Inchcape Financial Services v Classic Automobiles Limited

[1999] NSWSC 895

CITATION:	Inchcape Financial Services v Classic Automobiles Limited [1999] NSWSC 895
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	50085/98
HEARING DATE(S):	04.08.99 - 19.08.99
JUDGMENT DATE:	10 September 1999
PARTIES :	Inchcape Financial Services (Aust) Pty Limited v Classic Automobiles Pty Limited & Anor
JUDGMENT OF:	Foster AJ

COUNSEL :	A.J. Meagher SC and D. Studdy for the plaintiff. M.J. Neil QC and R N Gye for the defendants.
SOLICITORS:	Dickson, Fisher, Macansh for the plaintiff. Proctor Phair & Associates for the defendants.
CATCHWORDS:	Trade Practices - Misleading or deceptive conduct by corporation - Motor vehicle finance - Motor dealer - "Third party transactions/deals" - Finance application, dealer invoice and Form 4 incorrect on face - Misleading or deceptive as to identity of supplier and owner of motor vehicle - Identity important to financier - Misleading or deceptive conduct caused payment of finance and commission - Principal executive and director not in any way, directly or indirectly, knowingly concerned in, or party to, contravention by corporation - Trade Practices Act 1974 (Cth), ss. 52, 75B(1)(c) - Motor Dealers Regulation 1986, Sch. 1 Form 4 - Contract - Introducer Agreement not executed by Financier - Introducer Agreement not effective.
ACTS CITED:	Trade Practices Act 1974 (Cth) Motor Dealers Act 1974
CASES CITED:	Yorke v Lucas (1985) 158 CLR 661 Giorgianni v The Queen (1985) 156 CLR 473 Beach Petroleum N.L. v Johnson (1993) 115 ALR 411
DECISION:	Refer Paragraphs 44, 95, 119, 120, 123 and 124.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

FOSTER AJ

FRIDAY, 10 September, 1999

50085/98 - INCHCAPE FINANCIAL SERVICES (AUST) PTY LIMITED v
CLASSIC AUTOMOBILES PTY LIMITED.

JUDGMENT 1 HIS HONOUR: The plaintiff in these proceedings, Inchcape Financial Services (Australia) Limited (Inchcape) is a financier. As part of its business it provides finance in relation to the sale of new and used motor vehicles. In the course of its business it enters into terms purchase agreements, lease agreements, and chattel mortgages with customers in respect of motor vehicles. The first defendant, Classic Automobiles Pty Limited (Classic) is a licensed motor dealer which (inter alia) trades as Chatswood Classic Cars, from premises situated at Chatswood, on the Pacific Highway. The second defendant, John Keith Thompson (Mr Thompson) is the principal executive and a director of Classic. Both Classic and Inchcape are companies incorporated in Australia and are trading corporations for the purposes of the Trade Practices Act 1974 (Cth) (“the TPA”). 2 Between late October 1997 and May 1998 Classic forwarded to Inchcape applications for finance in respect of a number of persons purportedly acquiring motor vehicles through Classic. Inchcape claims, in these proceedings, that in respect of twenty-one applications, the information supplied by Classic was misleading and deceptive, resulting in Inchcape providing finance in circumstances when it would have otherwise declined. It entered into contracts of terms purchase and chattel mortgage with customers who failed to honour those contracts. In a number of cases the motor vehicles the subject of the contracts have not been recovered and the customers cannot be found. Inchcape has suffered considerable loss in respect of these transactions, the details of which will be referred to later. It seeks to recover those losses from Classic. Its main claim is based upon s. 52 of the TPA. It also claims in respect of alleged breaches of relevant terms of an alleged contract between itself and Classic, described as an Introducer Agreement. In the conduct of the case, this latter claim has assumed only secondary significance. Factual issues relating to it, however, have some bearing upon the credit of witnesses and it will be necessary for me to consider this claim later in these reasons. 3 The claim against Mr Thompson is based upon s. 75B of the TPA. I shall refer to the nature of the claim later in these reasons. 4 The hearing of the proceedings occupied twelve days. A number of witnesses gave evidence orally and by affidavit. A large number of documents were tendered. Issues of credit of witnesses assumed considerable importance as there was very significant conflict in the oral testimony. The demeanour of witnesses in the giving of their evidence was important and, during the hearing, I formed fairly distinct impressions as to reliability of testimony. Since the hearing terminated I have re-read the whole of the evidence and considered it in detail, in light of the demeanour of the witnesses which was fresh in my recollection. My impressions have been confirmed. 5 Before I consider the parties’ respective cases, it is necessary to set out certain uncontentious facts by way of background.

Background
Inchcape is a company the shares of which are held by Capital Consumer Finance Limited (Capital) as to 51% and by Inchcape Motors Australia Limited as to 49%. Inchcape Motors Australia Limited imports into Australia and distributes motor vehicles including Volkswagen motor vehicles. Capital is also a financier and, prior to the formation of Inchcape, provided motor vehicle finance to motor dealerships including Classic. When Inchcape commenced operations in January 1997 in New South Wales it took over the role of Capital in providing finance to Classic. Neither Capital nor Inchcape had the major role in providing finance to Classic. Neither provided it with floor plan financing. It appears from the evidence that neither financed the sale by Classic of new cars. Each had a role in providing finance for the retail rather than the wholesale aspects of Classic’s operation. This involved providing finance to approved customers of Classic, who were seeking to buy second-hand vehicles. It is clear that, throughout 1997 and into 1998, Inchcape was seeking to increase its business. In particular, it was negotiating to obtain the role of wholesale financier to Classic in respect of Volkswagen vehicles which Classic sold through its Volkswagen franchise. I shall refer to the course of these negotiations later. They had not resulted in any agreement by the time they came to an end, as a result of the problems with which this litigation is concerned. Witnesses called on behalf of Inchcape included Robert Edward Foster (Mr Foster) who is the New South Wales/A.C.T. State Manager for Inchcape. Prior to being employed in that position he was Sales Manager for Capital for a period of twelve months. He has had over twelve years experience in motor vehicle finance, having previously worked in Citibank’s Motor Vehicle Division for six years. Although described as the State Manager, the evidence makes it clear that his role was really that of Sales Manager. He had two sales representatives who reported to him, one of whom was Mr Richard Noye (Mr Noye), another witness in these proceedings. Each, as part of their job, made regular visits to motor vehicle dealerships including Classic. Mr Foster’s role was to make contact with senior executives of the motor dealerships, such as Mr Thompson. Mr Noye’s role was to deal with financial managers in such organisations, although, it is clear that Mr Foster also maintained contact with such executives. Mr Foster had a key role in negotiations with Mr Thompson for the obtaining for Inchcape of the wider floor plan type financing of Classic’s Volkswagen dealership.

