A former suspect in the disappearance of William Tyrrell claims police told him "we know you did it" and tried to turn his wife against him by charging him with historical child sex offences, a court has heard.

William "Bill" Spedding is suing the State of NSW in the Supreme Court alleging detectives pursued an "utterly hopeless" case against him in part to "punish" him over their suspicions in the Tyrrell matter.

He claims former lead detective Gary Jubelin hoped bringing the decades-old abuse case would "crack [Mr Spedding] open" and further the Tyrrell investigation.

Mr Spedding is claiming damages for malicious prosecution, wrongful imprisonment and abuse of process in the lawsuit against NSW Police and the director of public prosecutions.

He denies any involvement in William's disappearance and was never charged.

Mr Spedding told the court on Tuesday in the aftermath of the investigation he had high anxiety, found it hard to concentrate and suffered from low moods.

"When it was all going on it as quite depressing, very depressing," he said.

Detectives honed in on the white goods repairman soon after William Tyrrell vanished from his foster grandmother's home in Kendall on September 12, 2014.

Mr Spedding, who lived at Bonny Hills, had visited the foster grandmother's house on September 9 to fix a washing machine.

He gave a voluntary interview to police from Strike Force Roseann, the team investigating William's disappearance, in September 2014 and was released without charge.

His barrister, Adrian Canceri, told the court that in the months that passed police focused on gathering evidence which "inculpated" Mr Spedding in the disappearance.

On January 20, 2015, police raided Mr Spedding's home and business before conducting a six-hour interview at Port Macquarie police station.

Mr Canceri said his client claims during the interview Mr Jubelin leaned into his face and told him, "Mr nice washing machine man, I'm going to ruin you."

Afterwards, he claims, another detective made intimidating comments including: "We know you did it. We're going to get you. I'm going to come and arrest you."

Then in April 2015, Mr Spedding was charged with sexually assaulting two children in 1987 after Strike Force Roseann renewed investigations into historical allegations against him. 

Mr Canceri said those allegations had been made by Mr Spedding's opponents in a bitter court battle and police had declined to charge him at the time.

The barrister said a review of court documents would have shown key witnesses were "totally lacking credibility", as they contained evidence two children were "coaxed" into making statements against Mr Spedding.

Mr Canceri said prosecutors should have brought the proceedings to a "very swift end" once the evidence was obtained in 2016.

However, the case continued for another two years until Mr Spedding was found not guilty of all counts by a judge in 2018.

"The criminal proceedings were used as a vehicle to further the investigation of the plaintiff in the disappearance of William Tyrell and punish him for that," Mr Canceri said.

The hearing before Justice Ian Harrison continues.