Craig McAlpine, 47, was surrounded by Molotov cocktails, smoking a cigarette and had a lighter in his hand when police arrested him on December 28, 2007, in response to reports of threats made to a neighbour.

McAlpine had been due to stand trial in the ACT Supreme Court this week on charges of threatening to damage property, but pleaded guilty yesterday.

The court heard Richard Rattenbury and Aimee Marsh had arrived home on December 28 to find a scorch mark outside their house and broken glass on the lawn.

McAlpine was sitting on a chair in his driveway across the road, and when Mr Rattenbury confronted him, he picked up a petrol bomb on his letterbox and held a lighter to it. He said, ''I don't care if I go to jail, I will burn you and your house until you move.''

Ms Marsh then called the police and spoke to another neighbour, Elizabeth Awili-Jandara, who went to speak to McAlpine. McAlpine accused Ms Awili-Jandara of abusing her children, and threatened to burn down her house with her children in it.

He later told police he had become frustrated with his neighbours for playing loud music, and had just wanted to scare them while they were out.

In victim impact statements tendered to the court, Mr Rattenbury and Ms Marsh wrote that when they first moved into their Ngunnawal home, they had got on well with McAlpine. But when he threatened to burn down their house, they were frightened enough to break their lease and move away.

McAlpine told Chief Justice Terence Higgins yesterday that on the day of the incident, he had drunk 10 beers and half a bottle of whiskey.

He said he wanted to stop the victims from giving him and other neighbours a hard time, although he maintained he did not have a specific plan on the day.

Prosecutor Jane Campbell said this was doubtful, given that he had made the effort to siphon petrol from his car, fill 13 beer bottles and stuff pieces of material in them. McAlpine is due to be sentenced next month, pending an updated mental health report.