6 An important witness for Inchcape was Mr Iain Grant (Mr Grant). He was the General Manager and a Director of Inchcape. His appointment as General Manager commenced on 1 February 1997 and his directorship in March 1998. It is clear that he has had extensive experience in motor vehicle finance. He is senior in the organisation to Mr Foster, who reports to him. 7 Other witnesses for Inchcape included the four underwriters who dealt with the twenty-one applications which are the subject of these proceedings. They are Messrs Tindall, Corby, Taylor and Neil. Each gave evidence orally and by affidavit. Another witness was Ms Plumridge. She was employed as Team Leader of the Business Service Representatives (the BSRs) and gave evidence as to the role of such representatives in relation to Inchcape’s provision of finance to the customers of motor dealerships, including Classic. Another witness was Ms Clinch who, from March 1997 held the position of Team Leader in the Settlements Department of Inchcape. She gave evidence as to the role of settlements officers in Inchcape’s provision of finance. From 1 January 1998 she held the position of Manager of the Settlements Department. 8 The evidence of these witnesses established the system operating in Inchcape in 1997 and 1998 for the receipt and processing of applications for financial assistance. It may be summarised as follows. 9 Applications for finance were received by facsimile in the BSRs section. In the period November 1997 to May 1998 the section dealt with about twenty to thirty applications per day. The applications were received on a standard application form provided by Inchcape to the relevant business managers at the motor vehicle dealerships with which it dealt. These forms provided for the supplying of information as to the name of the introducer of the business, a description of the motor vehicle for which finance was being sought, the amount of the advance sought together with interest rate and repayment terms, and details in relation to the proposed borrower. With respect to the vehicle, information was sought as to its make and model, its year of manufacture, whether it was new or used, had a manual or automatic gearbox and whether it had options such as air-conditioning, airbags etc. Importantly, the name of the supplier of the vehicle was to be provided. The particulars relating to the proposed advance included the amount of a deposit or the value of a trade-in. Particulars in relation to the proposed borrower included name, address, date of birth, marital status, number of dependants, whether a home owner, buyer or renter, or whether living with parents, whether there was a mortgage over the home and the like. Where appropriate, employment details were required to be given, with contact telephone numbers. Also, credit and bank references were supplied in another part of the form. It is clear that these details were commonly filled-in by the business manager at the relevant dealership, who was dealing with the proposed borrower. In addition to the application form there would also be forwarded from the dealership a further Inchcape standard form described as a Privacy Consent Form. This was an authority to Inchcape signed by the applicant borrower to make enquiries and obtain information from various sources as to the applicant’s financial position. 10 When these documents were received into the section the BSRs logged the application details onto a register and set about obtaining other information. This information consisted of a valuation for a vehicle answering the description in the application. This was obtained from a standard reference work known as Glass’s Guide. A report was also obtained in respect of the applicant from the Credit Reference Association of Australia (CRAA). A check was made that name, date of birth and address of the applicant on the application corresponded with the CRAA report. If this material appeared satisfactory, it was passed-on to the Underwriting Department for the attention of an underwriter. 11 An underwriter would then assess the documentation. The evidence indicates that approximately 90% of applications were approved immediately, approval being based upon an assessment by the underwriter of the financial viability of the application. If it was clear that the applicant would be in a position to service the loan then the application would be approved subject to conditions as to the supplying of supporting documentation. There were standard approval conditions upon an Inchcape form, which also made provision for an underwriter adding additional conditions. An additional condition sometimes sought was the provision of a Form 4 document issued by a dealership, under the provisions of the Motor Dealers Act 1974 as prescribed by cl.16 and Schedule 1 of the Motor Dealers Regulation 1986. This was a form attached to a second-hand vehicle in a dealer’s saleyard. It provided for a three months’ warranty on the vehicle. It gave details relating to the vehicle such as make, model, year of manufacture, kilometres travelled, options, engine number, chassis number, registration number and asking price. It also provided for the recording of the cash price at which the vehicle was sold and the kilometres travelled at time of sale. Also to be included was the purchaser’s full name and address. In addition provision was made on the form for the recording by the dealer of the date when the notice was affixed to the vehicle. The form provided for the recording of the book number and entry number, the former referring to the book kept by a motor dealer recording the issuing of the notices, the latter being the serial number of the notice so recorded. The reason for an underwriter seeking the provision of such a notice would be to confirm that the vehicle in respect of which the application was made was correctly described. Four such notices were called for and provided in the present case. I shall make reference to them later. 12 The underwriter, having approved the application, subject to conditions, would return the file to the BSR section to be further processed. The BSRs then considered the underwriter’s requirements and, pursuant to them, would forward an Approval Advice document to the relevant dealer. This document indicated the granting of approval, subject to the provision of additional information identified in the document. The dealer then complied with the conditions and forwarded the compliance documents to the BSR dealing with the matter. On receipt of this material, the file with the additional material was sent to a part of the Inchcape organisation referred to as the Settlement Unit. 13 The procedures in relation to settlement are set-out in the evidence of Ms Clinch. Her testimony establishes that the finance transaction could not be settled unless the documents referred to in the Approval Advice were supplied. Additionally, an invoice from the supplier of the vehicle was necessary, this being required as an indication that the correct vehicle was being supplied pursuant to the contract. It also demonstrated the passing of title of the vehicle from the motor dealer to the finance company in the case of terms purchase and leasing transactions or to the borrower where a chattel mortgage was being given by the borrower to the finance company. The invoice further indicated that the dealer giving it was the owner of the vehicle. The invoice would be checked to ensure that the details contained in it, as to type of car, chassis number, engine number, registration number and name of customer corresponded with such details in the contract. 14 Ms Clinch also gave evidence, which I accept, that if the invoice showed the vehicle was being supplied by someone other than the introducing dealer on the application form, enquiries would be made to ascertain why the vehicle was being supplied by a third party. In circumstances where both the application and the invoice indicated that the supplier was other than the dealer the settlement figure would be paid only if the relevant Settlement Officer verified the transaction with the relevant underwriter and obtained authority to settle. In such cases, the invoice would have come from the supplier of the vehicle and not the introducing dealer. The supplier would be paid, not the dealer, if the transaction was permitted to proceed. 15 It is now necessary to consider the arrangements within Classic relating to the obtaining of finance for vehicles from Inchcape at the time of the subject applications. The evidence establishes that Mr Thompson did not directly concern himself in matters of financial management. He delegated this work to David Kevern (Mr Kevern) who supplied his services through a company structure, the company being named Janafe Pty Limited (Janafe). He had an assistant, Sharleine Whyte (Ms Whyte). Mr Kevern and Ms Whyte performed the role of business managers. They interviewed customers of the dealership wishing to acquire vehicles; they filled out and faxed to Inchcape application forms and Privacy Consent Forms; they forwarded supporting documentation and complied with the approval conditions imposed by the Inchcape underwriters; they obtained the customer’s signature to the application forms and contract documents; they received and disbursed settlement monies received from Inchcape. From time to time, as necessary, they would discuss transactions with the relevant BSRs at Inchcape. They received visits from Mr Foster and Mr Noye and could discuss transactions with them. They could not discuss transactions with the underwriters at Inchcape. 16 I have already indicated that in 1997 and 1998 Inchcape, through the direct solicitations of Mr Foster was endeavouring to become the main supplier of finance, floor plan and retail, to Classic in respect of its Volkswagen dealership. The financier which, then, had that status was Australian Guarantee Corporation (AGC). It is clear that, at least until late October to early November 1997, the bulk of the retail financing required by Classic’s customers was obtained from AGC. Inchcape received a relatively small amount. The evidence indicates that it could receive retail financing applications in respect of used cars after some form of monthly quota to AGC had been filled. Also other applications could be referred to it, if Mr Kevern saw fit. No significant pattern emerges from the evidence. However, from the beginning of November 1997 there was a considerable increase in the applications made to Inchcape. From November 1997 to May 1998, in excess of fifty such applications occurred, which, undoubtedly, were markedly more than had been received prior to November. Some of these were declined by the underwriters as not coming within Inchcape’s lending guidelines. A large number were accepted. Amongst those accepted were the twenty-one in issue in these proceedings. 17 The flow of applications ceased abruptly when a problem arose in relation to a transaction described in the evidence as the “Jimmy Lee transaction”. This had involved the advance of $180,000 for the terms purchase of a Mercedes Benz vehicle by Jimmy Lee. The repayments contracted for were $3,200 per month. No payments other than the initial payment had been made. The account was $9,600 in arrears and neither the vehicle nor Jimmy Lee could be found. These facts and other facts revealed by investigation of the problem brought the course of dealing between Classic and Inchcape to an end. They also brought to an end the negotiations, which were still current, for the finalisation of floor plan arrangements in respect of the Volkswagen franchise. 18 After the Jimmy Lee problem arose, the problems in relation to the other twenty transactions sued upon also came to light. I shall not refer by name to these transactions as, in my view, they have sufficient common characteristics to enable their being treated as a unit. It is clearly established that none of the vehicles involved in these transactions were vehicles sold from Classic’s premises at Chatswood nor from any other premises owned and controlled by it. They were never owned by Classic. They were owned by private persons or by one of two dealerships not associated in any way with Classic. 19 These vehicles had been introduced to Classic by Mr John Joseph Purchall (Mr Purchall), a finance consultant who traded under the name JP Investments. Mr Purchall had an association with Classic. He had been a business manager at a Collaroy dealership owned by Mr Thompson. He also acted from time to time as a business manager at Classic’s premises at Chatswood, apparently filling-in when Mr Kevern was away. It is clear that Mr Kevern knew him well and that Mr Thompson was also acquainted with him. Apart from these occasional part-time activities he conducted a business which he described as being that of a finance intermediary in the motor car trade. It appears that persons or small dealerships, who had no access to finance for their customers, would approach him, seeking his assistance in the obtaining of finance. It is clear that a type of transaction known as a “third party deal” was a recognised feature of motor car selling. It involved a motor dealer, who had access to a regular source of finance from a financier, introducing to that financier a customer who wished to acquire, or borrow on, a vehicle which was not part of the dealer’s stock. In such circumstances the dealer would make an application in which it was indicated that that finance was sought for the customer but that the vehicle was to be supplied by an outside party, commonly, but not necessarily, another dealer. If the finance company accepted the transaction and advanced the amount sought, a third party deal was consummated. 20 All the deals brought by Mr Purchall to Mr Kevern, in which Mr Kevern successfully applied to Inchcape for finance, were third party deals, in so far as the vehicles the subject of the transactions were not supplied by Classic from its own stock but came from an outside supplier, that outside supplier being the organisation or person who had approached Mr Purchall for assistance. I am satisfied on the evidence, however, that they lacked one very significant feature of accepted customary third party transactions. In each case there was no disclosure on the application made by Mr Kevern or Ms Whyte on behalf of Classic that the supplier of the vehicle in question was an outside or third party supplier. In each case the supplier was represented as being Classic. The description commonly used was “Chatswood Classic Cars,” this being the name under which Classic traded at Chatswood. I shall refer to this group of transactions as “the Purchall transactions.” 21 Against this background I turn now to consider the plaintiff’s case. 22 The Plaintiff’s Case

It is convenient to deal in the first place with the plaintiff’s claim pursuant to s. 52 of the TPA. It is asserted that Classic, through Mr Kevern, relevantly engaged in misleading or deceptive conduct by the provision of applications for finance, which indicated on their face that the supplier of the vehicle, in respect of which finance was sought for the customer in question, was Classic itself. Insofar as Classic was not the supplier of the vehicle in any of the cases in question this was incorrect and relevantly misleading information.

