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Three children were woken up as their father was stabbed to death by a stranger, a jury has heard.
Daniel Quelch, 34, had his throat cut and suffered more than 80 stab wounds at the Berkshire house, last August.
Benjamin Frankum, 25, of Littlehampton, Sussex, was arrested at the scene where he said he had been sent by MI5, Reading Crown Court heard.
Mr Frankum, who has schitzophrenia, was ruled unfit to enter a plea but will still face a murder trial.
Reading Crown Court heard Mr Quelch, from Reading, was staying at his parents' bungalow in Cherry Garden Lane, outside Maidenhead, where his three children, aged eight, four and two, had been having a sleep-over party.
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It was a totally motiveless crime
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Prosecutor Nigel Daly told the jury: "What happened is everybody's worst nightmare.
"Daniel Quelch was asleep in bed with his two-year-old son.
"Benjamin Frankum, a paranoid schizophrenic, came into his house. They did not know each other.
"Mr Frankum stabbed Mr Quelch 82 times.
"The motive - there isn't one. There is no evidence he knew Mr Quelch. It was a totally motiveless crime."
Mr Daly said Mr Frankum had been diagnosed with paranoid schizophrenia in 2001 but repeatedly failed to take his medication.
MI5 claim
Early on 23 August 2007, Mr Frankum broke into the home and stabbed Mr Quelch to death, then gave the children cola and yoghurt when they were woken up by the attack, Mr Daly said.
The jury heard Mrs Quelch saw Mr Frankum in his boxer shorts covered in blood when she arrived back at 0700 BST.
Mr Daly said Frankum told paramedics and police at the scene: "You don't want to go in there, there's stuff you don't want to see.
"There's a bloke in there, I've stabbed him about 10 times. He wouldn't die. There are about three children in there; they're all OK."
The court heard he told police MI5 sent him to kill the victim, adding: "Can you get me a can of Coke - there are some in the fridge?"
Mr Quelch was found in a pool of blood on the kitchen floor with his throat cut, the court was told.
The case continues.
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