A man who murdered a British tourist in a regional Australian town has been declared mentally unfit for trial.

Royce Mallett, a father of two children from County Durham, was stabbed in the chest by a stranger in the car park of a motel in Albury, New South Wales, on 8 July 2024.

David Summers-Smith - who has schizophrenia and was displaying symptoms of psychosis at the time of the attack - pleaded not guilty to his murder due to mental impairment.

A judge on Tuesday found he did commit the murder, but could not be held criminally responsible, ordering Summers-Smith to be held indefinitely in a mental health facility.

The court heard had Mallett, 30, had just climbed into a car parked outside the Hume Inn when Summers-Smith reached through the window and wordlessly stabbed him once with a steak knife.

"The result of that one act was both catastrophic and tragic," Supreme Court Justice Dina Yehia said in a written judgment.

Summers-Smith initially ran off, but later called police to report he had stabbed someone, and again admitted to the act when arrested.

The court heard the 29-year-old has a history of schizophrenia and psychotic symptoms which haven't responded to medication, and was receiving court-ordered treatment in the community at the time of the crime.

He had been self-medicating with the drug "ice" - crystal methamphetamine - and cannabis in the lead up to the attack, psychiatrists who assessed him reported.

They said he displayed ongoing delusional beliefs, and lacked insight into his illness and treatment needs.

Citing victim impact statements from Mallett's family, Justice Yehia said his loved ones were struggling to understand how Summers-Smith could have been in the community with a treatment-resistant psychiatric illness.

His partner Caitlin O'Keeffe in a letter told the court she is now faced with having to raise their children alone, and the reality that her children will grow up without the guidance and support of their father.

"It affects not just today, but every future moment that he should have been part of, and everyday moments that he's already missed," she said.

Mallett's father said he had lost not only his son, but his "best friend", and struggled to find enjoyment in life or motivation to do anything.

Summers-Smith's case will be periodically reviewed by the Mental Health Review Tribunal, who will monitor any potential recovery and have the power to revise his detention order.