Cody Franklin was unfit to participate in his judge-alone trial before Justice Richard Button, who said he was "floridly psychotic" and suffering from chronic and severe schizophrenia when he committed the crimes.

In June 2017 Franklin, 38, brutally bashed Arthur Phelan in his one-bedroom flat before dismembering his two pet birds and scattering their body parts, according to crown prosecutor Regina Kimbell.

After pouring birdseed on Mr Phelan's body and disassembling the birdcage, Franklin intentionally lit a fire in the elderly man's Parkes apartment and another one inside his own, directly below.

For the two counts of arson he was also found not guilty on the grounds of mental illness.

Mr Phelan was a "well-loved" and fragile gentleman who suffered from such poor health he mainly resided on his couch. He was known to lend small sums of money to people and kept a diary of the loans and repayments.

The Crown said the diary "strongly suggests that a sum of $20 was outstanding" by Franklin who likely visited Mr Phelan to collect more cash.

In the days before the assault witnesses saw Franklin's mental health deteriorating and believed he was smoking cannabis.

Three workmen had seen him through his window naked "talking incomprehensible gibberish," and destroying a window, while other neighbours watched him ruin personal belongings.

After he emerged from the complex "wearing nothing more than a pair of shorts in winter ...(he) was talking to imaginary people, was swinging his arms and hands, and was holding a lighter".

One woman gathered in a group outside the burning apartment heard Franklin say words to the effect of "you got what you deserved, you f***ing c***," while watching the blaze and flicking the ignition on a cigarette lighter.

"Even allowing for the mental disturbance of the accused, that was said by the Crown to show not only a basic knowledge that harm had come to the deceased, but also an emotional satisfaction with the outcome," Justice Button said.

Franklin had emerged from the apartment with bloody feet and lacerated knuckles, and his DNA was found on Mr Phelan's clothes.

But the defence countered this version of events with the hypothesis that an impoverished drug or alcohol addict may have been responsible for bashing Mr Phelan, given the Crown was relying solely on circumstantial evidence.

The defence also pointed to his son as a possible suspect after he had become estranged from his father over an unpaid debt.

However, the defence accepted there was no evidence that directly put his son in the apartment of either his father or Franklin on the morning in question.

Justice Button ordered Franklin to be detained and assessed by the Mental Health Review Tribunal.

Australian Associated Press