A mentally ill man whose conviction for murdering a taxi driver was quashed has pleaded guilty to the lesser charge of manslaughter.

Grant Lindon Collard was originally sentenced to life imprisonment after being found guilty of "scaring to death" 67-year-old Lindsay Ferguson during a taxi journey in Mandurah, south of Perth, in April 2013.

Mr Ferguson suffered a heart attack after Collard threatened him with a knife, stabbed part of the taxi with a knife and bought and used drugs during the trip.

Mr Ferguson tried to call for help but Collard smashed his two-way radio.

The taxi ended up crashing after Mr Ferguson collapsed and Collard spat at him before he walked off.

After a trial last year, Collard was found guilty of murder and deprivation of liberty.

He was sentenced to 12 years' jail for the deprivation of liberty charge, and life with a minimum of 17 years for the murder.

Collard appealed against the murder conviction and earlier this year, it was overturned by three Supreme Court judges.

The reasons were suppressed because of the possibility Collard would face another trial.

In the Supreme Court today, Collard pleaded guilty to the lesser charge of unlawfully killing Mr Ferguson, which prosecutors accepted.

He will be sentenced in March.

His lawyer, Simon Freitag requested a psychiatric report be prepared for the hearing to get an update on his client's "mental health difficulties".

Collard, who has been in custody since 2013, appeared in court today via video link from Albany prison.