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The lifeless bodies of the sleeping siblings, aged between seven and 15, were found in the rubble of the fire in Salford, Greater Manchester, on December 11.
Manchester Crown Court heard that the night was the culmination of a series of tit-for-tat attacks between with suspect Zak Bolland, 23, and 16-year-old Kyle Pearson.
Michelle Pearson, 36, had called police four times in the weeks leading up to the attack as the feud raged on – with Bolland telling him: "Watch, all your family's getting it, they're all gonna die."
Bolland and Kyle Pearson had been friends until the accused's Ford Focus was set on fire around November 25 last year, about two weeks before the fatal attack, and he blamed the teenager.
The court was told Bolland demanded cash and sent harassing text messages, including one demanding: "Fire letter box I want my my £500."
Both sides launched attacks, breaking windows in each other's homes with Bolland threatening to fire bomb Kyle's house, the court heard.
But due to an "apparent misunderstanding" police decided to take no action against Bolland for smashing windows at Mrs Pearson's home.
The jury was told that on the night of the fire, Bolland had crept into the garden of the Pearson family home with David Worrall, 25, with two lit petrol bombs tossed through a broken window of the home.
Kyle and mum Michelle Pearson managed to escape the blaze but one of the petrol bombs landed near the stairs – trapping the victims inside the three bedroom home.
Three-year-old Lia died in hospital two days later.
Demi Pearson, 15, her brother, Brandon, aged eight and sister, Lacie, aged seven, sleeping in a front bedroom, all perished in the blaze, started at around 5am on December 11 last year.
Paul Reid QC, prosecuting, told the court: "Their apparently lifeless bodies were recovered by the firefighters who attended and battled their way through the heat, smoke and flames."
The court heard that the day before the attack the three defendants spent the day drinking before Bolland and Worrall made their first visit to Jackson Street around half past midnight on December 11, four hours before the fire.
The pair, who were armed with an axe and a machete attacked the door before Bolland shouted: "Watch, all your family's getting it, they're all gonna die."
Kyle Pearson was "really worried" they would return so he got a door not attached to the frame and wedged it behind the front door.
Bolland, his girlfriend Courtney Brierley, 20, and father-of-one Worrall all deny four counts of murder.
They also deny three counts of attempted murder relating to Michelle Pearson, Kyle Pearson and Bobby Harris.
Bolland has admitted reckless arson, a charge denied by the other two.
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