A man accused of murdering a Melbourne drug dealer claims a key witness who dobbed him in had a "fling" with his girlfriend, it has been revealed in court.
Christopher Lavery, 31, is charged with the murder of 24-year-old James Russouw in March 2008, stabbing him in the neck and torching his body and car.
Until March 2016, Lavery had a solid alibi: that he was watching a film with a mate, "witness A", at the time of the murder.
But after Victoria Police advertised a $1 million reward for information in the case, witness A came forward and said the alibi had been a sham.
He told police Lavery had left partway through the movie and had later confessed to murdering Mr Russouw.
Acting on the new information detective Senior Constable Simon Hunt travelled to Cairns, where Lavery had been living, to re-question him about the death.
During a recorded interview played to the Supreme Court of Victoria on Thursday, Lavery told Const Hunt that he had a falling out with witness A a few years ago after discovering he'd "had a bit of a fling" with the accused's then-girlfriend.
Lavery also told the detective he'd given Mr Russouw about $800 on the day of his death to "buy some (cannabis) buds".
He admitted to purchasing drugs from Mr Russouw and onselling to friends in order to "make a buck on the side".
Lavery said he never saw the money again, and found out about Mr Russouw's death the following day when "it was on the news" and "through mates" and "through word on the street".
The trial continues.