Banks say Dunne did a special deal for wife Gayle
Mavior claims the syndicate "reaped the very substantial benefit" of the work carried out after last winter's floods and says it is "disingenuous" of the lenders to deny liability.
The dispute is the latest in a series of court battles involving Ms Killilea, a former gossip columnist who reinvented herself as a property developer after moving to the US two years ago.
She is currently embroiled in a legal row with NAMA, which is seeking access to records linked to her property deals.
The 'toxic bank' claims she did not have the means to pay for four expensive properties in the US and Switzerland and Mr Dunne's money paid for the deals .
NAMA claims these deals netted the Dunnes millions, while Mr Dunne's debts at home remain unpaid.
Mr Dunne owes €185m to NAMA.
Ms Killilea has no personal debts owed to NAMA, but the agency appointed a receiver over certain assets of Mavior in July 2011.
Mr Dunne paid €275m for Jury's Hotel and €125m for the Berkeley Court in 2005, and had hoped to build a Knightsbridge-style 37-storey tower block on the site of the hotels.
But the ambitious project was blocked by An Bord Pleanala and the hotels were re-opened under the 'D4' brand.
Zrko repossessed the hotels last January and in May the High Court ordered Mr Dunne to repay €164m borrowed from Ulster Bank.
The syndicate of banks entered mediation talks with Ms Killilea's company earlier this year in a bid to resolve the dispute over the refurbishment contract.
However, these talks broke down and the syndicate has asked the High Court to force Ms Killilea's company -- which it describes as "a shell" -- to prove it can pay more than €600,000 in legal costs if the case goes ahead.
Mavior, whose shareholders are two Isle of Man companies controlled by Ms Killilea, is resisting the security of costs application.
The syndicate claims Ms Killilea wrote to them last November to say the fixtures and fittings in D4 Hotels were held for her benefit by way of a trust created in September 2008, despite the fact that Mavior said the company owned them and that no other person was the beneficial owner.
"Having regard to the foregoing and the manner in which it (Mavior) manipulates its accounts and assets -- appearing to own valuable assets at one moment and being a mere trustee the next -- the defendant (Zrko) is deeply suspicious that the plaintiff (Mavior) is little more than a shell company," said an Ulster bank official in papers lodged in the courts.
The litigation has unmasked further details about Ms Killilea's conversion from gossip columnist to property developer. Ms Killilea became a director of Mavior last year.
She replaced her husband as director of the company, formerly known as Mountbrook Homes, which under Mr Dunne's 16-year reign as director was one of the biggest players in the property market during the Celtic Tiger.
Mavior changed from a limited liability company to a private unlimited company in June 2009, which means it does not have to file accounts or make public any financial information.
The disputed deal was concluded on November 26, 2011, and much of the works were covered by insurance policies, but the syndicate says it needs to spend a further €708,818 to carry out remediation works "inadequately undertaken" by Ms Killilea's company.