Barrie Fellows was called to give evidence on Tuesday at the re-trial of Russell Bishop who is accused of murdering nine-year-olds Nicola Fellows and Karen Hadaway.
They disappeared while playing near their homes in Moulsecoomb, Brighton, in October 1986 before their bodies were found the following day on the South Downs in Wild Park.
Bishop, 52, was acquitted of the murders in 1987 but was ordered to stand trial again after new evidence was unearthed following advances in DNA testing.
He has denied two charges of murder.
His defence team has pointed the finger at Nicola’s father, Mr Fellows, saying police spent 32 years investigating the wrong man.
But Mr Fellows told jurors at the Old Bailey on Tuesday he took police to look around Wild Park because it was his daughter’s “favourite” spot.
He said he had banned Nicola from the park after dark, even telling her the “bogeyman” lived there, and denied knowing she had a camp or “secret den” at the site.
Joel Bennathan QC, representing Bishop, asked Mr Fellows: “Were you party to Nicola being filmed in a pornographic video, Mr Fellows?”
Mr Fellows said: “No.”
The lawyer went on: “Were you anything to do with her death?”
Mr Fellows appeared close to tears as he again replied: “No.”
Nicola’s father said he was cleaning a swimming pool and gardening at a house in Hove the day the girls went missing.
He said he came back home on the bus via the butchers to pick up some ham for supper and stopped at the nearby house of Theresa Judd, with her brother-in-law Dougie Judd who was a lodger of the Fellows.
The lawyer suggested there was an hour missing in his alibi, and asked if Mr Fellows went to Wild Park before he went home.
Mr Fellows denied it, telling the lawyer: “You are trying to mislead me, sir. It’s not happening.”
He admitted giving Nicola a “thick ear” once and threatening to “chop her fingers off” when she was suspected at school of stealing.
Asked about breaking his great-grandmother-in-law’s nose, Mr Fellows said: “The police did not want to take it any further. I swung around and did not see her, seriously, sir.
“I do not deliberately punch old ladies on the nose.”
He was also asked why he told Karen’s mother, Michelle, that her daughter had been “in the wrong place at the wrong time”.
Mr Fellows said: “I probably did say that yes – so was Nicola in the wrong place at the wrong time. They should not even be in Wild Park. They had been banned from the park in the dark.”
Bishop’s lawyers then pressed him on how hard it was to identify his daughter’s body in the morgue, at which point Mr Fellows started to cry.
“It’s not nice going to the clinically-white room. It’s difficult talking about it anyway. I walked in there and there was a sheet over my little girl up to the neck,” he said.
He added that he had asked if he was allowed to give her her “pocket money” before putting 50p into her hand.
Prosecutor Brian Altman QC said it was being suggested that Mr Fellows sexually abused his daughter and Karen, punched Nicola in the face and killed the pair.
An emotional Mr Fellows said he understood.
The lawyers suggested his lodger at the time, Mr Judd, was filmed having sex with Nicola and was having an “improper relationship” with her.
Mr Judd said on Tuesday this was “total lies” and the first time he heard the allegation he thought it was a “wind-up”.
No charges were ever brought against Mr Fellows or Mr Judd.
The trial continues.