Giving evidence in the murder trial of Christopher Michael Dawson on Tuesday, former detective sergeant Paul Mayger said the investigation was suspended in May 1992 after discussions with either the coroner or Director of Public Prosecutions.
"I raised the issue of witness testimony and statements of the police that Lynette Dawson had been seen a week after her supposed disappearance, and I was advised that unless we could refute that evidence, the investigation probably shouldn't proceed," he said.
Mr Mayger examined the January 1982 disappearance of Mrs Dawson in the early 1990s.
Dawson, now 73, was charged in 2018 with the murder of his wife. Prosecutors allege he killed her and disposed of her body in January 1982 so he could have an unfettered relationship with one of his former high school students, known as JC.
He has pleaded not guilty.
In a 1991 police interview, Dawson told Mr Mayger that his wife had been spotted by family friends Sue and Ray Butlin on the Central Coast a week after she allegedly left her marital home in the Sydney suburb of Bayview.
In the NSW Supreme Court on Tuesday, Mr Mayger said he had not spoken to the Butlins during the investigation. He suggested this would have been intended, but said the crime squad's heavy workload meant newer cases took priority over older ones.
Earlier this month, Mr Butlin told Justice Ian Harrison that his wife had briefly seen Mrs Dawson at a fruit stall on the Pacific Highway north of Sydney before she got into a car and drove off.
The former police officer said documents from his investigation in the early 1990s had been destroyed by damp while in storage. As a result, only some material was provided to Detective Damian Loone who investigated Mrs Dawson's disappearance from 1998 to 2015.
Rebecca Hazel gave evidence of a book she had written on the Dawsons and JC titled, The Schoolgirl, Her Teacher and his Wife.
She met JC at a women's refuge where both worked in the late 2000s. Over the years, they chatted and Ms Hazel took notes on JC's story.
Ms Hazel published the book through a collaboration with Hedley Thomas, an investigative journalist at The Australian who published The Teacher's Pet podcast on Mrs Dawson's disappearance in 2018.
Thomas promised Ms Hazel protection from any defamation lawsuits filed over what she said in the podcast.
She told the court the book was written as a non-fiction account claiming Dawson murdered his wife, but rather than go into forensic detail the focus was on JC and Mrs Dawson's family.
In a 2012 email, JC told Ms Hazel that she was not permitted to leave the house without Dawson and had to earn the right to wear certain clothing, for instance by being a "sex slave" for 24 hours.
In early 2013, Anna Grantham told Ms Hazel that after the disappearance, she had taken a heart-shaped picture frame gifted by her co-worker Mrs Dawson to a clairvoyant.
The frame allegedly conjured images of a couple holding hands before the dark-haired man pushed the woman's head under the water, holding it there. The clairvoyant then saw something rolled up in a carpet being put into a car.
Ms Grantham testified in May that she had seen Dawson pushing his wife's face down into the mud next to the family swimming pool before she disappeared.
In emails read to the court, Thomas told Ms Hazel he was "deeply moved" by Mrs Dawson's disappearance, saying his own grandmother had gone missing when his father was a teenager.
"She had mental health challenges and walked away from their Sydney northern beaches home one night never to be seen again. It was believed that she walked into the ocean, swum out and drowned," he wrote.
The judge-alone trial continues.
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