23    It was claimed, through evidence which I accept, that it was a matter of importance to Inchcape and, indeed, to any financier to know that the vehicle in respect of which finance was sought was a vehicle owned by the dealer seeking finance for its customer. It operated as an indication that the dealer, who had either purchased the vehicle for the purpose of offering it for sale as a second-hand vehicle, or who had accepted it as a trade-in, had undertaken all normal checks in relation to the acquisition of the vehicle. These would involve, through examination of the vehicle, the ascertainment of the correspondence between the details on the registration papers as to engine and chassis numbers with the numbers actually displayed on the vehicle and an enquiry through the Register of Encumbered Vehicles to ascertain that there was no money owing on the vehicle to some other person or organisation (a REVS check). Also, a check on the identity of the person supplying the vehicle, through his motor vehicle licence details and other evidence. Also, it could be assumed that in most cases a statutory declaration would have been obtained from the person in question as to his identity and ownership of the vehicle. Mr Thompson, himself, agreed that a finance company would want to be confident of these matters. 24    The provision, later in the transaction, of an invoice indicating that Classic was the seller of the vehicle operated as a document of title and also as confirmation that the vehicle, having been acquired by Classic, had been subjected to all the relevant checks. Both Mr Thompson and Mr Kevern agreed that the provision of the invoice was, in effect, a guarantee of title. 25    In all the cases in issue in these proceedings the application form and the invoice are relied upon as making the misleading representation that the vehicle came from Classic’s own stock and therefore had attracted the safeguards just discussed. 26    It was claimed that the misleading information, thus conveyed to Inchcape, resulted in Inchcape suffering the damage in respect of which it sues. It was submitted that, having regard to the way in which the applications were processed at Inchcape from their receipt by the BSRs, their assessment and conditional approval by the underwriters and their ultimate payment after the Settlement Officers had satisfied themselves that the underwriter’s conditions had been fulfilled and that the invoice in all proper respects corresponded with the application, the necessary result was that Inchcape made its payments in respect of the transactions as a direct consequence of Classic’s misleading conduct. 27    I should add that the payment in question was not only the payment of the amount of finance required to complete the transaction but also a payment of commission to Classic. The evidence establishes that this commission was split between Mr Purchall and Classic in the ratio of 60% to 40%, Classic’s 40% then being split 60% to Classic itself and 40% to Janafe. It is claimed by Inchcape that the amounts of commission in relation to the subject transactions were also paid as a result of its being mislead by the conduct referred to. 28    I am quite satisfied that prima facie, these claims are made out. There is evidence given by each of the underwriters who dealt with the claims that they were aware that Inchcape had a policy of not engaging in third party transactions. I am further satisfied that had any of these transactions been identified as third party transactions, the relevant underwriter would not have embarked upon an evaluation of the application without obtaining authorisation to do so. There is some evidence to indicate that such authorisation could have been obtained from Mr Foster. It could certainly have been obtained from Mr Grant. However, on the evidence, there is no reason to suppose that, having regard to the policy referred to, such authorisation would readily have been given. Moreover, such authorisation would, quite clearly, not amount to a direction to approve the transaction. The power to approve remained solely the province of the underwriters who, if authorisation were granted, would proceed to evaluate the application in the ordinary way, according to the ordinary guidelines of financial viability. 29    These considerations, however, are really beside the point in the present case. Although, as already indicated, the transactions in question were, indeed, third party transactions, they were not presented to Inchcape in this form. No reference was made in the application or in the invoice to the existence of a third party supplier. This fact was disguised. Consequently, Inchcape’s policy in relation to third party transactions and its procedures in relation to them were never engaged. If they had been presented as third party transactions, I entertain no doubt that authorisation to the underwriters to proceed with their assessment would have been withheld. 30    There was much consideration in the evidence of the way in which individual applications were dealt with by the underwriters. It is clear that a number of the transactions in question were not regarded as clear cases for acceptance. Some were originally declined but were resubmitted with additional information which led to their acceptance. Some were accepted by an underwriter after having been declined previously by another underwriter. Others succeeded after reference to the Supervising Underwriter, Mr Tindall. It is clear, also, that a number of the applications emanating from Mr Purchall were declined. However, none of the problems associated with these applications which caused concern to the underwriters related to their being third party transactions. I am satisfied that, quite apart from the fact that their true third party nature was disguised, there was nothing in the transactions themselves which caused any of the underwriters to believe that they were in fact dealing with concealed third party transactions. One of the underwriters, Mr Taylor, whom I felt to be a rather suggestible witness, tended to accede to propositions that the type of vehicle, the high interest rates, and the areas of residence of the purchasers could be indicative of the transactions not emanating from Classic. However, his evidence in this regard fell well short of establishing that he regarded the transactions with which he dealt as being of a third party nature. He clearly did not. Otherwise, he would have referred them to senior levels in Inchcape. 31    I am quite satisfied, therefore, that the misleading characteristics of the application forms and the invoices, namely their indication that the vehicles in question were owned and supplied by Classic, effectively caused Inchcape to finance the Purchall transactions. Had the correct situation been disclosed on the face of this documentation, the transactions would not have proceeded. In these circumstances, it is unnecessary to consider the detail of the individual transactions. 32    The misleading nature of Classic’s conduct in relation to these transactions is heavily underlined when consideration is given to what was known by Mr Kevern, acting on behalf of Classic, as opposed to what was revealed to Inchcape. Mr Kevern, of course, knew that all the transactions were third party transactions introduced by Mr Purchall. It is obvious from the documents maintained in the files of Classic in relation to the Purchall transactions and from the evidence of Mr Kevern and Mr Purchall, that any documentation which might have revealed the true position to Inchcape was kept from it. The transactions were frequently introduced to Classic by a fax sent by Mr Purchall which provided information as to the nature of the transaction. This documentation or the information contained in it was not made known to Inchcape. The result was that, in respect of some of the transactions, Inchcape supplied finance believing the transaction was of a particular type when, in fact, the money was intended to be used for a different transaction, the existence of which was not disclosed to Inchcape. For instance, in the case of applicant Akkouche, Inchcape advanced money on the basis that it was purchasing the relevant motor vehicle from Classic to be provided to Mr Akkouche under a normal term purchase agreement. In fact the vehicle was not sold by Classic to Inchcape. It was never owned by Classic. It was owned by Mr Akkouche who was seeking to raise finance on it. The term purchase agreement was inappropriate. Inchcape entered into it as a result of being deliberately mislead by Mr Kevern. A similar situation existed in relation to a transaction involving an applicant Mr S. Chan. 33    In addition to the initiating faxed information, Mr Purchall would forward to Classic registration certificates in relation to the vehicles together with notes as to information he had obtained, such as REVS checks. The registration certificates would have indicated that the vehicle in respect of which finance was being sought was owned by a third party. This information was never supplied to Inchcape. It was deliberately withheld. In relation to Mr Chan’s transaction, Mr Kevern gave the following evidence:

“Q. You didn’t send them Mr Purchall’s fax of 8 January or a copy of the certificate of registration with the note “No revs check”, because if you had done so, it would have been obvious that this was a third party deal, isn’t that right?
A. Well, they would ask why we had a registration paper in the name of Chan there.”

34    The conduct of Mr Kevern in relation to the supplying of Form 4s when requested by an Inchcape underwriter as a condition of approval was also deceptive. There were four such cases. It is not necessary to refer to them in detail. The same deception was practised in each case. Mr Purchall either supplied information to Classic which would be provided in a regular Form 4 or forwarded, in circumstances where the vehicle was being supplied by a dealer, the Form 4 which had actually been placed on the vehicle in that dealer’s yard. The real Form 4 could not be supplied to Inchcape as it would reveal the third party nature of the transaction. Instead, Mr Kevern, or Ms Whyte at his direction, produced a Form 4 purporting to issue from Classic. It contained all the information to which reference has already been made and which would be expected to appear upon a Form 4 legitimately attached to a vehicle offered for sale in Classic’s own saleyard. It appears from the evidence that Mr Kevern and Ms Whyte maintained a number of blank forms in the desk in Mr Kevern’s office which were to be used for this purpose. They contained a false reference to the book number and entry number referred to above. These pieces of information gave the document apparent authenticity. The document, when forwarded to Inchcape, provided information as to the identity of the vehicle through registration number, engine number and the like. This information was being sought by the Inchcape underwriter. However, the provision of it in the body of a bogus Form 4 concealed the fact that the true Form 4 would have revealed, namely that the vehicle was not owned by Classic but by a third party. I am satisfied that the provision of such documents was part of a plan to conceal from those making the relevant financing decisions in Inchcape the true nature of the transaction for which finance was being sought. Also, I have no difficulty in inferring that this concealment was occasioned by an awareness on the part of both Mr Kevern and Mr Purchall that if the true nature of the transaction had been disclosed finance would not be forthcoming. Indeed, Mr Purchall, in his evidence, readily conceded that these documents were supplied instead of the legitimate ones in order to prevent Inchcape knowing the true position. 35    I should add that both Mr Purchall and Mr Kevern had significant motivation for misrepresenting the position to Inchcape in order to achieve the financing of the transactions. The commissions which were paid to Classic in the first instance were of not inconsiderable size. Mr Purchall received 60% of them and the percentage received by Mr Kevern would have provided incentive to him to deceive Inchcape into supplying the finance and paying the commissions. In fact, in respect of only four transactions Mr Purchall received commission payments totalling $24,000. 36    Notwithstanding the apparent strength of this case, Classic has sought to defend it in a variety of ways. It has asserted that Inchcape was not misled because it was aware of the relevant facts. As I understand it, it was but faintly suggested that persons other than Messrs Foster and Noye in Inchcape were aware of the true position. In my view there is no evidence to support this assertion. I reject it. It is claimed, however, that Mr Foster and Mr Noye were fully aware of what was going on and had even directed that the deception be practised in the way that it was. Upon this factual foundation defences such as acquiescence and estoppel are sought to be raised together with an assertion that knowledge on the part of those two employees must be regarded as, in law, the knowledge of Inchcape. As part of this case, the credit of Mr Foster was severely attacked. Included in this attack was an allegation that he had deliberately manufactured evidence relating to the alleged execution by Mr Thompson and his wife, on behalf of Classic, of an Inchcape Introducer Agreement in January 1997. In these circumstances, it is convenient to consider together the question of the Introducer Agreement and the Classic defences. 37    The Introducer Agreement and Classic’s defences to Inchcape’s claim

Prior to the formation of Inchcape, Capital had provided finance to Classic in relation to business which had not been given to AGC. It was provided pursuant to a document described as an Introducer Agreement between the two companies, the document being dated 25 August 1996. As already indicated, Inchcape, after its formation, took over this aspect of Capital’s business. It is claimed that in February 1997 an agreement in the same terms, with the substitution of Inchcape for Capital, was executed by Classic, the signatories being Mr and Mrs Thompson. On behalf of Inchcape, reliance is placed upon the evidence of Mr Foster as to the execution of the document. Its execution is denied by Mr and Mrs Thompson. Mr Foster has testified that he delivered the document, after its execution, to a Mr Rowland, an officer of Inchcape charged with the responsibility for the keeping of such documents. He has not seen it since. It cannot be found.

