A Bomaderry man stands accused of threatening to slit a person's throat to obtain a pack of cigarettes.
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Twenty-year-old Alexander Manning faced Wollongong Local Court on Sunday from the holding cells, charged with demanding property with menaces, with intent to steal.
The court heard the alleged incident occurred in a shop in Nowra.
Defence lawyer Stephanie Fowler said Manning had "significant vulnerabilities" in custody, as an Aboriginal man with an acquired brain injury from a car crash and schizophrenia.
Ms Fowler said Manning received in-home care and help managing his money.
It was unlikely he would receive a full-time jail sentence if found guilty of the crime, she said, given his limited criminal history and his personal circumstances.
But Sergeant David Weaver, prosecuting for police, said Manning's health needs would be provided for in custody.
Sergeant Weaver said the prosecution case was "reasonably strong" and it was possible Manning would serve time in custody for this offence if found guilty.
Registrar Tina McKenna said Manning's vulnerabilities meant he had shown why his detention was not justified.
But Sergeant Weaver said there were concerns about the protection of the community and Manning committing offences on bail, noting he had allegedly committed other crimes while already on bail, including common assault and assaulting police.
Ms Fowler said her client could be banned from Stocklands Nowra and stay at home unless in the presence of a support worker.
Ms McKenna found bail conditions could mitigate any potential risks posed by Manning's release, but gave him a stern warning that any breach would land him in jail.
"This will basically be your last chance at bail," she said.
Manning must not leave his Bomaderry home unless with a support worker or his mother, cannot enter Stocklands Nowra, and must not contact or go near prosecution witnesses.
He will return to court later this month.
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