Hitching his way back to Sydney, with his hair dyed dark brown and a moustache, Stephen murdered a truck driver, Bill McDonald, and adopted his identity. He answers an advert about a room for rent at James Newman's luxury beach house. James (Scott McRae) had earlier been introduced as police constable Max Simmonds's cousin, and when Stephen moves into his beach house, Mr Bad reemerges, and the rein of terror starts all over again. As Jamie's new lodger, 'Bill' and Jamie decide to celebrate becoming housemates by inviting two attractive young women to join them for drinks at the beach house – but it ends in tragedy with the grisly death of one of the women at the hands of Mr Bad. He returns to Eden Street with attempts to take revenge on Lisa, by freezing her to death in an industrial sized freezer. He then goes after Toni and keeps her chained-up in a derelict shed in the middle of the forest, and continually torments Sheridan with terrifying psychic visions and more twisted mind games.