Re Prudential Finance Limited v Sma Motors Pty Limited; Selected Financial Packaging Pty Limited and Peter Iliffe [1990] FCA 119 (19 April 1990)

FEDERAL COURT OF AUSTRALIA

Re: PRUDENTIAL FINANCE LIMITED
And: SMA MOTORS PTY LIMITED; SELECTED FINANCIAL PACKAGING PTY LIMITED
and PETER ILIFFE
No. N G678 of 1989
FED No. 148
Trade Practices - Deceit

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES REGISTRY
GENERAL DIVISION
Wilcox J.(1)

CATCHWORDS

Trade Practices - misrepresentation - invoice submitted by vendor of motor vehicle stating sale price - Arrangement made between vendor and purchaser of vehicle for inflation of price with cash payment to purchaser - Invoice submitted by finance broker to financier who entered into leasing arrangement in reliance upon the invoice - Default by lessee leading to loss on re-possession and resale - Evidence does not establish that vendor knew the identity of the financier when issuing the invoice - Significance of that fact - Cross-claim by vendor against broker - Question whether or not broker knew of fraud.

Deceit - Claim made alternatively in deceit - Same issues.

Trade Practices Act 1974 s.52

HEARING

SYDNEY
19:4:1990

Counsel for the Applicant: Mr C.J. Birch

Solicitors for the Applicant: Pigott Stinson

Counsel for the Respondent/
Cross-Claimant: Mr I.L. Johnston QC

Solicitors for the Respondent/
Cross-Claimant: Fiddes Pogson Mackay

Counsel for the Cross-Respondents: Mr G.M. Gregg

Solicitors for the Corrs
Cross-Respondents:

ORDER

The court orders that Judgment be entered in the principal proceeding in favour of the applicant, Prudential Finance Limited, against the respondent, SMA Motors Pty Limited, in the sum of one hundred and ten thousand five hundred and eighteen dollars ($110,518).

The cross-claim be dismissed.

SMA Motors Pty Limited pay the costs of each of the other parties to the proceedings.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

This is a tale of falsehood and folly, the major issue in the case being how far those elements extended.
The facts

2. The respondent, SMA Motors Pty Limited, carries on business under the name Scuderia Veloce Motors ("SVM"). This business is conducted in three separate locations in the suburbs of Sydney and involves the sale and servicing of several makes of luxury cars including Porsche, Ferrari and Volvo.

3. The case arises out of the sale by SVM of a Porsche 928 S4 Coupe on 7 July 1988. But the story starts a little earlier, in March 1988, with the arrival at SVM's Lindfield premises of a mysterious gentleman named Nicholas Marcello. Mr Marcello was introduced to Frank Howe, the manager of the Lindfield branch of SVM, by an existing client who stated that Mr Marcello was "an absolute whiz on investments" who had "made millions of dollars over the past five years". Mr Howe also learned, perhaps incongruously, that Mr Marcello had no office premises, his postal address being his parents' home at Edgecliffe and his usual telephone contact being his car phone.

4. Mr Marcello was interested in purchasing a new Ferrari car. After negotiations extending over some weeks, a deal was finally made. SVM sold a new Ferrari 328GTSI to a financier, Beneficial Finance Corporation Limited, for $171,800, the intention being that this vehicle would be leased to Mr Marcello. Mr Marcello sold his used Mercedes Benz car to SVM for $72,350 cash. The trade-in figure was $9,850 above the value which SVM put on the Mercedes Benz. These transactions were effected about 13 May 1988.

5. Almost immediately, Mr Marcello was back at the Lindfield showroom expressing interest in a new Porsche 928 S4. On this occasion the transaction was to be on behalf of a company: a Tamworth-based investment company called Advantage Investments Pty Limited, in which Mr Marcello claimed to be acquiring an interest. Once again there were lengthy negotiations between Mr Marcello and Mr Howe. In late June or early July, they reached the stage of Mr Howe enquiring about finance. He telephoned Peter Iliffe, one of the two directors of a finance broking company, Selected Finance Packaging Pty Limited ("SFP").

6. SFP and Mr Iliffe are cross-respondents to this proceeding. When it was established in February 1987 SFP had negotiated an arrangement with Prudential Finance Limited ("Prudential"), the applicant in this proceeding, whereby, subject to approval in each particular case, SFP could enter into leases in its own name but on behalf of Prudential.

