William Rodney Cahill, 28, has been charged with the stabbing murder of Brian Liston, who had just finished an evening German class and was waiting to catch a bus home from Camperdown in December 2015.

From inside a nearby halfway house and boarding facility, Mr Cahill allegedly watched Mr Liston, 51, smoking a cigarette at the bus stop before he emerged from the facility brandishing a kitchen knife.

What unfolded was a frenzied and random attack.

According to a Crown case statement tendered in the NSW Supreme Court, Mr Cahill stabbed Mr Liston multiple times as he screamed, "Please stop stabbing me, stop, stop."

Mr Liston tried to escape but fell over and continued to be stabbed repeatedly by Mr Cahill as he lay on the ground and terrified residents tried to intervene.

Mr Cahill, who was covered in blood when he was arrested, told police he had seen a man smoking at the bus stop and thought he knew him.

According to the statement, he said he went to the bus stop in order to give the man "a yelling" for being in his area.

Mr Cahill made admissions to police that he had gone armed with a knife and stabbed Mr Liston but claimed "he stabbed me a little bit, so I went crazy".

Court documents also reveal that in the year before the stabbing, Mr Cahill had been found to be mentally unfit to stand trial on robbery charges but was released from custody without a home to go to.

After Mr Liston's death, residents said they had long held concerns about violent and unstable offenders living in the halfway house and boarding facility.

During a mental health fitness inquiry on Thursday, both Crown prosecutor Terry Thorpe and defence barrister Craig Smith were united in their submission that Mr Cahill was not fit to stand trial.

Their conclusion was based on the findings of three experienced forensic psychiatrists.

"He has been diagnosed with schizophrenia. That is a diagnosis that has existed for some time and the impact of that diagnosis is that the accused is unable to, in effect, properly instruct his council and to properly participate in the conduct of the trial," Mr Thorpe told the court.

The court heard that Mr Cahill was unable to give his legal team a coherent account that would enable them to mount a defence on his behalf in the trial.

Justice Peter Hidden will hand down his decision on Mr Cahill's fitness early next month.

If he found unfit to stand trial, he will be referred to the Mental Health Review Tribunal, which will periodically re-examine his condition.

Mr Cahill will remain in custody.

Several members of Mr Liston's family were in court for the hearing. His brother-in-law, Tim Bakker, said he felt let down by the legal system and had to leave the court room because he was so angry.

"He should be made to face up fo what he has done and I don't believe he has," Mr Bakker said.

"Brian was a lovely fellow going about his business as a school teacher. That man [Mr Cahill] should have been identified as needing some sort of governance.

"It's almost like cross your fingers, put him out there, look at the sky and hope it goes away."