Former New South Wales Minister Ian Macdonald admitted to the independent Commission Against Corruption on Thursday that he spent two hours with a sex trade worker at a top Sydney hotel.

However, he maintained that he did not have sex with the prostitute because he fell asleep after the massage since he was drunk, sore and distressed.

The corruption watchdog is looking into allegations that property tycoon Ron Medich paid for the massage services in exchange for the minister setting up for Medich meetings with executives from Country Energy and Energy Australia.

Macdonald, who used to be NSW energy minister, two Country Energy executives and Medich had an $871.60 dinner on July 15, 2009. They had baby goat, calamari and wine. After the two executives left, Macdonald hinted to the property tycoon that he needed a neck and shoulder massage.

Medich brought the minister to the Four Seasons Hotel and paid $300 for a room and provided a young Asian escort named Tiffanie. In a separate session with the commission, Tiffanie said that she was of the impression that when she was hired, she was supposed to have sex with the client.

The minister said he did not find it unusual that the woman hired to massage him did not have any equipment because he believed that Chinese massage techniques do not require any.

Macdonald said he considered declaring the massage session on his pecuniary interest list, but decided against it because he thought the register is only applicable to gifts over $500 in value. Medich's associate paid Tiffanie $400 for her service.

The commission asked the minister if he paid back Medich for the dinner, room and massage service in some other way.

"I had a vague memory that I might have (offered)... trying to pay Medich back for something like that is an impossibility," Macdonald was quoted by The Sydney Morning Herald.