38    Mr and Mrs Thompson deny the execution of the agreement. There is a substantial conflict of testimony, which is typical of many of the factual disputes in this case. Mr Thompson said that Mr Foster was lying. This piece of evidence was given in an emotional and histrionic way, which typified much of his testimony. 39    Mr Foster gave a short and circumstantial version. He said that in February 1997, before Inchcape’s commencement of business on 1 March 1997, he attended the office of Mr Thompson at Classic’s premises at Chatswood. He explained to him that Inchcape would be taking over from Capital on that date and that it was necessary for a new Introducer Agreement to be signed. It was the same as the “Capital Finance Agreement barring the change in name”. He gave the document to Mr Thompson and said that “we require the document to be signed”. It was necessary to “formalise our arrangement and be ready for business on 1 March.” He said that Mr Thompson assented, took the document into the adjoining office where his wife was working and, shortly thereafter, brought it back signed by himself and his wife with the company seal affixed. Mr Foster says that he took the document back to Inchcape’s office and handed it over to Mr Rowland. 40    Mr Thompson denies the whole episode. He said that he would never have signed such a document in these circumstances. He further said that he kept the company seals, of which there were about ten for the different companies in his organisation, at home in his study and that he would bring a seal into the office only when it was required for the execution of an important document. Consequently, the company seal would not have been available in his wife’s office for the execution, on the spot, of the Introducer Agreement. His wife was the company secretary and there was a safe on the premises. The company seals were too important to keep in that safe. She agreed with her husband in saying that important documents would not be signed on the spot but would be the subject of advice from accountants and lawyers. She remembered the previous Introducer Agreement with Capital but could not remember the occasion of it being signed in 1996, nor of the taking of advice in respect of it. This document had not been produced on notice to produce. However, she said in evidence that she had searched for and found it and handed it to her solicitor. She seemed quite clear about this. However, shortly after, in re-examination, she said she was not sure about this. I formed the view that her memory was not reliable. 41    As to Mr Thompson’s testimony, it is necessary to have regard to other occasions in his evidence where his memory appeared to be deficient in relation to other documents which might have been regarded as of importance. In the course of the lengthy negotiations in relation to the Floor Plan Agreement, various letters of offer were given to him by Mr Foster. One such document, Exhibit H, dated 5 June 1997, apparently produced on discovery, could not be recalled by him. He said that “Maybe it got lost in the system.” A subsequent document, Exhibit J, was dated 7 August 1997. It was an important document. It contained an elaborate offer which could be accepted in principle, although subject to subsequent documentation. Mr Thompson had signed that document. He said he recollected signing it “vaguely” apparently after having lunch with Mr Grant. He undoubtedly received a very important letter from Mr Grant, Exhibit P, setting out Mr Grant’s recollection of a significant discussion between the two of them, consequent upon the surfacing of the Jimmy Lee problem. It recorded Mr Grant’s version of an oral agreement reached between them in that discussion. Mr Thompson was unable to produce this letter and said that he must have misplaced it. In these respects and in a number of other respects to some of which I shall make reference later, I had concerns as to the reliability of Mr Thompson’s testimony. 42    I find myself unpersuaded that the company seal was handled with the care suggested in the evidence of Mr and Mrs Thompson. It is not without significance that the Capital Introducer Agreement, Exhibit E, after execution by Mr and Mrs Thompson, had had an incorrect company seal affixed to it. Moreover if the execution of that document had taken place with the solemnity suggested in their evidence, I find it difficult to understand why they could not recall at least some significant aspects of its execution, the receipt of advice in respect of it, or explain how it was that the incorrect seal was affixed. 43    I prefer the evidence of Mr Foster. I consider that the suggestion by the defendants that he would lie about the execution of this document simply to protect his position in Inchcape is highly improbable. It was, obviously, a fairly insignificant document in comparison with the agreement that he was hoping to negotiate for the much more extensive financing of Classic’s operations. I should add that the rather elaborate evidence given on behalf of Classic, illustrated by photographs, to the effect that Mr Foster would not have been able to observe what was going on in Mrs Thompson’s office does not affect my view of the situation. I do not understand Mr Foster to have claimed that he could make such an observation. 44    However, there is a problem in relation to the Introducer Agreement. Before it could become effective it would need to have been executed on behalf of Inchcape. There is no evidence that it was executed. There is no evidence from Mr Rowland as to what occurred after the document was handed to him. I am not prepared to find, on the balance of probabilities, that the document ever came into effect. Consequently I dismiss Inchcape’s claim based upon the terms of the Introducer Agreement. It is fair to say that no real reliance was placed upon it in these proceedings. However, I reject the assertion that Mr Foster was lying in relation to its execution and I draw no adverse inference as to his credibility from this episode. 45    I turn then to the substance of Classic’s defence. It is two-fold. In the first place it is asserted that Mr Foster, as State Manager of Inchcape, authorised Classic to enter into “disclosed” third party deals in February 1997 and later in October-November 1997 broadened this authorisation to include “non-disclosed” third party transactions. Alternatively, although, perhaps, as part of the same argument, it is asserted that at all relevant times Mr Foster was aware of precisely what was going on in relation to the Purchall transactions and that his knowledge was, relevantly, the knowledge of Inchcape, with the result that Inchcape was not misled. There are, of course, legal questions involved in these defences. However, as they are fundamentally dependent upon the view I form, on the facts, as to Mr Foster’s involvement in these matters, it is appropriate that I consider the factual questions first. 46    I should say, at the outset, that although, on occasions I felt that Mr Foster’s testimony might be a little glib and rehearsed, my overall impression, based, to a considerable extent, upon his demeanour in the witness box, was that he was a reliable witness. He made a much more favourable impression upon me than did Messrs Thompson, Kevern and Purchall and Ms Whyte. However, it is rare that demeanour can be the sole determinant of credibility. It is necessary, of course, to consider the effect of the evidence and inferences that may be drawn from it. 47    As I have already indicated, Mr Foster was, throughout 1997 and into 1998 concerned with negotiating a larger agreement with Classic and with, in effect, taking over at least that part of AGC’s business which related to Classic’s Volkswagen franchise. Classic relies upon certain events, which occurred in the negotiations in February, as indicating agreement or authorisation by Foster, on behalf of Inchcape, for Classic’s entering into the Purchall transactions in November. 48    It is clear that Mr Foster attended a meeting at the premises of Classic at Chatswood on 4 February 1997. I am satisfied that Mr Thompson was present for only part of the meeting and that the discussion about the projected business arrangements took place between Mr Foster and Mr Kevern and also Classic’s financial adviser. Mr Foster made a diary note of this conversation shortly after its occurrence. After recording some aspects of the discussion, the note concludes “outside deals okay from new/used dealership to be placed in letter of offer for retail paper.” 49    There is also in evidence a letter of 4 February 1997 addressed to Mr Thompson and signed on behalf of Inchcape by Mr Foster and a Mr Wang. Mr Foster’s signature is dated 4 February 1997. The letter itself is a precursor to other letters which were part of the negotiation process. The letter of 4 February 1997 commences with the sentence “Further to our recent discussions, we are pleased to submit an outline of our financial plan which may be available to your dealership.” There follows an exposition of that plan under a number of headings. The plan covers the projected provision of retail finance and wholesale or financial floor plan finance and related matters. In the portion relating to “RETAIL FINANCE” the following passage appears:

“Incentives are available to your dealership for retail business and are applicable to standard fixed rate, fixed term loan, hire purchase and lease transactions only. Maximum term of 60 months and a minimum amount financed of $5,000 will apply.
NON REGULATED TRANSACTIONS : Lease / Term Purchase / Consumer Lease Incentives will be paid at settlement on deal by deal basis.
REGULATED TRANSACTIONS: Consumer Loans
Incentives will accumulate in your favour in our records and shall be payable to your dealership monthly in arrears after adjustment for rebates for contracts predetermined within three (3) months of acceptance.
Notwithstanding (sic) the above, on a case by case basis we are pleased to consider incentives on retail business which may be outside the guidelines.”