7. There is an issue between the parties as to whether Mr Howe was aware of SFP's arrangement with Prudential. There is also a major dispute between him and Mr Iliffe as to the content of their telephone conversations concerning finance for the Porsche. But it is common ground that an agreement was eventually reached whereby SFP would procure the leasing of the vehicle to Advantage Investments for a period of five years, the terms of the lease reflecting a purchase price of $257,275. SFP put this proposition to Prudential for its approval. The application to Prudential was supported by documents, including an original (white) invoice numbered 1397, issued by SVM and dated 7 July 1988. The invoice was addressed to SFP but it proposed delivery of the vehicle to Advantage Investments. The invoice identified the subject vehicle as a "New Porsche 928 S4 Coupe". Particulars of colour and trim, and chassis, engine and registration numbers, were set out. The invoice referred to 12 "dealer fitted accessories" and showed the price as $257,275.

8. As is now agreed, this invoice was incorrect in three respects. Firstly, the subject vehicle was not new; it was a demonstration model. But not much turns on this because the evidence is that it was used as a demonstration model for only about a week and only travelled roughly 200 kms. Secondly, many of the listed "dealer fitted accessories" were not in fact extras on this model. They were standard equipment included in the list price. This is a matter of some importance, because the evidence is that, when the application was considered by Prudential, the relevant officer checked the correctness of the price shown on the invoice by ascertaining the list price of a standard vehicle and by ascertaining and adding the value of the itemised "dealer fitted accessories". Had the standard items been omitted from this list it would have been apparent that the price of $257,275 was excessive. Thirdly, and most importantly, the stated price was not the true price being charged for the vehicle by SVM. The price actually charged by SVM was a base price of $210,056, inclusive of all extras, plus registration of $4,215 and less a discount of $5,556 -- a net figure of $208,715. This means that, after payment by Mr Marcello of the registration fee, the receipt by SVM of the invoiced sum of $275,275 would result in an over-payment of $52,775.

9. None of these inaccuracies was obvious to Prudential. Its officers made some inquiries about Advantage Investments and approved the transaction. On or about 11 July 1988 a cheque for $257,275 was delivered to SVM, the cheque being drawn upon a bank account which was kept by Prudential, but which bore the name of SFP and was operated jointly by Prudential and SFP. On the same day, SVM drew a cheque for $52,775 in favour of Advantage Investments and delivered this to Mr Marcello. Both cheques were paid on presentation. Mr Marcello took delivery of the Porsche.

10. Late in April 1989 Paul Peterson, the administrative officer of Prudential, discovered that lease payments over the Porsche had fallen into arrears. He contacted Josephine Kenny, one of the directors of Advantage Investments, who told him that Mr Marcello had been employed by the company to set up an operation in Sydney but that his employment had been terminated. Mrs Kenny referred Mr Peterson to Greg Huxley, of a company which is identified in the evidence only as "Asian Pacific". Upon contacting Mr Huxley, Mr Peterson learned of the existence of a different version of SVM's invoice 1397. Mr Huxley sent a copy of this document to Mr Peterson by fax. The fax copy shows the true transaction, revealing the over-payment of $52,775. The document Mr Huxley transmitted in that facsimile message is also in evidence. It is the second (yellow) copy of the original white invoice sent to Prudential. Much of the material contained on this yellow invoice is a sensitized paper reproduction of material upon the original invoice. But the price shown on the original document does not appear. Instead, the calculations already summarised are set out.

11. Mr Peterson obtained possession of the Porsche. It was valued by P.L. Pickles and Co. Pty Limited, auctioneers, and eventually sold by that company for $158,000. After deduction of Pickles' commission, Prudential received $155,000.
Prudential's claim against SVM

12. In the principal proceeding Prudential seeks to recover from SVM a total sum of $110,517.83. This sum is calculated by taking the original outlay of $257,275, crediting the moneys received -- whether for lease payments or on resale -- and allowing 15%, by way of pre-judgment interest, on the amount outstanding from time to time. There is no dispute regarding the calculations.

13. The capital loss suffered by Prudential is, of course, greater than the difference between the true sale price of the vehicle and the represented sale price. But counsel for Prudential justifies recovery of the full amount of the loss by pointing to evidence, from each of the two Prudential officers who were primarily involved in the decision to accept the transaction, to the effect that he would have rejected the transaction if he had known that it involved a payment of over $50,000 to the lessee. I accept this evidence, which was not challenged.

