Katie Foreman sexually assaulted Wendy Evans and threatened to kill members of her family before she died, a court has heard.
Ms Foreman perished in a deliberately lit fire that tore through the main bedroom of her Corrimal home on October 27, 2011.
Evans has pleaded guilty to Ms Foreman's murder; three others — Ms Foreman's estranged boyfriend Bradley Rawlinson, Michelle Proud and her partner, Bernard Spicer — have denied the charge.
Jurors were on Wednesday played a recording of a phone call between Proud and her sister-in-law, Peggy Anne Case, Spicer's sibling, which took place in early 2012 after Proud was arrested and remanded in jail.
The pair discussed the fire, at which time Proud admitted that Spicer had been involved.
At one stage, Ms Case asked Proud why the pair did it.
"This Katie chick threatened to kill Wendy's [family]," Proud was heard to say.
"She raped Wendy with a stick when she was knocked out, and Wendy's got the video of it."
Proud told an upset Ms Case that Evans had "snapped" that night, and her brother was not to blame.
"It's not his fault Peg, it's Wendy who ... asked him to do this shit and it wasn't supposed ... it was only supposed to be a scare, you know what I mean ... and she goes and blows it [the house] up," Proud said.
"He was just there, it wasn't supposed to happen like this and now he's being brought into this shit. It's not his fault Peg ... he only went there to scare her."
Proud told Ms Case she was only in jail because she "knew about it afterwards, which is bullshit".
The court also heard alleged payment from Evans and Rawlinson to Spicer and Proud for their help in Ms Foreman's killing was made through Ms Case's TAB account.
She confirmed $1000 was deposited on October 26, 2011, a further $1000 on November 8, and a final $350 was placed into the account on November 25. She said each time she removed the money the same day and gave it to Spicer.
She said Proud told her the money was from her friend Wendy, who owed it to her from when she had visited her in Wollongong in October.
Meantime, the court also heard from crime scene analyst Detective Senior Constable Suzanne Sutherland, who spent more than 12 hours examining Ms Foreman's house in the wake of the fire.
She said the stairs leading up to the landing on which Ms Foreman's body was found were not damaged by the fire, however a Fire and Rescue NSW accelerant detection dog indicated accelerant on steps four and five, about halfway up the staircase.
"The carpet and underlay were removed and placed in individual arson bags," Snr Const Sutherland explained, saying the items were later reshown to the detection dog, which again gave a positive indication for accelerant.
She said Ms Foreman's badly burned body was discovered on the landing just outside her bedroom, facing downwards and towards the wall.
She said ash and debris was found around the body but not underneath it, which was consistent with the explanation that the body had been there prior to the debris falling from above.
Snr Const Sutherland's evidence will continue on Thursday.