50    Both Mr Thompson and Mr Kevern have given evidence that they relied upon the passage in the letter of 4 February, 1997 as indicating agreement on the part of Inchcape for the entering into by them of third party transactions which would be financed by Inchcape. They assert that the passage in question is the fulfilment of the understanding recorded in the passage in Mr Foster’s diary. They claim, in effect, that an agreement corresponding to that passage was reached at the meeting and that, as indicated, it was “placed in the letter of offer for retail paper”, being, the letter of 4 February 51    I do not accept this. In the first place I am satisfied that letters outlining the financial plan were taken by Mr Foster to the meeting and that they were distributed and used as a basis for discussion at the meeting. That is Mr Foster’s evidence and I accept it. It is corroborated, in my view, by Exhibit 4 which is another copy of the same letter upon which Mr Foster has made, from time to time, short manuscript notes of subsequent conversations between himself and representatives of Classic relating to the proposed plan. I am satisfied that he took this letter to the meeting of 4 February and retained it thereafter, using it in subsequent discussions. Moreover, part of the diary note of that meeting, made by Mr Foster, reads “Advised by DK that if Lionel okays John will sign.” It is clear from the evidence that “Lionel” was intended to refer to a Mr Neil Bettridge, Classic’s financial controller, and that “DK” is Mr Kevern and “John” is Mr Thompson. The letter of 4 February, Exhibit F, was in fact signed by Mr Thompson on 6 February, as appears from the exhibit. In my view, this makes it abundantly clear that the passage in Exhibit F relied upon by Mr Thompson and Mr Kevern was not, in fact, added as a result of the reference to outside deals noted in the diary note. It has no relation at all to that part of the diary note. The reference to “retail business which may be outside the guidelines” in the passage relied upon refers to “incentives” as discussed in the previous parts of the passage. There is no connection between the passage relied upon and the portion of the diary note. Indeed, I am not satisfied that Mr Kevern or Mr Thompson ever considered that there was such a connection before the advent of this litigation. 52    However, the diary note is indicative of what I accept to be the position, namely that third party transactions were a feature of motor car sales which were well known to Mr Foster. Finance companies would accept them if they were satisfied as to their viability. In my view, Mr Foster’s note makes it plain that outside deals, i.e. third party transactions, were acceptable if the supplier of the relevant vehicle was a “new/used dealership”. The reason for this is obvious enough, on the evidence. If the vehicle came from such a dealership then it might reasonably be expected that all the necessary checks, to which reference has already been made, would have taken place. I am satisfied that Mr Foster, at the meeting on 4 February, indicated that Inchcape would consider receiving third party applications of this limited kind. 53    It would appear that from time to time deals of this kind were accepted by Inchcape. The evidence does not indicate any pattern of acceptance. I am satisfied that such occasions would have been rare and would have been an exception to Inchcape’s general policy of not accepting such transactions. However, it is apparent that in December 1997 Mr Grant had occasion to speak to Mr Foster in relation to third party transactions that were being introduced by way of a private broking company described in evidence as E.F.S. It was conducted by a business manager at a motor dealership referred to as “Trivett’s”. Mr Foster knew and trusted the manager in question and had formed the view that the transactions would be advantageous for Inchcape. It is clear that they were not introduced to Inchcape as relating to vehicles sold by the Trivett dealership. The true supplier was disclosed. These were disclosed transactions, apparently of the type referred to in the discussion of 4 February. 54    Mr Grant did not approve of the transactions. They were outside Inchcape’s strict guidelines. He instructed Mr Foster to bring the transactions to an end and, apart from two which had advanced to a stage where Mr Grant obviously thought it was unreasonable to halt them, they were rejected. Mr Grant issued instructions to Mr Foster that he and the representatives under him should make it clear to the dealerships associated with Inchcape that third party deals would not be accepted. 55    Both Mr Foster and Mr Noye gave evidence to the effect that, pursuant to these instructions, they advised dealers, including Classic, that Inchcape would not accept third party transactions for financing. Each, however, placed the E.F.S. matter and the receipt of instructions in the October-November 1997 period and their notification to dealers as having taken place in November. This alleged timing was clearly wrong in light of the date of the E.F.S. transactions, as demonstrated from documents relating to them which were tendered in evidence. Both Mr Thompson and Mr Kevern denied receiving any indication from Messrs Foster or Noye to the effect that Inchcape would not accept third party transactions. On the contrary Mr Kevern asserted that in November he was specifically authorised by Mr Foster that he could present to Inchcape “non-disclosed” third party transactions. He further asserted that he was instructed by Mr Foster to present Mr Purchall’s transactions to Inchcape as transactions emanating from Classic and in respect of vehicles owned by Classic. This non-disclosure was to be effected both on the application form and the invoice. The giving of this authorisation and instruction was firmly denied both by Mr Foster and Mr Noye. 56    In this context, what effect should be given to the evidence relating to the E.F.S. transactions and their sequelae? Considerable reliance is placed upon them by Classic as indicating that both Mr Foster and Mr Noye are untruthful in their denials. I have given careful consideration to this submission as, undoubtedly, each are incorrect when they assert that they notified Classic in November that Inchcape would not accept third party deals for financing. Moreover, it would appear that the dating of the E.F.S. controversy in December only became apparent during the course of the hearing when documents relating to those transactions became available. This led to the suggestion that Messrs Foster and Noye had deliberately chosen a November date for the making of the alleged notification in order that it would coincide with the commencement of the disguised Purchall transactions, thus eliminating any suggestion that they had a part in those transactions. It was suggested that they had been caught out, in an obvious attempt to fabricate evidence, by the late revelation of the true date of the E.F.S. episode. 57    I have given, I consider, due weight to these submissions. I am not satisfied that the facts have the significance sought to be attributed to them. In the first place the incorrect dating appears in the affidavit evidence. In the affidavits of both witnesses the connection between the E.F.S. incidents and the giving of the warning pursuant to Mr Grant’s instructions are clearly connected. The references to the E.F.S. transactions were made in circumstances clearly inviting investigation in the way in which it in fact occurred. It would, plainly, have been very foolish to have lied in the affidavits in circumstances where exposure of the lie could so easily have been achieved. This makes more likely the alternative explanation, that a mistake was made in the recollection of the dates. Moreover, if the assumption is made that Messrs Foster and Noye were not involved in the deception that was being practised on Inchcape from November onwards by Messrs Kevern and Purchall, then there would be nothing to indicate to them that Classic was forwarding to Inchcape any third party transactions at all. In these circumstances, in following out Mr Grant’s instructions, they would not have been seeking to bring to an end any third party deals of which they actually knew, let alone an established pattern of dealing, such as was present in the E.F.S. transactions. There would be nothing to make the giving of the warning, in those circumstances, particularly memorable, other than that it followed upon the instruction given by Mr Grant. In such circumstances, reliance simply upon recollection, without making a check against documentation which would have been available, could easily produce a mistake as to the date of the giving of the warning. An intention deliberately to lie would have involved, as a matter of prudence, checking the dates of the E.F.S. incident before committing the lie to affidavit form. 58    Moreover, if Messrs Foster and Noye were involved in the Purchall transactions which had been increasing in volume in November and December common prudence would surely have suggested that, after Mr Grant’s clear instructions had been received, they or at least Mr Foster would have taken positive steps to prevent the transactions continuing. It must be remembered that the evidence clearly indicates that they had nothing to gain from these transactions, other than such kudos as might accrue to them from increasing Inchcape’s business with Classic. It was acknowledged by Mr Kevern that there was no agreement that either of them should share in the commission income that was being generated. Nor was there remuneration from Inchcape based upon the volume of introduced business. The risk of continuing the transactions after Mr Grant’s clear instructions would have been significantly high, especially in circumstances where no private gain was in contemplation. When I take all these considerations into account I consider that the likelihood of the matter is that the warning was given and that, in the circumstances, it was given perfunctorily, there being no indication that any third party dealing was in fact going on, and that in making their affidavits they were simply mistaken as to the date. 59    I come then to consider other evidence bearing upon the issue of whether Mr Foster was a knowing participant in the Purchall transactions. That is, whether he widened, as alleged, his authorisation for disclosed third party transactions given in February 1997 to the authorisation in November 1997 of “non-disclosed transactions”. 60    It is to be noted that Mr Thompson does not allege that Mr Foster spoke to him about any such widening. Moreover, to speak of a progression from authorisation of disclosed third party transactions to non-disclosed third party transactions, as though it were nothing but a natural evolutionary process, is clearly nonsensical. The first type of transaction was one clearly recognised in the trade and, if subject to proper safeguards, was acceptable. The other necessarily involved deception being practised on the finance company. In my opinion it could never be acceptable. The defendants’ argument that, in effect, Mr Foster might readily slip from one form of authorisation to the other would seem to be contrary to common sense. He would be procuring deception of his employer. The only motive suggested for his taking such an unworthy and dangerous step was a desire to enhance his position in Inchcape by increasing the flow of business from Classic. This would seem to be an extraordinarily poor motive for such an undertaking. However, it is the defendants’ case that Mr Foster did so. I turn, then, to consider the evidence called by the defendants in this regard. 61    The genesis of Classic’s involvement with the Purchall transactions was an approach made by Mr Purchall to Mr Kevern in late October 1997. He told Mr Kevern that he had a number of transactions in respect of which finance was required and asked whether Classic would be interested in processing them as outside deals. They consisted of deals coming from small dealerships and also some private deals and deals involving refinancing of vehicles. It is clear that the idea was to obtain the necessary finance through Classic’s relationship with Inchcape. Obviously, because of the large number of transactions in contemplation, there would be significant commissions to be earned. I am satisfied that there was discussion as to how such commissions should be split between Classic, Mr Purchall and Mr Kevern’s company, Janafe. 62    Mr Kevern took the suggested deal to Mr Thompson. This occurred the following day. Both Mr Thompson and Mr Kevern give evidence as to what was said. Mr Thompson gives the more circumstancial account both in his affidavit and orally. I am satisfied that Mr Kevern came to his office and said “John, Purchie’s got some outside business. We could put it through Inchcape. We can make some money out of this”. Mr Thompson enquired where the vehicles would be coming from and was told that they would come from a particular dealership. Mr Thompson knew the proprietor and, accordingly, agreed. He asked who the other suppliers would be and was told that the vehicles would come from “an accountant at Parramatta” and someone else. He expressed the view that that part of it could be “risky business” as “they are the ones you have to be careful of.” He said “just do it according to the book and, as long as Inchcape are happy with it, I am happy.” It is clear that he also indicated that appropriate checks should be made. The cars should be sighted, and REVS checks, bank statements and registration certificates obtained. He was advised that “Purchie will check them out”. 63    It is clear that Mr Purchall also had a conversation with John Thompson shortly after this in which Mr Thompson asked where the business was coming from and was given the same reply as Mr Kevern had previously given. He required of Mr Purchall that he do all the necessary checks. Mr Purchall responded that he would do so. 64    I am also satisfied that at about the same time, Mr Purchall had a further conversation with Mr Kevern in the terms which appear in Mr Purchall’s affidavit, namely:

“DK: “Chatswood Classic has to invoice the goods. You have got to sight the
vehicles and do the necessary REVS checks.”
JP: “I agree with those terms.””

