It is often said that he who laughs last laughs the longest.

There are different explanations for the origins of this phrase, but it might be a good idea if it was printed out and pinned up in the boardroom at Carrow Road.

There was enough evidence during his three years as Norwich City manager that Paul Lambert, more often than not, has the final word in any long-running battle of wills.

A triumphant return to muddy Colchester and a grandstand finish against Reading at Carrow Road were two examples of old scores being settled in style when he was in charge of the Canaries, and this season's events have served only to enhance the image of a man who, tripping and falling in the compost heap, would emerge sooner or later covered in roses.

Earlier this season, when things were going none too well for his old club or his new team, information regarding Lambert's compensation battle with City, following his acrimonious exit last May, was made public at a fans' forum.

It doubtless garnered a bit of much-needed support for the Canaries after a difficult start to the season, and cast the one-time folk hero in an unfavourable light.

But, though the dispute is now resolved, it has backfired spectacularly on the field with a fired-up Villa inflicting two of the most painful results of the season on Chris Hughton's team.

The first defeat, in the Capital One Cup, cut off a very plausible route to a lucrative first Wembley final for Norwich in 28 years, but the second reverse, in Saturday's Premier League fixture, could yet prove to have devastating long-term consequences.

With less than two minutes left at Carrow Road, it appeared it would finish honours even, with City extending a useful unbeaten run to eight home league games – not the ideal result but not a disastrous one, either, matching the scoreline at Villa Park in October and keeping the visitors below Hughton's men in the table with just two matches to go.

But as the clock ticked down, a slide rule pass from Villa's Ashley Westwood enabled Gabriel Agbonlahor to gain a yard on defender Sébastien Bassong and sweep the ball past goalkeeper Mark Bunn into the bottom corner with precision that would have graced the Crucible.

It was one moment of brilliance that changed the mood dramatically in both sections of City's biggest crowd of the season.

True, on the balance of play, on possession if not clear-cut chances, Norwich had not deserved to lose – but they could also have lost more heavily after Villa's flying start to the second half.

It was also true that Villa were extremely fortunate to finish the game with 11 men after the indiscretions of Joe Bennett and Christian Benteke brought no more than yellow cards when either or both might have seen red.

But, those issues aside, the table doesn't lie and after just two wins in 19 league games, City's condition has gone from stable to serious to critical.

Victory over West Bromwich Albion in the final home game of the season next Sunday is now a must. Anything less could be fatal with a trip to last season's champions on the final day.

City were the better side in the first half. They might have had a penalty after 12 minutes when Matthew Lowton blocked Anthony Pilkington's cross with his arm, and both Robert Snodgrass and Ryan Bennett might have more seriously tested jittery keeper Brad Guzan.

But there was a warning on the stroke of half-time when a cross from Agbonlahor took a deflection off Javier Garrido and bounced on top of the bar with Bunn, once again preferred to England cap John Ruddy, scrambling across his goal.

Ten minutes after the break, it was Agbonlahor who took possession on halfway, skipped away from Pilkington and with City players backpedalling, struck a powerful 25-yard drive that fizzed past Bunn.

With City stretched, Weimann should have made it 2-0, poking the ball over from three yards out from a cross by Agbonlahor, who rolled another shot wide after a one-two with Benteke

Benteke escaped with a yellow card after grabbing Bassong by the neck and Hughton elicited jeers for substituting Wes Hoolahan before City were handed a way back into the game. Joe Bennett, already on a yellow card, hauled down Snodgrass and skipper Grant Holt fired the spot-kick to Guzan's left for his sixth goal of the season.

It looked set to stay that way before Agbonlahor's clinical finish prompted unconcealed glee from his manager on the touchline.

Holt almost saved the day in stoppage time but headed agonisingly wide from a cross by substitute Kei Kamara, the final contribution of his loan spell before leaving City to negotiate a perilous fortnight.