A man who bashed a Canberra grandfather to death will remain at Calvary Hospital's mental health unit for now after a judge granted him bail, despite fresh concerns the facility was not secure enough.
Danny Klobucar, 27, was found not guilty by way of mental impairment of murdering Phillip's Miodrag Gajic, 71, on New Year's Day in 2014.
A jury found Klobucar to be the killer, but agreed with strong psychiatric evidence that he was suffering from paranoid schizophrenia and did not properly understand his actions were wrong.
That verdict meant Klobucar would be held in a secure facility, for a length of time to be decided by the ACT Civil and Administrative Tribunal, and reviewed monthly until he was no longer deemed a threat to himself or the community.
His case returned to the Supreme Court this week after a judge found he was technically still on remand for other serious charges, unrelated to the killing, including assault.
Prosecutors argued he should be returned to the Alexander Maconochie Centre until the outstanding charges were resolved.
They have also lashed out at a decision to move Klobucar to Calvary Hospital's Brian Hennessy Rehabilitation Centre under a conditional release order last Friday, saying the unit wasn't secure enough.
Mr Fernandez on Friday said there was debate in the ACT's mental health community as to whether that course of action was appropriate, and whether Klobucar should have instead been dealt with under a forensic mental health order.
Klobucar's lawyer, John Purnell SC, wanted the separate charges dropped, or alternatively for his client to be granted bail to reside at the hospital.
Justice Penfold told Mr Purnell the court needed to take into account a range of issues, including recognition of victim's rights, attached to prosecuting the separate charges.
"I think you're too ready to dismiss the symbolism of all this," she said.
She accepted there was an "irregularity" about Klobucar's status that could be looked at when his case was next reviewed by ACAT next month.
The bail application was opposed by the Crown, who argued Klobucar was likely to reoffend and community safety needed to be considered.
Mr Fernandez said Klobucar had been sent to the hospital mental health unit because there was no other facility in the ACT he could be referred to, and raised concerns security at the facility was inadequate.
Judges and magistrates have made repeated calls for a secure mental health facility, which has has long been considered a "missing link" in the ACT's criminal justice and health systems.
The lack of a secure unit has left many inmates with mental health issues inside the territory's jail, which only has a small crisis support unit designed for short-term care.
Construction is under way on a $43.5 million Symonston building that will provide 25 overnight in-patient beds, but it is not expected to open until late this year.
Justice Penfold granted Klobucar bail on conditions he reside at the appropriate facility decided on by ACAT, that he not consume alcohol or drugs and that he attend court when necessary.
A hearing on whether the other charges should proceed against Klobucar will take place next week.