The woman known as SD, who cannot be named for legal reasons, appeared alongside her partner and foster father of William at a Parramatta Local Court hearing on Thursday.
She was applying to have two counts of common assault and two of intimidation dealt with under the mental health act after she was charged in October 2021.
The court was told the woman physically assaulted her 10-year-old foster daughter by kicking her in the thigh, causing "pain discomfort and bruising," and striking her with a wooden spoon.
SD told a treating psychologist that she kicked the girl because she believed she was about to kick the other child, but the alleged victim denied this.
SD also allegedly verbally abused the child over a sustained period of time.
In a telephone conversation SD allegedly told her friend: "I need to break her".
The charges do not relate to William, who was aged three when he went missing in September 2014 from a home at Kendall on the NSW mid-north coast.
Magistrate Peter Feather said the family dynamics changed in July 2021 when the parents adopted another child, a six-year-old girl, leading to the eldest feeling left out and "jealous".
"Seems that the alleged victim began to act up to some extent," Mr Feather said.
SD was diagnosed with major depressive disorder and PTSD, and some of her mental ill-health relates to the "difficult relationship she had with her mother and the loss of her mother in most recent years ... in fairly difficult circumstances," he said.
It was unlikely that SD would ever re-offend given all her foster children had been removed from her care, the court was told.
The magistrate said it was a strong prosecution case with several aggravating factors including that one incident occurred in front of another child, and that SD was in a position of trust and authority given she was family.
He found it would be reasonable to impose a community corrections order if she was being sentenced today, and believed the public interest was best served by dealing with the offences under the criminal system.
Mr Feather formally dismissed the application for her charges to be dealt with under the Mental Health Act that would have avoided a conviction.
SD will likely join William's foster father in a January hearing. He is charged with one count of common assault, and one for intimidation.
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