The 51-year-old faced the NSW Supreme Court on Monday after pleading not guilty to murdering David Vale more than three years ago.
He is accused of stabbing Mr Vale twice on a footpath in Kempsey, on NSW's mid-north coast, just before midnight on March 1, 2023.
The 39-year-old died of stab wounds while sitting behind the wheel of his car after leaving an alleged altercation with Lardner.
Lardner is accused of stabbing his cousin with an intent to kill or inflict severe harm, but defence lawyer Dennis Stewart argued he had reacted in self-defence.
He told the judge-alone trial in Port Macquarie that Lardner had been sitting on a veranda smoking a cigarette when an angry and agitated Mr Vale confronted him and demanded they have a fight.
The now-deceased man accused Lardner of ripping him off during a drug deal, Mr Stewart said in his opening address.
"He was angry and agitated ... and hanging out for drugs," he said.
During their fight, a knife fell from Mr Vale's clothing onto the ground, and the duo - who had been exchanging punches - wrestled over it, the court was told.
"(Lardner) became fearful if David Vale successfully took the knife off him, he would be stabbed and probably killed," Mr Stewart said.
"(Lardner) couldn't get away from him and he stabbed David Vale, and the accused deliberately did that in order to defend himself."
The now-51-year-old stabbed his cousin just once, Mr Stewart said.
But prosecutor Brian Costello said Mr Vale had been stabbed twice - in the chest and arm - which was not consistent with an act of self-defence.
"(Lardner) pursued David Vale towards his car to inflict those stabbing injuries ... the stabbing occurred in an act of aggression," Mr Costello told the court.
The court was shown CCTV footage depicting Mr Vale kicking out at a man as he retreated from the alleged altercation to his car.
Mr Vale drove a short distance to his nephew's house and arrived "bleeding profusely", the prosecutor said.
The fatally wounded man allegedly told his nephew he had been stabbed by Lardner, but did not describe why the incident had occurred.
Mr Vale had methylamphetamine, commonly known as ice, in his system when he died in his vehicle 300m from the scene.
The trial continues.
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