Jamul Omar Ghali, 25, of Belconnen, is facing a charge of arson after a fire at the Illawarra Court apartment block on Monday night.

The fire prompted fears about toxic fumes and forced the evacuation of nearby units, the ACT Magistrates Court heard on Tuesday.

Prosecutors said there was no known motive for the fire and it could easily have had much more serious consequences.

The court heard the quick actions of a man inside the unit had helped contain the fire and prevent it from spreading and causing more damage.

A witness has claimed he saw Ghali deliberately starting the fire to his neighbour’s unit.

But the defence lawyer for Ghali, who applied for bail on Tuesday, suggested her client could have been set up by the witness and wrongly identified.

She said the prosecution’s concerns about her client’s release could be addressed through bail conditions, including directing him to live in Civic with a friend, not go near the apartment complex or contact witnesses, and accept supervision from correctional authorities.

Police expressed fears that Ghali might reoffend or interfere with witnesses if released on bail.

They said the fire had had the potential to expand and engulf the dense apartment block, had the resident not acted as quickly as he had.

If the fire had not been contained, police said residents would have been forced to jump from the upper level.

The court heard the toxicity levels of fumes had caused concern for nearby residents.

Chief Magistrate Lorraine Walker denied Ghali bail, noting there was an overriding concern for the safety of the public and about further offending.

Ms Walker put Ghali on a short remand, and he will be brought back before the court next week.

Police indicated to the court that they would try to complete forensic analysis quickly and provide further identification evidence.