The woman, who has name suppression, told how Alahakoon had been working as a jeweller in Christchurch when his workplace building collapsed in the deadly February 2011 earthquake.
He then lost his job in June of that year, and started drinking and gambling on pokies more, she said.
"He gets angry really fast when he's drunk,'' she told the court.
The Crown has told the court that Alahakoon and Sawal had visited Mr Battelage - who had recently been having an affair with a woman they knew - on the night he died.
All three went to Oxford Working Mens Club where they drank and watched cricket on TV, before returning to his home.
Mr Battelage then sent text messages to friends, saying "something going wrong''.
His badly charred body was found by firefighters later that morning.
The Crown says that the movements of Alahakoon and Sawal that night were captured by CCTV and security technology.
They dumped their clothes, which had the victim's blood on them, outside a red zone property, the Crown alleges.
The defence counsel of both accused say the other was responsible.
"He was there, but not involved,'' Alahakoon's counsel Kerry Cook told the court earlier this week.
"Mr Sawal was responsible for the murder and arson, not him.''
John Brandts-Giesen, counsel for Sawal said his client was "totally stunned'' and "scared beyond belief'' when Alahakoon killed their mutual friend. Sawal said he was used as "bait''.
Alahakoon is also charged with assaulting a woman, who has name suppression, with a pair of scissors on December 5, 2011, and again on Boxing Day that year.
The trial, before Justice Christian Whata, continues.
