Phil Jeffs faces the hangman's noose for a scandalous crime that has all of Razorhurst guessing.

The rivalry between Kate Leigh and Phil Jeffs reaches boiling point, leading to a legendary street battle between their rival gangs. Jeffs is determined to put Kate and Tilly out of business by poisoning their cocaine supply and slashing their workers. The police create Australia's first drug squad to fight the deadly cocaine epidemic, and Kate starts an affair with a sexy young gangster, angering her faithful lieutenant Wally.

Fresh out of prison, Kate Leigh puts a bounty on the heads of Tilly's husband, Big Jim Devine, and her chief henchman, Frank Green, as payback for the murder of Greg Gaffney and the razor attack on Bruce Higgs. In a pre-emptive reprisal Tilly vows to eliminate Kate's muscle before they eliminate hers.

Meanwhile, Kate learns the truth about her son-in-law and is forced to take action that will drive her own daughter away.

Big Jim faces the noose over the attempted murder of his wife but at the 11th hour Tilly refuses to testify against her husband and the charges are dropped.

The ultra-nationalist New Guard are proving such a danger to his government that Premier Jack Lang guarantees Bill Mackay the new title of NSW Police Commissioner if he can stamp them out.

His wife having left him and taken the kids, Frank throws in his lot with Nellie and the pair try to escape Razorhurst for a new life in Queensland.

Guido Calletti's ambitious plans to seize Kate's cocaine supply are forgotten when he and Frank clash over Nellie yet again.