Can I defy Lilting Lullaby?

No. Defy cannot target Lilting Lullaby.

Defy checks the printed (base) cost of the target spell, and can only counter a spell with 4 or less energy and 1 or less power. Lilting Lullaby costs 2 power, which exceeds Defy's power restriction. Defy's own power cost is 1, so its targeting condition ("no more than rune of any domain") caps at 1 power — Lilting Lullaby's 2 power is outside that range.