A man holding an axe was seen arguing with another man hours before a body was discovered near a Melbourne preschool.

Danny Volpe, 57, faced the first of a two-day committal hearing in the Melbourne Magistrates' Court on Tuesday charged with the murder of Cameron Harris, 39.

Mr Harris' body was discovered in a car park next to a preschool in Upper Ferntree Gully in the afternoon of September 17, 2016.

Three people gave evidence about an argument they had seen between two men just a few suburbs away from where the body was found on the day of the murder.

However, they were not asked if the accused was one of the two men.

Mei-Yee Hocking was at a duck pond with her daughter near Croydon Library when she heard the men arguing "so vehemently".

"The other one was trying to be appeasing, saying 'I'm you're friend, it's not like that'," she told the court.

"The other man just kept yelling."

She saw one of the men go to the boot of a car and take out an axe.

"I couldn't believe what I was seeing and said to the lady standing next to me, "He's got an axe! That's an axe isn't it?" she said in her police statement.

She called triple zero, and saw the car speed off, screeching its tyres.

Later that afternoon she saw on the news that a body had been found in Ferntree Gully.

"I thought that maybe the two incidents could be linked," she told police.

"I had a bad feeling about it all weekend."

Another witness, Debbie Cooke said the argument was about property, with one of the men saying "I just want my stuff".

She also saw the man grab an axe.

"He lifted the axe right above his head with his left hand with total disregard for the public," she said in her police statement.

But another witness said he did not see an axe, but saw a man holding a knife.

"He had a knife cupped in his hand," Philip Ricardo said in court, describing it as a 30cm fishing or hunting knife.

The committal hearing will continue on Wednesday.

AAP

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