14. It is said on behalf of SVM that any recovery should be limited to the difference between the amount actually paid to SVM for the vehicle and the amount which would have been paid if its true price had been stated: that is, $52,275. However, having regard to the evidence which I have just mentioned, the applicant's claim is not so limited. If it establishes that it was induced to enter into the transaction by SVM's misrepresentation, it is entitled to recover the whole of the loss thereby occasioned: see Toteff v. Antonas [1952] HCA 16; (1952) 87 CLR 647. It is not to the point that, absent the misrepresentation, it may have entered into some different transaction which occasioned it loss.

15. Prudential rests its case for recovery of its losses upon two bases: deceit and contravention of s.52 of the Trade Practices Act 1974. I think that it is entitled to succeed on each of these bases; and to recover the amount claimed by it, as set out above.

16. There is no doubt that the original invoice incorrectly stated the purchase price of the vehicle. Mr Howe denied knowing that Prudential would finance this transaction. This denial is contested, two separate items of evidence being relied upon. The first item is evidence that, a few weeks before the Porsche transaction, Mr Howe agreed to a request from Mr Iliffe that Prudential be allowed access to SVM's showroom for the purpose of making a video film advertising its luxury leasing package. That evidence indicates that Mr Howe was aware, firstly, of Prudential's interest in that type of business and, secondly, that a business connection existed between Mr Iliffe and Prudential. But it does not show that Mr Howe knew that any lease entered into by SFP would, in reality, be a lease entered into by Prudential.

17. The second item of evidence is more cogent. Mr Iliffe said that, when he set up SFP, he saw Mr Howe and told him that SFP had a principal-and-agent agreement with Prudential under which SFP could write leases in its own name on behalf of Prudential. But, although SFP had a number of transactions with SVM in the 15 months to May 1988, it does not appear that any of them were lease transactions in its own name. The reason was that the agreement between SFP and Prudential did not at first extend to the leasing of luxury cars; the term "luxury" being defined by reference to the limit allowed on depreciation for income tax purposes. And SVM dealt largely in luxury cars. It was only in May 1988 that Prudential entered the luxury field, at least so far as SFP was concerned. Mr Iliffe gave evidence that, when this happened, he informed both Mr Howe and the business manager of SVM, David Forsyth. I accept that evidence. It leads me to conclude that, if they had thought about it at all, Mr Howe and Mr Forsyth -- who was peripherally involved in the subject transaction -- would probably have inferred that the ultimate financier of Advantage Investments was SFP. But there is no evidence to suggest that either gentleman did think about the matter. SVM was to be paid before delivery of the car and the identity of the payer was a matter of no moment to Mr Howe and Mr Forsyth. There is no suggestion that either was expressly informed that Prudential was involved in the transaction. The evidence does not permit a finding that either Mr Howe or Mr Forsyth was in fact aware of Prudential's role.

18. However, in my opinion, that does not matter. Mr Howe conceded in evidence that he was aware that Mr Illife had formerly been working as an employee in the finance industry and had decided to go into business with a partner. He said that he assumed that Mr Iliffe "did not have millions and millions of dollars of his own". He agreed that Mr Iliffe "was seeking underwriters in the finance world with those resources". He said that he assumed that when Mr Iliffe put a quotation to him for finance the finance was being provided by someone else. Explaining the form of the original invoice, Mr Howe said that "the finance company will not accept an invoice for a car that shows the full details of the make-up of pricing of the car - any trade-in involved, any pay-out involved, any discount involved". Given that, on Mr Howe's version of the conversations between him and Mr Iliffe, SFP already had full details of all of these matters, he must have had in mind a financier other than SFP; otherwise it would have been simpler to put the same details on the original invoice as upon the copy. Finally, it is significant that, when Mr Howe learned that Prudential was in fact involved in the matter, he expressed no surprise that the financier was someone other than SFP. Asked about this matter, he said that "it was not a surprise because I did not know which finance company was involved".

19. It is no defence to Prudential's claim for SVM to say that, when he wrote and delivered the original invoice, Mr Howe did not know the identity of the particular company which would pay the amount it demanded. Insofar as the claim is based on deceit, the matter is covered by the statement of principle of Menzies J., with whom Barwick C.J. and McTiernan J. agreed, in Commercial Banking Company of Sydney Limited v. RH Brown and Company [1972] HCA 24; (1972) 126 CLR 337 at p 343:

"A person who makes a false and fraudulent
misrepresentation is only liable to the
persons to whom it is made, ie. to the persons
whom it is intended should act upon it: Peek
v. Gurney (1873) LR 6 HL 377. It is not
necessary for liability that the
misrepresentation should be made directly, it
can be made to one, to be passed on to
another; it is not necessary that it should be
made to a particular person; it can be made to
a group to which the plaintiff belongs so that
the plaintiff is one of those intended to be
deceived. The representation must, however in
one way or another, be made to the plaintiff
to induce him to act upon it.".

