, Anne Adams.
Ms Rosbotham said she had asked him: "Did you abuse my sister?"
She said: "Liam was horrified and shocked that I came out with it.
"He said, 'Yeah that happened but that's between me and Aine. We'll face our demons in our own time.
"Me and Aine will face each other in our own time."
The court heard Ms Rosbotham hadn't known her father, as she'd been a baby when her parents' marriage broke up, but that she re-established contact with him in 2002 and then met him on around seven occasions.
Defence barrister Eilis McDermott said the alleged confession by Liam Adams hadn't happened.
"If your father had suggested to you he'd sexually abused your sister, you wouldn't have let him over your door," she said.
Ms Rosbotham told the court that in hindsight she shouldn't have done so: "I was very young and silly. I'm 10 years older and I'd do things differently now."
Ms Rosbotham was shown photographs of her smiling with her father, which it was suggested contradicted her claim that she never relaxed in his company.
She told the court: "It looks like I'm relaxed (but it's) a Kodak moment.
"I don't feel relaxed now but if you asked me to smile, I could."
The jury heard transcripts of Liam Adams' interviews with police after his 2007 arrest, in which he repeatedly denied abusing Aine.
"There is no way I done any of those things," he told detectives.
He denied that 20 years earlier he'd been confronted about the alleged abuse at a meeting in Buncrana with his brother Gerry Adams, his daughter Aine, and Aine's mother.
He said he'd first heard the allegations from his solicitor just weeks before his arrest.
Adams told police a statement by Aine's mother, Sarah Campbell, was "full of lies" and he didn't know why she was lying.
He said he didn't know why Aine had made such allegations about him or why her sister Sinead had said he'd confessed to the abuse.
The case continues.