At a living wake for a family friend, Christopher Michael Dawson said his wife was living in a commune west of Sydney more than 25 years after she disappeared, a judge has been told.
Giving evidence at Dawson's murder trial on Monday, Kay Sinclair said she bumped into twin brothers Chris and Paul Dawson at a wake for Phillip Day who was sick with cancer and died in 2007.
She said Dawson told her his wife Lynette had left home and was living in a Blue Mountains cult or commune at the time. The woman asked how a wife could just up and leave her kids.
"Paul said something along the lines of, 'she was a little bit crazy'," she told Justice Ian Harrison.
Ms Sinclair, whose husband went to Sydney Boys High School with the Dawsons, is a professional recruiter. She said she knew body language and described the Dawson twins' behaviour as "creepy" because of the way they sat so close together.
"I think Chris was checking with his older twin that he was saying the right thing. That was the impression that I got," she said.
Dawson, now 73, is accused of murdering his wife and disposing of her body in January 1982 so he could have an unfettered relationship with a woman known as JC who was his babysitter and former high school student.
He has pleaded not guilty to the charge.
Former police officer Ian Kennedy also went to Sydney Boys. He told the court he may have attended a school reunion with the Dawsons in 1985 but denied saying Mrs Dawson was seen living in New Zealand at the time.
"I had no part in any investigation into Lynette's disappearance at all," he said.
Paul Dawson has previously told the court that Mr Kennedy pulled his brother aside at the reunion and told of his wife's whereabouts.
On Monday, footage was played of testimony given by Elva McBay at the Local Court in 2020. Mrs McBay, who has since died, claimed she saw Mrs Dawson for a few seconds in March 1983 on Macquarie Street, Sydney during a visit by Prince Charles and Princess Diana.
The woman appeared to come out from the Sydney Hospital, ducked under the barricade, crossed the road in front of the royal convoy, and disappeared into the crowd on the other side.
While she told her husband, "I think that was Lynette Dawson," at the parade, Ms McBay said in 2020 that the woman was too quick and she could not confirm she had identified her correctly.
She also said someone who looked like Mrs Dawson had been seen on an episode of The Antiques Roadshow.
Mrs McBay worked at the same school as Paul Dawson and became a family friend, being a lifelong supporter of the Newtown Jets rugby league club where the twins played.
Mrs Dawson was crying and distressed at the birthday party of one of her daughters in 1981 after having a row with JC, the court heard.
At the party, Mrs McBay said JC threatened Mrs Dawson, saying she wanted to "get rid of" her.
"I thought [JC] meant she wanted to get Lyn out of the house and I said to Lyn 'you've got to get her out of the house'."
Dawson's former neighbour Malcolm Downy testified that he had seen Mrs Dawson "upset and nervy" when she knocked on his rear laundry door shortly before her disappearance.
"She looked stressed and she didn't have the kids with her. That was strange. That woman never went without her children," he said.
The prosecution is trying to adduce evidence from another neighbour, now deceased, who claimed Mrs Dawson came to her crying that her husband had called her a "fat and ugly bitch".
The alleged taunts were made because Mrs Dawson could not shed the weight she had gained after the birth of one of her daughters.
The NSW Supreme Court trial continues on Tuesday.