Of all the murder plans a seasoned Melbourne judge has heard, the plot driven by a barking dog is "the most bizarre".

Even the way Joseph Drago, 69, allegedly killed his neighbour was unusual, Justice Betty King said during a Supreme Court bail application.

Despite this, Justice King granted bail on Tuesday to the retired engineer from Balwyn North who was charged with the murder of Thornbury car dealer Tony Dockerty, 63.

Justice King said the nine months it took to charge Mr Drago, who police suspected of the death early on, was the major factor in bailing the father and grandfather.

He was bailed on a $600,000 surety with strict conditions to live almost under house arrest with his wife in McCrae on the Mornington Peninsula. He is only allowed to leave the home in the company of his wife to visit his elderly mother, and for medical and legal appointments.