A recent stabbing at Lake Illawarra that left a 32-year-old man with a punctured lung occurred in the midst of a consensual threesome, a court has heard.

Sara Joyce McDonald, 36, is accused of using a carving knife to stab her flatmate and possible casual lover, Paul Marshall, on March 16 after becoming upset while trying to join him and another woman in a threesome.

Police investigating the scene of the stabbing at Grove Circuit, Lake Illawarra last month. Credit:Robert Peet

Court documents reveal McDonald and Marshall lived together in the Grove Circuit house but were not dating, although police said the circumstances of the stabbing may indicate they were in a casual sexual relationship.

The pair were with two other males and an unidentified female in the house on the morning of March 16 when they broke off into respective groups to have sex, police said.