A FORMER policeman murdered a Sydney escort with whom he had been having a sexual relationship after she paid him $20,000 to kill her lover's wife, a court has been told.

Michael Anthony Wallace, 55, today pleaded not guilty to murder but guilty to the manslaughter of Zoe Zou as his trial began in the Supreme Court in Sydney.

Mr Wallace admitted shooting Ms Zou, who went missing in the northern beaches suburb of Manly on November 19, 2003, and whose baby daughter was found abandoned in her pram in a Manly street hours after her disappearance.

The court was told police had trailed Mr Wallace to a remote bush location 35km east of Lithgow in March 2004, after he told an undercover police officer he was going to dig up Ms Zou's remains.

He admitted to shooting Ms Zou and taking steps to cover up his actions, including burning out her Peugeot, fabricating alibis and lying to police, said defence barrister Peter Bodor, QC.

"He accepts responsibility for her death by gunshot, ...(but) Mr Wallace says this is a case of manslaughter and he will, in due course, tell you about the circumstances of the killing and what provoked him to do what he did."

The Crown alleges Ms Zou paid Mr Wallace $20,000 to kill the wife of her lover, Tim Titheradge, and that Mr Wallace had planned to rip her off by taking the cash without carrying out the hit.

Mr Wallace, from Sydney, told police he and Ms Zou had met at dinner one night in 2002, and ended up sleeping together "that night and indeed numerous times after".

He said he had supported her through the birth of her child with Mr Titheradge and subsequent turmoil as Mr Titheradge went on to marry another woman, whom he had promised to wed some 20 years earlier and with whom he had three children.

"While she was actually in hospital ... having the baby ... he actually went through with the marriage which indeed, from her point of view, she was shattered that he'd betrayed her in this fashion," Wallace said in a 2003 police interview, played to the court today.

Brothel owner Zuni Wilding told the court that Ms Zou had told her parents Mr Titheradge was her husband, and she was devastated when he married.

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