Spencer McDougall, 23, faced Wollongong Local Court on Monday charged with wounding with intent to cause grievous bodily harm over the incident, which left the victim in hospital with a punctured lung.

Court documents said the victim contact McDougall via Snapchat at 2.30am on Saturday wanting to buy a gram of cocaine for $300.

McDougall told the man to meet him up the road from his house in an hour.

It is alleged McDougall armed himself with an 18-cm carving knife before going to meet the buyer, who arrived with a friend.

McDougall got into the back seat of the victim’s car before the pair began negotiating over the price.

However, the conversation quickly turned argumentative, prompting the pair to get into a physical confrontation outside the vehicle.

Police allege McDougall twice “lunged” towards the victim, stabbing him on the left side of his rib cage before fleeing back to his house.

The victim was taken to Wollongong Hospital where it was confirmed his lung had been punctured.

He provided a statement to police, leading them to McDougall’s house a short time later.

McDougall was discovered laying in bed, asleep, with the knife next to him.

Officers seized the knife and some of McDougall’s clothing before arresting him and taking him to Wollongong Police Station.

A subsequent strip search allegedly revealed cocaine hidden in a bag in McDougall’s underpants.

McDougall allegedly admitted making a slashing motion towards the victim during his interview with police but said he was unaware the knife had connected.

In court on Monday, defence lawyer Matt Russoniello said McDougall would fight the charge on the basis he did not intend to cause the victim grievous bodily harm at the time and had been acting in self defence.

“He says he is the victim of an assault by the two men, who he believes wanted to rob him,” Mr Russoniello said.

“He says he was kicked and punched at least 30 times and pulled out the knife for his own self defence and preservation in the hope they would see the knife and back away.

“He says they didn’t back away, they chased him.”

He urged the court to grant McDougall bail, a move opposed by police.

“The prosecution strenuously opposes bail – this offence is of the highest degree of seriousness,” Sergeant Ben Bragger said.

“It all stems out of a drug deal that the accused was the supplier in.

“He’s brought a knife to a fist fight and has admitted to the stabbing.”

Magistrate Cate Follent refused to release McDougall, saying the case against him was strong and he would likely face a jail term if convicted, despite his lack of criminal record.

The case will return to court in early October.