65    Following upon these conversations, Mr Purchall began to introduce transactions. The business was performed in the way it had been discussed. Quite clearly, it could have been conducted in this way without the receipt of any instructions from anyone at Inchcape. Classic had the necessary Inchcape application forms. It was provided with the necessary information for the completion of the forms by Mr Purchall, either orally or through faxed instructions, and documents were provided such as certificates of registration and true Form 4s in respect of the vehicles. Mr Kevern and Ms Whyte required no assistance from anyone on the part of Inchcape to fill out the application forms showing, incorrectly, that Classic was the supplier of the vehicles and also to supply invoices incorrectly showing Classic as the owner and supplier. Clearly enough the whole scheme could have been put into effect without any outside instructions. 66    However, Mr Kevern asserts that Messrs Foster and Noye were directly involved from the outset. He says that within a week of his discussion with Mr Thompson he spoke to Mr Foster in his office at Classic. He gives the following account in his oral testimony:

“Q. Would you please tell his Honour what you said and what Foster said at that discussion.
A. Certainly. I started off by saying to Robert Foster:
“John Purchall, who I believe you know from your Citibank days, and as you know has been associated with Chatswood Classic and at another dealership, that John Thompson used to own at Collaroy, has got some outside business”.
I explained to him that he was getting it from Haberfield Autos, he had accountants that used to supply business. He also had a financial planning organisation that he used to get some business from. I asked Robert, would Inchcape be interested in looking at that business?
Q. Did he say anything to you?
A. No, he replied, yes, he did remember John Purchall from his Citibank days and that he would only accept that business from Chatswood Classic Cars as if we had to invoice the deals through Chatswood Classic Cars, as if we were supplying the vehicles.”

67    This evidence was contrary to the version he had previously given in his affidavit. There he had sworn that Mr Foster had not replied immediately but had got back to him the following day with his reply, which was in similar terms. Considering the importance of the conversation, I consider this discrepancy to be of some significance. In his evidence he explained it on the basis that he was, at the time of the making of the affidavit, confusing the occasion of Mr Foster’s reply with the occasion, occurring a couple of days after the conversation with Mr Foster, when, he alleges, Mr Noye had a conversation with him confirming the arrangement that deals were to be invoiced through Classic. I feel there is little substance in this explanation, as the affidavit also refers to the Noye conversation. In his oral testimony he describes the conversation with Noye as follows:

“Q. Would you please tell the Court what was said in that conversation?
A. Certainly. I said to Richard that I had conversations with Robert Foster regarding John Purchall and some outside deals. I asked Richard, had Robert spoken to him? Richard Noye replied to me:
“Yes, he has. I believe Chatswood Classic Cars will be invoicing all the vehicles.”
Q. Anything further at that conversation?
A. No, that was it. I replied, “Well that’s good that you know about it.””

68    These two conversations form the basis of the defendants’ case that, in forwarding the series of disguised third party transactions to Inchcape for approval, they were doing so at the express direction of Mr Foster, in collaboration with Mr Noye. Both men firmly deny that the conversations occurred. I have already indicated that I hold a reasonably favourable view of Mr Foster as a witness. I was similarly impressed by Mr Noye who, so far as demeanour in the witness box can take the matter, appeared to be a truthful and reliable witness. 69    I was, on the contrary, not impressed by the evidence of Mr Kevern. His demeanour did little to inspire confidence in his testimony. He was both voluble and evasive in answering questions. He was cross-examined, at considerable length, in relation to matters to which I have already made reference, namely the forwarding of application forms which erroneously described Classic as the supplier of the vehicles, the disparity between information in the forms and that supplied by Mr Purchall, the forwarding of false Form 4s, and the retention from Inchcape of the correct Form 4s and other documentary material which would have indicated the true nature of the transactions in respect of which finance was being sought. Whenever he was in difficulty in answering questions on these topics, which happened frequently, he resorted to a stock answer to the effect that Mr Foster and Mr Noye knew what was going on. One answer that he gave I found to be quite significant. Having repeatedly indicated that both Mr Foster and Mr Noye had been party to a course of conduct which could only have led to deception of their employer, he responded to a question in cross-examination by saying that he thought that they were acting honestly. Of course, had he answered to the contrary, he would have been obliged to admit that he himself was involved in this dishonesty. I have already set-out a portion of his evidence which indicated quite clearly that, in respect of the Chan transaction, he knew perfectly well that Inchcape was being misled. 70    Mr Kevern gave much more evidence in which he sought to portray Mr Foster as the guiding hand behind the Purchall transactions. He swore that Mr Foster had told Mr Purchall “to sight all vehicles and forward copies of the registration papers so that Mr Foster could be satisfied as to the ownership of the vehicle.” This would account, of course, for his receipt of registration certificates and correct Form 4s from Mr Purchall and their presence in Classic files kept by him. It may be noted, incidentally, that he swore that he did not send these registration papers and other evidence of title to Inchcape because he was never asked for them. He denied that he had deliberately not sent them on. This evidence, in my view, is unacceptable. The material, if furnished to Inchcape, would have resulted in the revelation that Classic, was not, as represented in the other material forwarded by Mr Kevern, the owner and supplier of the vehicle. Moreover, this evidence is quite contrary to evidence given by Mr Purchall. Mr Purchall was quite adamant that he did not meet Mr Foster until late December or early January, although he said that he had met Mr Noye previously. He was quite clear that he had commenced submitting his deals to Classic before he had any meetings with anyone from Inchcape. He said his first contact was with Mr Kevern when “we cleared up that it was acceptable for me to do it for Mr Kevern and Mr Thompson” and that was before he sent in any applications. He gave this evidence in chief. In cross-examination he agreed that he did not discuss with Mr Foster “certificates of registration or REVS checks or checking vehicles before May 1998” and he stated that David Kevern had told him that “it was the instructions of Mr Thompson that he should sight all vehicles that weren’t coming from dealers and get copies of registration papers and do REVS checks.” In light of this evidence it is quite impossible to accept Mr Kevern’s assertion that Mr Foster was the source of the precise instructions as to the checks to be made by Mr Purchall in respect of the vehicles he financed. I am satisfied that Mr Kevern introduced this evidence in an attempt to bolster his allegations that Mr Foster was the controlling mind in the Purchall transactions. 71    It was also part of Mr Kevern’s evidence that both Mr Foster and Mr Noye regularly discussed with him the Purchall transactions during the course of their frequent visits to the Classic dealership. He said that in the course of a twenty minute discussion Mr Purchall’s name would be mentioned at least ten times. Furthermore, if the initial conversation with Mr Foster had in fact occurred and the instructions had then been given to invoice all the vehicles from Classic, it would be most unlikely that Mr Kevern would not have discussed this conversation with Mr Purchall. Indeed, one would have expected that by December 1998 Mr Purchall would have been thoroughly familiar with Mr Foster’s role in the scheme and that Mr Foster would, himself, be thoroughly aware of Mr Purchall’s identity and function. However, Mr Purchall’s evidence as to the single meeting he alleges occurred between him and Mr Foster, before the Jimmy Lee problem surfaced in May 1998 does not fit in with this scenario. 72    Having said that he felt sure he had come across the name of Mr Foster when Mr Foster had been working at Citibank, he said that he remembered meeting him in Mr Kevern’s office either late December 1997 or early January 1998 when he was introduced to him by Mr Kevern. He said the introduction took the following form: “This is Purchie. He has been introducing business from other dealers to us.” Considering the alleged involvement of Mr Foster in the whole scheme to the full knowledge of Mr Purchall, it is quite impossible, in my view, that Mr Kevern would have introduced the two men in this way. Mr Foster does not accept that this meeting occurred. 73    I was not impressed by Mr Purchall’s demeanour in the witness box. He was very guarded in committing himself in cross-examination when there was an obvious risk of his being caught out by documentary evidence. His evidence is important in the alleged implication of Mr Noye in the scheme. I shall refer to that now. 74    I have already referred to Mr Kevern’s evidence as to the alleged conversation with Mr Noye shortly after the initial conversation with Mr Foster. This was alleged to have taken place in Mr Kevern’s office. It may be noted that the office was shared by Ms Whyte. They shared a desk and were, for the most part, in the office together. Ms Whyte gives no evidence as to hearing Mr Noye making the statement alleged. Mr Purchall, in his affidavit evidence and in his oral evidence in chief, made no mention of hearing any statement from Noye to the effect that the vehicles should be invoiced from Classic. However, in his cross-examination he made reference to this, for the first time, in an unresponsive answer. I set out the whole passage so that the statement can be seen in context. It is as follows:

“Q. On the occasion you spoke first to Mr Kevern and Mr Thompson about doing this business, you remember that?
A. Yes.

