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What part of "no" did he not understand? The N or the O?
I am normally all for "please" and "thank you", but I think this is one situation where I would advise to leave it out.
"I said no. Stop that now!" and take the paper or whatever he has decided to destroy/play with that time away from him.
I understand what you are saying, but this guy was totally oblivious to what she was saying and waving a sharp knife around in the air. No matter how harmless he may be, this could result in serious injury to someone. Anyone who was so carried away that he would grab a paper in someone else's home and start cutting it up is not someone I would approach casually.
Oh, I think she could have. I think the mindset of "accommodating him" was in evidence, and the mindset of "stopping him" was not.
I don''t think you have to wrestle it out of is hand, but walking directly toward him with a stern face and a hand out for him to give it to you. And "Chuck, stop--don't cut up my stuff!"
I also think the "not that, I use that" might have been replaced with "Don't cut up my stuff!"
But basically, how lame is he? Cutting up paper with a kitchen knife? I'm not even cure how that works.
And he truly has indicated that he has no respect for your home or your possessions. THAT is the main point. Not that he didn't listen to your directions, but that he just starting looking at YOUR STUFF to find something to cut up, which means he doesn't respect YOUR STUFF. Which means, he doesn't really respect you.