See also per Gibbs J. at pp 346-347.

20. The same approach has recently been taken by the House of Lords in relation to negligent misstatement: see Caparo Industries PLC v. Dickman [1990] UKHL 2; (1990) 2 WLR 358 at p 368.

21. I think that a similar position applies in connection with the s.52 claim. Section 52 focusses attention upon the conduct of the corporation rather than the effect of that conduct on others; although, in order to obtain damages, an applicant must establish that he or she suffered damage as a result of reliance upon that conduct. But, if that can be shown, the fact that the misleading conduct was a misrepresentation made generally, rather than to the applicant personally, is not a ground for refusing relief. In cases too numerous to mention, this Court has granted relief under s.52 where statements were made to the world at large; in advertisements, by business names, on packaging, and so on. The risk taken by a misrepresentor is that an unknown person may read and act upon the misrepresentation. Perhaps at some stage a question may arise as to whether the damage suffered by such a person is too remote from the original statement. But there is no need to consider that possibility in this case, as Mr Howe concedes that he foresaw the likelihood of a finance company relying on the invoice.

22. Counsel for SVM submits that Mr Howe believed that Mr Iliffe was discussing the transaction with a third party, presumably a financier, and that this belief absolves him from responsibility because the third party would know the true facts of the transaction. Mr Howe did not give evidence of any such belief but counsel says that this should be inferred from what he called the "to-ing and fro-ing" on the telephone. But that proposition ignores Mr Howe's own account that, in one continuous conversation, he and Mr Iliffe concocted a price of $257,275 by adding the extras, at agreed values, to the base price. Moreover, even a belief by Mr Howe that the invoice would not in fact mislead anyone would provide no defence to the s.52 claim, if Prudential in fact relied upon the invoice in entering into the transaction, and thereby suffered loss. Intent is not an ingredient of a s.52 claim.

23. Finally, counsel submits that there must be imputed to Prudential the information held by Mr Iliffe, its agent.

24. On the view I take of the facts, this submission does not arise. Mr Iliffe did not know the true position. But, even if the situation were otherwise, I doubt the correctness of the submission. It is clear that the invoice reached Prudential, that it was accepted as correct by Prudential's officers and that, on the facts of the invoice, Prudential entered into the transaction. There was a misrepresentation causing loss. It seems to me that, as between SVM and Prudential, it is not to the point to say that, had he done his duty, the agent of Prudential would have informed that company of the true facts and thus broken the chain of causation. The fact is that Prudential did rely on the misrepresentation, to its loss. The situation is not unlike that examined in Collins Marrickville Pty Limited v. Henjo Investments Pty Limited [1988] FCA 40; (1987) 72 ALR 601; (1988) 79 ALR 83 where the loss would have been averted if the applicant's solicitors had done their job.
SVM's claim against SFP

25. The cross-claim made by SVM against SFP recites the claim made by Prudential against SVM and proceeds:

"4. The Cross-claimant says and the fact is
that if the Cross-claimant is responsible
for any loss or damage suffered by the
applicant (which is denied) the same has
been caused by the Cross-respondents and
the Cross-claimant seeks indemnity in
respect of the same.
PARTICULARS
The Cross-respondents requested the
Cross-claimant to act as it did with
respect to the moneys and vehicle
involved in this transaction and did not
disclose to the Cross-claimant that they
the Cross-respondents were acting as
agents for the applicant, if such be the
case, or that the applicant or any other
person or corporation might suffer loss
or damage in respect of this transaction.
5. In the circumstances set forth in The
Schedule the Cross-respondents are in
contravention of Section 52 of the Trade
Practices Act."

26. On no view of the evidence can it properly be said that SFP requested SVM to act as it did with respect to the moneys and vehicle involved in the transaction. Mr Howe's evidence is that he telephoned Mr Iliffe and enquired whether SFP was willing to provide finance in excess of the purchase price. His first version, given in his evidence in chief, was that there were two telephone conversations between himself and Mr Iliffe. The first conversation took place when he telephoned Mr Iliffe and told him that "Mr Marcello, acting for Advantage Investments, wanted to buy a Porsche 928 S4 demonstrator that we had". Mr Howe said that "we had arrived at a price and that he wanted to lease the car for $270,000". Mr Iliffe asked why this was the case and Mr Howe replied "that Marcello said that there were tax advantages for him and for Advantage Investments in being able to do that". (The nature of the tax advantages is not obvious, given the limits on depreciation, and has not been explained during the course of this case). According to Mr Howe's first version, he explained to Mr Iliffe that during the course of his negotiations with Mr Marcello the price of the vehicle had dropped from approximately $230,000 to about $210,000 because of the strengthening of the Australian dollar against the Deutschmark. Mr Iliffe is said to have commented that he knew Advantage Investments and that the company was "as safe as the Bank of England". The conversation ended with Mr Iliffe saying that he did not believe that he could accommodate Mr Howe but that he would ring him back.

