A drug-addicted and mentally ill man accused of beheading a British woman in a Tenerife supermarket has denied the murder, telling a court that his actions are governed by the voices he hears in his head.

Jennifer Mills-Westley, 60, was stabbed and decapitated while shopping on the Avenida Juan Carlos in the resort of Los Cristianos on 13 May 2011. Mills-Westley, originally from Norwich, had been living on the Spanish island after retiring from her job as a road safety officer with Norfolk county council.

Jennifer Mills-Westley. Photograph: EPA

Deyan Deyanov, a 29-year-old homeless Bulgarian, denied killing the grandmother of five as his trial began at the provincial court in Santa Cruz de Tenerife. Deyanov, who answered questions in Bulgarian through an interpreter, has been diagnosed with acute paranoid schizophrenia.

He told the court he is haunted by voices telling him how to behave and said they had told him he was "an angel of Jesus Christ who is going to create a new Jerusalem". He added: "They direct how I act, sometimes they say kill, fight, hit, pray."

After watching CCTV footage of the fatal attack, he said he did not recognise himself in the video, which he described as "a montage; a film".

Deyanov also said he had been using crack cocaine and LSD before his arrest, and had no memory of living in Tenerife.

Asked if he knew he was in Tenerife after being brought there from a psychiatric unit in Seville on the Spanish mainland, the defendant said: "I have just found out."

He also denied that he had lived in Wales, where he was sectioned in summer 2010 under the Mental Health Act at Glan Clwyd hospital.

The jury was shown two 22cm (8.7in) knives, said to have been used in the murder, and told of the moment the attack took place.

Ángel García Rodríguez, prosecuting, said: "The accused approached Jennifer Mills-Westley, whom he did not know and who was shopping, attacking and striking her repeatedly with a knife in her back and neck until she was completely decapitated."

A witness told the court that he had emerged from a hardware store to see a man "walking around with a head in his hand". Davide Balsamo, an Italian who has lived in Tenerife for five years, said: "I came out of the shop and suddenly I saw him come off the kerb, completely covered in blood.

"I ran up to him and hit him with all my strength using my motorcycle helmet and knocked him silly." Asked if the defendant was the man he had struck, he replied that he was.

Francisco Beltrán, for the defence, told the jury his client was in "total disagreement" with the charge of murder that had been laid against him. "He has committed no crime, and it goes without saying that he has not committed the crime of murder," said Beltrán.

He instead asked the jury of nine to regard his client as a "sick man" who had been living on the streets without a diagnosis or treatment for his mental condition.

Mills-Westley's daughters – Sarah Mills-Westley, 43, from Norwich, and Samantha Mills-Westley, 39, who lives in the Midi-Pyrenees region of France – were present in court, as were Jennifer Mills-Westley's brother John Smith, 63, and sister-in-law, Julie Smith, 62.

Giving evidence, Sarah Mills-Westley said that her mother had begun to worry more about crime on the island. "It was nothing specific but she was increasingly concerned that Tenerife was not as safe as when we used to visit 30 years ago," she said.

Speaking shortly after the murder, Sarah Mills-Westley described her mother as a kind and vivacious person who had brought "love and light" to her family.

"Mum retired a number of years ago and was fully enjoying her retirement travelling between Tenerife and France where she spent time visiting her daughter and grandchildren, and her other daughter in Norfolk," she said. "She was full of life, generous of heart, would do anything for anyone."

The prosecution is seeking for Deyanov to be sentenced to 20 years in a psychiatric unit. The case, which is expected to last five days, was adjourned until Wednesday.