William vanished while playing at his foster grandmother's home in Kendall on September 12, 2014.

Kendall man Tim Palmer told the coronial inquest into the child's suspected death on Wednesday he had a conversation with friend Michael McInally in 2018 in which Mr McInally said he needed to get something off his chest.

He said on the day William Tyrrell went missing he saw a white sedan driving "crazily" down Batar Creek Road and the driver using his left hand to push something into the passenger side footwell, Mr Palmer said.

"He said if I was to tell anyone this story, he would deny it," Mr Palmer told the NSW Coroner's Court.

Mr McInally then addressed the inquest and disputed several elements of Mr Palmer's story.

He said in fact, he had been driving down Comboyne Street when he saw a person holding their left hand up as if to get better phone reception.

Asked by the coroner why he would tell a story in 2018 about how he saw someone in 2014 trying to get phone reception, Mr McInally said: "I don't know".

"I was in a drunken state," he said. "I don't remember half of the conversation."

But Mr Palmer's version was wrong, he said.

Mr McInally said he remembered the car as he had never seen it in the area before.

Mr Palmer said he believed his decision to tell police about the 2018 conversation led to the long-time friends falling out.

The inquest resumes on Thursday, August 15, in a closed court.

Earlier this week, Deputy State Coroner Harriet Grahame ruled to close the court in the interest of justice for some witnesses to give evidence behind closed doors.

A handful of the 54 people on a draft witnesses list have been assigned pseudonyms and granted permission to give evidence before just the coroner, lawyers and court staff.

Public scrutiny of the court and its processes was an important factor in delivering justice, Ms Grahame said, but publication had the potential to frustrate its operation.

"It may seem unusual (to close the court) ... but it is a regular process," Ms Grahame said.

"Not on a daily basis but it happens from time to time. Closing the court is a difficult step but it is sometimes necessary."

Read more: William's foster and biological families give evidence

A further 45 witnesses will be called in the next three weeks, including persons of interest who will appear before the Coroner when the inquest travels to Taree Courthouse from Monday, August 19.

So far, witnesses have included William's biological and foster families and emergency services personnel on the ground the day the toddler disappeared.

Counsel assisting the coroner Gerard Craddock said last week the absence of eyewitnesses and forensic evidence makes the investigation into William's suspected abduction among the hardest cases in the world to solve.

He reinforced that people called to give evidence will simply help put the pieces of the puzzle together and are not on trial.

All of the evidence collected by Strike Force Rosann is being presented before the Coroner who will determine if the three-year-old was abducted by someone. There is evidence yet to conclude that William is dead.