27. Mr Howe said that Mr Iliffe did ring back on the same day and that he said that he could not accommodate him at $270,000. Mr Howe reported this to Mr Marcello who asked how much finance Mr Iliffe would provide. Mr Howe and Mr Iliffe then had a conversation in which Mr Howe gave Mr Iliffe a list of extras. "When they totalled $250,000-odd he said that that would be adequate and that he felt he could do something and I then told him where he could get in touch with Mr Marcello to arrange the lease".

28. Mr Howe's second version was given in the course of his cross-examination. Mr Howe said that during his first telephone call he asked for a quotation on a lease at $210,000 or $204,500. Mr Iliffe said that he would ring back. Mr Howe and Mr Marcello then had a conversation during which Mr Marcello asked Mr Howe whether the finance company would finance the car at an inflated price. By that stage Mr Marcello and Mr Howe had already agreed on the details of the options and price, but Mr Howe agreed to put the figure of $270,000 to Mr Iliffe when he rang back with the quotation. He did so, giving an explanation about the changed exchange rate, tax advantages etc. There was then a third conversation when Mr Iliffe said that he could not go to $270,000, but finally agreed to a figure exceeding $250,000.

29. Mr Iliffe's evidence in chief was that Mr Howe telephoned him, gave him some background information about Mr Marcello and Advantage Investments -- of whom Mr Iliffe says that he was previously unaware -- and then gave him "a rundown on the cost" of the motor vehicle. The "rundown" consisted of a basic price and a list of extras totalling $257,275. Nothing was said about any moneys to be expended otherwise than in payment for the vehicle itself.

30. Under cross-examination, Mr Iliffe conceded that the figure of $270,000 was put to him by Mr Howe. But he said that this figure was given to him after Mr Howe had given him the price of the car, $257,275, with details of its composition. According to Mr Iliffe, nothing was said about currency variations or tax advantages. Although Mr Iliffe did not so say -- he was not asked about the matter directly -- he apparently rejected the proposal to finance at $270,000.

31. As is apparent from the above summary, the issue between Mr Howe and Mr Iliffe is a narrow one. It is common ground that Mr Howe made the initial contact, that it was he who proposed a lease at $270,000 and that Mr Iliffe rejected that suggestion. It is also common ground that Mr Howe gave to Mr Iliffe a list of the extras and a total price of $257,275. The issue is whether Mr Howe said this $257,275 figure was the actual price of the car -- the enquiry about $270,000 being merely an after-thought tried out on Mr Iliffe -- or whether it was a price they concocted together as a "fall back" arrangement after Mr Iliffe had indicated that $270,000 was too much.

32. I do not find either of these accounts to be inherently improbable. But I find myself unpersuaded, even on a bare balance of probabilities, of the correctness of Mr Howe's account. There are several reasons for this. In contrast to Mr Iliffe, Mr Howe was not an impressive witness. He frequently prevaricated in responding to questions, sometimes tendentiously disputing the obvious. On some matters, his evidence was uncertain or inconsistent. In saying that, I do not put much weight upon the variation between the account which he gave of his conversations with Mr Iliffe in his evidence in chief and that given in cross-examination. It is not unusual for even honest and careful witnesses to omit reference to some portion of a conversation, or series of conversations, or to become confused as to the number of conversations held with a particular person on a particular subject within a short period of time. Mr Iliffe's own evidence is open to the criticism that, when first asked to recollect the conversation he omitted any reference to the figure of $270,000 and had to be taken to this matter in cross-examination.

33. My second reason for distrusting Mr Howe's version of the conversations is that the account given by Mr Iliffe tallies with notes made by him during the conversation itself. Mr Iliffe's notebook was tendered in evidence. The relevant entry commences with some names and background information. It then sets out a "base" figure of $231,847 and a series of "options" to each of which a dollar value is assigned. The list is totalled at $257,275. The figure "$270,000" appears to the right of, and level with, the figure "$257,275". There follow, in a different ink, figures representing the residual value and monthly payments required on a transaction at $257,275. On the opposite page, in the earlier ink, are further details about Advantage Investments.