Q. And you say that was in either late October or early November?
A. Yes.

Q. Is that right? One or other of them said you had to do the usual checks, the registration, REVS check, statutory declaration? Did they also suggest you get a statutory declaration?
A. No, that is something I use myself when it is a sale and lease back, it protects me.

Q. And did, at that time I take it there was discussion about the fact that the invoices would be issued by Chatswood Classic?
A. Yes.

Q. Did that they, at that time, give you copies of Chatswood Classic invoices? That is blank forms so you could complete them?
A. On the occasions when I had completed them it would have been done in Chatswood Classic office. I don't have any Chatswood Classic documentation.

Q. Was it discussed that on the Inchcape applications the introducer and supplier would be described as Chatswood Classic?
A. They were to be the introducer.

Q. Yes?
A. Yes.

Q. And the supplier?
A. And the supplier. These were the instructions given to Mr Kevern from Richard Noye in my presence.

Q. I see, when did that conversation take place?
A. When we first started introducing business.

Q. You have not given any evidence about that in your evidence-in-chief, have you?
A. I don't recall. I mean, if it's not in there, it's not in there.

Q. And I suggest it is a lie?
A. No, sir.

Q. You have never met Richard Noye, have you?
A. Many times. Half a dozen times in David Kevern's office, at least, in the presence of others.”

75    The written transcript does not, of course, reproduce the effect of the evidence as given in Court. Although the initial questions, as recorded, are somewhat lacking in specificity, there was no doubt, in my recollection, that they were directed to the activities of Mr Kevern and Mr Thompson in late October or early November. The “discussion” referred to was a suggested discussion between Mr Purchall and them or either of them. The reference to Mr Noye had all the appearance of being introduced by Mr Purchall in an attempt to undo the damage, which his answers were creating, to the case made against Messrs Foster and Noye. This was in circumstances where he knew that Mr Noye alleged that he had never met Mr Purchall. 76    Later when he was being cross-examined on the topic of the Form 4 notices the following occurred:

“MEAGHER: Q. You have not given any evidence about any conversations you say you had with either Mr Foster or Mr Noye about Form 4 notices, have you?
A. I have not.

*Q. And that's because you don't suggest that you did have any conversations with either of those gentlemen about Form 4 notices?
A. I understood from Mr Kevern that--

Q. Please, address my question.
A. Would you repeat the question?

QUESTION MARKED * READ

HIS HONOUR: Q. That is Foster or Noye?
A. I had no direct conversation with Foster or Noye regarding Form 4s.

MEAGHER: Q. All your conversations were with Mr Kevern, were they?
A. My conversations regarding that matter, as a conversation with dialogue, were with Mr Kevern. However, I was there with Mr Kevern and with Sharleine Whyte in David Kevern's office when Mr Noye laid down that the vehicles had to be invoiced through Chatswood Classic Cars.

HIS HONOUR: What did that have to do with Form 4s?
A. In the trade generally, if the car is a warrantable car it is required that the finance company requires evidence that the car engine number, VIN number, registration numbers, correspond to the documents given, the invoice and the details on the contract.

Q. The Form 4 is a way of supplying that evidence?
A. It is an accepted way of supplying that evidence, that most finance companies do ask for.

MEAGHER: Q. Do you accept there is a distinction between a genuine Form 4 and a dummy or false Form 4?
A. Yes, I do.

Q. You don't suggest, do you, in the ordinary course of events finance companies accept dummies or false Form 4s, do you?
A. I would think that, knowingly, they wouldn't.

Q. You say that there was an occasion, was it in Mr Kevern's office when Mr Noye was present and he talked about invoices? Is that what you say?
A. About invoices? No. His instructions were for the business that I submitted that Chatswood Classic Cars had to invoice the vehicles.

Q. Were you present when Mr Noye said that?
A. Yes, I was.

Q. Where did that statement take place?
A. Where?

Q. Yes?
A. In Mr Kevern's office.

Q. Who was present?
A. Myself, Mr Kevern, Mr Noye and probably, but I can't say with 100 per cent certainty, Sharleine Whyte.

Q. What do you say Mr Noye said?
A. That the contracts--

Q. Try and give us--
A. Words to the effect that all the deals that had to be submitted had to be invoiced by Chatswood Classic to Inchcape.

Q. Is that all he said?
A. Words to that effect, yes.

Q. When do you say that was?
A. Before we started submitting the business.

Q. When do you say that was?
A. Before we started submitting the business.

Q. In October 1997?
A. October/November, yes. Before we started submitting the business.

Q. When did you start submitting the business?
A. In October or November 1997.

Q. Do you say this was after the conversations you had had with Mr Kevern and Mr Thompson?
A. I do.

Q. And I suggest to you that your evidence in this respect is just false, isn't it?
A. No, sir.

Q. You are making it up?
A. No, sir.

Q. And Mr Purchall, there is no reference to this conversation with Mr Noye in either of your affidavits, is there?
A. (No answer).

Q. You know there isn't, don't you?
A. There is no evidence, not in the affidavit.

Q. You didn't give any evidence in your evidence-in-chief when you answered the questions of Mr Neil?
A. I answered the questions.

Q. You made no reference of this conversation with Mr Noye in your evidence-in-chief?
A. I was not asked the question.

Q. You understood when you gave your evidence-in-chief that the critical issue in this case, or one of the critical issues, is whether Inchcape knew that this business was third party business. You knew that, didn't you?
A. Yes.

Q. And if you were present at a conversation with Mr Noye in which he said to you, "These applications have to be naming Chatswood as supplier and the invoices have to be issued by Chatswood" that would have been critical, wouldn't it?
A. Critical to what?

Q. Critical evidence to assist his Honour to decide who is telling truth?
A. I answered the questions that were put to me, sir.

Q. I suggest you just made that evidence up?
A. No, sir.”

77    Again, I have set out the passage at length so that the evidence given as to Mr Noye’s alleged statement on invoicing can be observed in context. The transcript does not capture the atmosphere of the courtroom. Another unresponsive answer was being thrust upon the cross-examiner. I gained the distinct impression that Mr Purchall was concerned that his previous attempt to make this point had not been very successful and he wished to try again. On this occasion he attempted to add verisimilitude by reference to the presence of Ms Whyte. When the topic was returned to after some questioning on Form 4 matters (in which he conceded that finance companies would not knowingly accept false Form 4s), he diluted the earlier statement by saying that he couldn’t “with 100% certainty” assert that Sharleine Whyte had been present. Only a short time before he had had no hesitation in asserting positively that she was. I felt that he had had misgivings about the earlier statement, as it had occurred to him that he could be in conflict with Ms Whyte’s evidence, which in fact he was. I was not impressed with his demeanour in the course of this evidence. 78    I have already set out Mr Kevern’s version of this alleged conversation with Mr Purchall. I am satisfied that it was an attempt on his part to recount the same alleged conversation. It is significantly different from the version given by Mr Purchall. It would be unreasonable to assume that they were seeking to give evidence of two different conversations as the thrust of each was suggested instructions given by Mr Noye in relation to the highly significant matter of the false invoicing. Mr Kevern does not suggest that Mr Purchall was present. Indeed the alleged conversation as recounted by Mr Kevern strongly suggests that he was not. Nor does Mr Kevern suggest that Ms Whyte was present at the conversation. Moreover, Mr Kevern’s version can hardly be described as a “laying down of instructions” to them by Mr Noye. 79    In the situation that Mr Noye denies ever having met Mr Purchall, let alone having conversations such as this with him, I find the discrepancies between the versions of Mr Kevern and Mr Purchall to be highly significant. 80    Mr Kevern gave further evidence as to the complicity of Messrs Foster and Noye in the Purchall transactions. He said that both men were regularly in his office after the transactions commenced and discussed them with him. The paperwork in relation to the transactions was kept in trays upon his desk. The trays were also used by Ms Whyte. The evidence establishes that there were three such trays arranged vertically. The top tray contained material relating to AGC. The second tray contained copies of the material forwarded to Inchcape. The bottom tray contained the material forwarded to Inchcape together with Inchcape’s approvals. The evidence establishes, also, that after a transaction had been finalised by payment, Mr Purchall would forward to Classic the whole of his file of material relating to it. This would put into Classic’s possession material such as certificates of registration in respect of the vehicles and Form 4 notices which had been attached to those vehicles at the other dealerships. As already indicated, this sort of material was present in the files kept by Classic but was not present in Inchcape’s files, because it was never forwarded to them. 81    Mr Kevern avers that in the course of regular discussions with the two men he would discuss the Purchall transactions separately from such transactions as were, in fact, ordinary transactions emanating from Classic. He says that he would separate the documents and place them on the desk so that they could be separately examined. The Purchall transactions would then be discussed separately from the Classic transactions. I consider that this evidence is an attempt by Mr Kevern to attach plausibility to his contention that the Inchcape men were well aware of the Purchall transactions. Both men deny it. It is most significant that Ms Whyte who, it appears quite clearly, would have been present on most, if not all, of these alleged occasions does not corroborate this. In fact she states in her evidence that she never saw Mr Foster looking at any of the documents contained in the trays. She did see Mr Noye in Mr Kevern’s office on a far more regular basis than Mr Foster. She says that the documents he looked at came from the middle tray. Her evidence establishes that these documents were the documents sent to Inchcape, namely the application forms and privacy authorities. These documents bore no indication that the vehicles originated from Mr Purchall. Indeed, the application forms indicated that they came from Classic. 82    Mr Kevern went further in his evidence. He said that both men would specifically examine the material which came from Mr Purchall to determine whether appropriate checks such as REVS checks had been made according to, as he suggested, Mr Foster’s instructions in that regard. Quite apart from Ms Whyte’s evidence that Mr Foster did not look at any documents, there is a basic lack of likelihood in this evidence. It is clear that Mr Purchall provided this material after the matters had been settled, that is after Inchcape had paid out the money. One wonders what purpose could be served by Messrs Foster and Noye satisfying themselves that all appropriate checks had been made after payment had occurred. I am satisfied that Mr Kevern’s evidence in this regard is not worthy of acceptance. 83    Mr Kevern also sought to involve Mr Foster in the use of the sham Form 4 notices in some of the Purchall transactions. As has been seen, Mr Purchall does not claim to have had any discussions with the men about the use of these documents. However, Mr Kevern sought to implicate Mr Foster as a result of conversations which he said occurred, the first in mid December 1997 to early 1998 and the second about two and a half months later. He says that the first conversation occurred as a result of his receiving a request from a relevant underwriter via a BSR for the provision of a Form 4, as a condition of approval. It is perfectly plain that if he had forwarded a correct Form 4 supplied through Mr Purchall this would have indicated that the vehicle in question was not being sold to Inchcape by Classic. There was, therefore, an obvious problem relating to the exposure of the true nature of the deal. However, he did not discuss this problem with Mr Foster, in a way that might have been expected if, indeed, Mr Foster was, in effect, a co-conspirator. He says that he complained to Mr Foster that if he sent along a Form 4 purporting to come from Classic Cars then Classic might be involved in the warranty obligations associated with such a form. He also says that he complained that the vehicle was not subject to warranty, as it fell outside the ambit of the relevant regulations. No explanation is given as to why Inchcape was not simply informed that no Form 4 existed, for this reason. However, Mr Kevern stated that Mr Foster told him that he would fix the matter up. Thereafter, he says, there were no applications for Form 4s until the requests appeared again some two and a half months later. He says that he approached Mr Foster again who said he would make enquiries and later told him that the Form 4s were only required for the checking of the relevant particulars of the vehicle. In my opinion, it would have been plain to anyone associated, as long as Mr Kevern had been, with the financing of motor vehicles, that this would always have been the purpose of the request. However, Mr Kevern appears to put forward this alleged statement by Mr Foster as a satisfactory reason for his issuing the bogus documents. I simply do not accept his evidence on this topic. 84    I should add that Ms Whyte gave clear evidence that Mr Kevern gave her instructions in relation to these documents, which were kept, in blank form, in a drawer in the office. She agreed that Mr Kevern said to her that “if Inchcape ever asks for a Form 4 just complete one of these and copy it and fax it off”. She also agreed that she had had no conversation about the Form 4s with either Mr Foster or Mr Noye. She also stated that Mr Kevern had told her that the Form 4s had always to be issued by Chatswood Classic because it was issuing the invoices. Her evidence may be contrasted with that of Mr Kevern, given in cross-examination in relation to a particular bogus Form 4. The passage is as follows:

