Having stabbed and killed a man after failing to rob a service station, Zack Mavin casually walked off twirling a knife in his hands as though nothing had happened.

He still had the knife when police found him "laying low" on his front verandah, still covered in the black paint he sprayed on his skin to hide tattoos he did not have.

Mavin kept holding the knife while surrounded by police telling him to drop it until he was tasered.

He earlier used it to stab and kill Robert Palmer, 54, after trying to rob a 7-Eleven, however he is not criminally responsible for either act, Justice Stephen Campbell ruled in the NSW Supreme Court on Tuesday.

The 26-year-old's "bizarre" behaviour in the Newcastle suburb of Shortland in December 2020 would have disturbed the several onlookers. Even experienced police were wary of approaching him.

"Perhaps only the very brave would be prepared to intervene or to take him on," the judge said.

Mavin arrived at the 7-Eleven armed with a hammer, a knife in his waistband, a smaller knife in his sock, and an improvised incendiary device that ended up burning only the bottle containing it.

After arming himself with the intention of robbing the place, he "somewhat unusually" joined the queue of customers inside.

Leaving with nothing, Mavin bummed a cigarette from a group of people whom he told about his unsuccessful robbery attempt, showing them the knife before asking if any of them wanted to get stabbed when they doubted his story.

After they fled, Mavin argued with Mr Palmer.

Mavin was walking away from Mr Palmer, then appeared to stop, turn and quickly move towards him, slashing at him with the knife before inflicting a "deeply penetrating" stab wound to his chest.

He then casually ambled away "as though nothing had happened".

"He appeared to be more or less twirling the knife until he returned it to his waistband," Justice Campbell said.

Mavin, off his medication for paranoid schizophrenia, incorporated Mr Palmer into a delusion, thinking the retriever puppy he had stumbled over as the pair argued was a pitbull terrier being set upon him, the judge found.

Mr Palmer's family told the court of the unmitigated grief and trauma of his death, recounting how people lined the street on the day of his funeral to farewell the cherished community member.

"My brother has been robbed of the life he had every right to live," his older sister Janelle said.

"As a family, we too have been robbed of a life we expected to live."

There was no evidence of Mr Palmer acting aggressively.

"He is entirely blameless in what happened," the judge said.

Mavin's exaggerated perception of events, a result of his psychotic and disordered mind, caused him to believe he needed to defend himself, the judge said.

The black paint he sprayed on as a "disguise" brought him more attention and he brought so many weapons with him to rob the 7-Eleven they got in the way, methods suggesting planning for a robbery and an attempt to avoid detection but which "clearly evince the workings of a disordered mind," Justice Campbell said.

Mavin was referred to the Mental Health Tribunal and will be detained until it determines he can be released without posing danger to the public or himself.

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