34. The form of these two pages is consistent with Mr Iliffe's account of the matter. There are no figures appropriate to a quotation at $210,000 or $204,500. The detailed list leading to a total of $257,275 has been written out before the figure of $270,000 is mentioned. The quote figures are written in a different ink, apparently at a later time than the remainder of the entry. If Mr Howe's evidence was correct, one would have expected Mr Iliffe's notes to have taken a very different form.

35. A further indication of the truth of the matter is the behaviour of the parties when it became known that Advantage Investments had fallen into arrears. On the morning of 1 May 1988 there was a meeting between representatives of Prudential, including a solicitor, and three officers of SVM: its chief executive officer, Mr R.J. Atkin, Mr Howe and Mr Forsyth. During the course of that meeting a reference was made to the possibility of criminal proceedings against Mr Howe. The Prudential representatives were clearly accusing Mr Howe of fraud. Early that afternoon there was a meeting at SVM's Lindfield premises between Mr Iliffe and the three SVM executives; though they may not all have been present throughout. As a result of something said, Mr Iliffe left the premises and drove to his office at Crows Nest. He picked up his notebook and returned with it to Lindfield. He showed the relevant entry to the SVM executives. On the following day, Mr Atkin asked Mr Iliffe to give him a photo-copy of the relevant pages. Mr Iliffe obliged. There was a further meeting on the following day, 3 May. It is not necessary to refer to the various versions of these meetings. What is significant is that it is conceded by the witnesses for SVM that, at no stage, did any of them accuse Mr Iliffe of being involved in the deception. Given that Prudential was accusing Mr Howe and that, as Mr Atkin said in evidence, SVM was actively considering paying out the lease in order to avoid further embarrassment, one might have expected Mr Howe to protest that Mr Iliffe knew all about the matter and so was not deceived. But he did not do so.

36. The closest there was to an accusation against Mr Iliffe, according to anyone's version of these conversations, was in the evidence of Mr Atkin. He said that he asked Mr Iliffe "if he believed that Frank Howe had given him all the information in relation to this transaction". He said that Mr Iliffe's reply was: "yes". If this answer was given, it would be inconsistent with a recent discovery by Mr Iliffe that the actual sale price was well below $257,255. But I do not accept this evidence. Mr Atkin is a close friend of Mr Howe and he has clearly been concerned to protect him, especially against the possibility of a criminal prosecution. In the course of his cross-examination Mr Atkin gave this revealing answer:

Q. "Indeed, the manner in which you conducted
yourself in about April/May of 1989 I
suggest to you was directed towards
protecting Mr Howe?"
A. "I do not agree with that completely."

37. Finally, there is evidence from Mr Peterson, of Prudential, that, immediately after his first conversation about the matter with Mr Huxley, during which he learned of the second invoice, he telephoned Mr Howe. Mr Peterson quizzed Mr Howe about this invoice. When he got to the item of "$52,000 going to Advantage Investments", Mr Howe replied: "that was what the client had arranged". Mr Howe identified the client as Mr Marcello. Mr Peterson's evidence proceeded:

Q. "And when you say he said to you that that
is what the client had arranged, did he
explain what that meant?"
A. "No, he did not. I said to him that this
was not a normal finance company
transaction, that we did not purchase
vehicles that had amounts of money in them
and he just said that was what the client
arranged, that was the transaction."
Q. "Did you ask him any questions about what
he had said to Selected Financial
Packaging?"
A. "I specifically asked him whether Selected
Financial Packaging had any knowledge of
the transaction and he said no."

38. Counsel for SVM challenged this evidence in cross-examination. But I see no reason to reject it. I was impressed by Mr Peterson as a witness. Moreover, I see no reason why he should be untruthful on this matter. He is not shown to be a friend of Mr Iliffe. There does not appear to be any reason for him to protect Mr Iliffe or his company. On the contrary, as he is still a senior employee of Prudential, one might expect him to harbour a sense of grievance if he believed that Mr Iliffe, the agent of Prudential, had connived at a fraud by SVM which had caused Prudential a substantial loss.

39. I think that the probabilities tend against the claim made by SVM against SFP and Mr Iliffe. Accordingly, it is not necessary for me to consider what relief would be appropriate if that claim had been made out. The cross-claim must be dismissed.

40. SVM must pay the costs of each of the other parties.