With blood all over his hands and jeans, Phillip Dunn allegedly told another man that "something had happened" involving Wangaratta man Nathan Day.
It was hearing this information more than a month after the 34-year-old went missing that made police believe there were "suspicious circumstances" surrounding his disappearance - a week later they found his body buried in a backyard.
Dunn, 59, and Darcy McNamara, 43, have been charged with Mr Day's murder and are facing a committal hearing at Wangaratta Magistrates Court this week.
Mr Day died after his throat was cut, possibly with a knife, and his body was found buried in McNamara's Ryan Avenue backyard on September 5, 2018.
Wangaratta Detective Sergeant Chris Hill gave evidence on day four of the hearing on Thursday about a statement made by Wangaratta man David Gottschling.
"Dunn came over one night, had blood all over his hands and jeans, and said something had happened," Mr Gottschling told police.
He told police that Dunn said "the body is at Darcy's place".
Detective Hill had just started working in Wangaratta the week the investigation into the missing Mr Day started.
He said the Homicide Squad's missing persons unit took over the investigation days after Mr Gottschling told detectives about what he had allegedly seen.
"It led me to believe that McNamara and Dunn had some knowledge of what happened to Nathan Day," Detective Hill said.
"It was certainly enough for me to brief the missing persons unit and work out how we go forward."
Mr Gottschling was due to give evidence in court on Thursday , but did not show up so the prosecutor hoped his appearance can be rescheduled for next week.
As Mr Day's family and friends worried about what had happened to him when he was missing, one friend said Dunn was "gloating".
Donna Hart was a friend and former housemate of Mr Day and said the two had "a fling" at one point.
She gave evidence that Dunn started talking to her at Wangaratta Coles.
"He spoke to me and said 'it's a blessing that Nathan's not here anymore ... it couldn't have happened to a better fellow'," she said.
"It's like he made the effort to come right past me to tell me this, like he was gloating."
Multiple witnesses have described Mr Day as someone who drank wine heavily, plus used ice, cannabis and prescription drugs.
Ms Hart said she had heard Mr Day threatened to kill people when he was angry, but did not believe he would go though with it and said "they were just words".
"He was always a friendly, happy-go-lucky person," she said.
"He was always the same whether he was high on anything.
"He was just a good-natured person."
The hearing continues Monday.