Police pursued historical child sex offences against a then-suspect in the William Tyrrell investigation even after being told by a potential eye-witness "the whole thing had been made up", a court has heard.
The NSW Supreme Court heard on Friday that detectives did not interview the witness, who can't be named, before laying the charges against William "Bill" Spedding in 2015.
Detective Sergeant Sam Brennan told the court he did not feel it necessary to speak to the witness first because records showed he was asleep at the time the incident was said to have occurred in 1987.
He agreed that was despite evidence the complainants had been "coached" to make claims against Mr Spedding, which included reports of screaming inside a small caravan the witness was also in.
The court heard when Detective Sergeant Brennan did speak to the witness a month after charges were laid, they asserted "nothing happened".
But Detective Sergeant Brennan defended the investigation, saying he was confident there was enough other evidence — including independent medical reports — to justify the prosecution.
Mr Spedding was acquitted of the charges in 2018 and is now suing the State of NSW on claims including malicious prosecution and wrongful imprisonment.
He claims the charges were used to gain leverage against him in the police investigation into William Tyrrell's disappearance.
William, three, had vanished on September 12, 2014, from his foster grandmother's home in Kendall, which Mr Spedding had visited days earlier to fix a washing machine.
The tradesman has never been charged and denies any involvement in the incident.
His barrister, Adrian Canceri, pressed Detective Sergeant Brennan on Friday about why he didn't interview the witness before charging Mr Spedding with offences he had been cleared of in the 1980s.
The senior detective disagreed it would have been "very important" to speak with the witness as they were said to have been sleeping during the incident.
He said a later meeting in June 2015 was "cordial" but conceded the witness asked why they hadn't been interviewed.
"[The witness] said words to the effect of, 'I was there, I'm very surprised you haven't spoken to me'," Mr Canceri said.
"Yes," the police officer replied.
Mr Canceri suggested that during another meeting, in January 2016, the witness said words to the effect of "the whole thing had been made up" to Detective Sergeant Brennan.
"Yes ... that was his view," he replied
He said he took care in his discussions with the witness as he had information suggesting they "may have also been a victim".
The court heard the witness refused requests for an official statement until they provided one in February 2018.
Detective Sergeant Brennan agreed "alarm bells" were ringing when the witness said the allegations against Mr Spedding had been "rammed down our throats" by another party, but not to the point where the police officer questioned the case.
Mr Canceri asked why police included information about their suspicion of Mr Spedding's involvement in the William Tyrrell matter in opposing a bail application after he was charged.
The barrister accused police of using the Tyrrell case to "strengthen" allegations against Mr Spedding and "make sure [he] was refused bail".
"I wouldn't presume the local court or any magistrate would be swayed in the way that you're suggesting," Detective Sergeant Brennan said.
The court also heard the police fact sheet prepared for the court said one of the two alleged victims did not disclose being sexually assaulted by Mr Spedding.
Mr Spedding spent more than 50 days in custody before being eventually released after a second bail application.
The state maintains the charges came from a "professional, careful" investigation and were not influenced by the Tyrrell case.
The hearing, before Justice Ian Harrison, continues.