“Q. Did you tell her that if she got requests for Form 4s she could prepare dummy Form 4s?
A. I never exactly said it in those words to her.
Q. What were the words you said to her?
A. She was present when Robert Foster and that were talking about Form 4s and she would have thought that’s what they want, that’s what she will give them; a Form 4.”

I do not accept this evidence.

85    I am satisfied that there was no discussion with either Mr Foster or Mr Noye about the use of these forged documents and that they were unaware of the deception which was being practised when they were forwarded to Inchcape. 86    It is necessary to refer to two areas of the evidence in which it was sought to implicate Mr Noye in the Purchall transactions. The first relates to the topic of the interest rates being charged in the transactions. Mr Kevern said that about mid December 1997 to mid January 1998 he received a phone call from Mr Noye, in which Mr Noye stated that Mr Foster and he had discussed the interest rates and that they would like Mr Purchall to vary them a little bit. He agreed to let Mr Purchall know and did so by telephone. A few days later, he says, in the course of a weekly call, Mr Noye gave the same instruction to Mr Purchall, who happened to be in Mr Kevern’s office. He said that Mr Noye gave no reason for the request to make the variation. He was cross-examined as to whether Mr Noye had advanced a reason along the lines that too many deals at a high rate of 17% would draw attention and would look suspicious. He did not vary his evidence that no reasons had been given but said that “it was obviously thought of.” Ms Whyte gave some evidence on this topic. In her affidavit she said that she recalled that on one occasion either Mr Foster or Mr Noye spoke to Mr Kevern and herself in relation to interest rates. In her oral testimony, the following version was given:

“Q. Could you please tell his Honour what you heard anybody say during that conversation and try, if you can, to put it in italics, in the first person if possible?
A. Okay. I remember the conversation, a conversation between David Kevern and Richard Noye in regards to interest rates being very high, at around 18, 19 per cent.
Q. And who said what?
A. Dave, this is Richard Noye talking to David, saying they were all very high, around the 18, 19 per cent and they needed to be adjusted accordingly.
Q. Do you recall him saying anything else?
A. No.
Q. Do you recall if Mr Kevern said anything?
A. David just agreed with what he said, asking him why and I don’t really recall what Richard said then.”

87    It is to be noted that Ms Whyte makes no reference in her affidavit or oral testimony to Mr Purchall being at this conversation. There is obvious conflict with Mr Kevern, in that he says that the conversation he had with Mr Noye alone took place over the telephone. I am in some doubt as to whether I can place any reliance at all upon Ms Whyte’s evidence in this regard. However, she may well have heard a conversation about interest rates. Such a conversation could well have taken place between Messrs Kevern and Purchall in her presence and with the passage of time she has come to think that it involved Mr Noye. Also the reference to the interest rates of “around 18, 19 per cent” causes some difficulty. The evidence in the case suggests that interest rates were not higher than 17%. In any event, I cannot regard her evidence as corroborating that of Mr Kevern as to his alleged conversation with Mr Noye. Furthermore, it can have no corroborative effect in relation to the alleged second conversation, which involved Mr Purchall. I turn then to that alleged conversation. 88    Mr Kevern’s version has already been given. Mr Purchall said in evidence that he met Mr Noye some five or six times and that the conversation occurred on the second or third meeting. Mr Noye was looking through the applications in Mr Kevern’s office and “he mentioned that the interest rates on the applications were all around 17% and suggested that we should vary them because it makes it look too obvious that they were not deals from within Chatswood Classic Cars.” Mr Purchall says that he then agreed to vary the rates. 89    Mr Purchall was cross-examined about this alleged conversation. He agreed that the person to whom “it would look too obvious” was “Inchcape”. However, when asked whether he believed it “was all a secret from Inchcape” he said that he didn’t know. It was put to him that there were two possibilities, one that he was making it all up and the other that he knew it was a secret from Inchcape and he was joining in the secret. His answer was “no, it was just the procedure that had to be followed. I believe Inchcape were well aware.” He was then asked the following questions and gave the following answers:

“Q. If you believed that this was all well known within Inchcape, what was the point of Mr Noye saying to you, as you say he said, that:
“We should vary the interest rates, because it looks too obvious that these deals are not from Chatswood”?
A. I have no idea why he said that, but he said it.
Q. I suggest to you he never said it?
A. That is not true.
Q. And you never met him?
A. That is not true.”

90 The matter was revisited in further cross-examination. Mr Purchall maintained that he did not know why Mr Noye had said this to him. He also said that he, obediently, varied the rates in accordance with Mr Noye’s direction. It seems quite obvious that Mr Purchall was prepared to give evidence implicating Mr Noye in the deception of Inchcape, his employer, but was not prepared to accept that the same evidence, if accepted, would necessarily implicate him. Moreover, an examination of the interest rates charged in the applications submitted after the time of this alleged conversation does not demonstrate any significant downward variation. 91 Evidence was given by these witnesses that Mr Noye had regular conversations with Mr Purchall in Mr Kevern’s office. It appears that Mr Purchall would have visited Mr Kevern’s office about five or six times in the period November 1997 to May 1998. It is, of course, possible that one or more of these visits may have coincided with Mr Noye’s regular visits to Mr Kevern. However, this is not necessarily so, especially as Mr Noye’s visits would have been relatively short in duration, forming part of a day’s routine visits to the Classic dealership and other dealerships in his area. Mr Noye was, after all, only a sales representative and, in my view, could not realistically have been seen by Messrs Kevern or Purchall as having any authority to bind Inchcape outside the sphere of an ordinary salesman. There was some evidence given of an alleged occasion when Mr Purchall announced in Mr Noye’s presence, in Mr Kevern’s office, that he had run out of Inchcape documentation and that Mr Noye then took him outside to Mr Noye’s car and gave him documents from the car. Mr Noye denies this, as he also denies having any knowledge of Mr Purchall at all. Mr Purchall says that the relevant documents were contract forms. Ms Whyte says that they were application forms. She gives confused evidence about the occurrence. In her affidavit she speaks of the documents being taken from the seat of the car. In her oral testimony she speaks of them being taken from the boot. In the end she said she was not sure. I think her evidence on the matter is unreliable. 92 I was not satisfied, in general, with the evidence of Mr Purchall. I was unimpressed with the evidence of Mr Kevern. The evidence of these witnesses fall far short of satisfying me as to the truth of their allegations against Messrs Foster and Noye. I have not attempted to set out all the evidence and issues of fact bearing on this. However, I have considered it all and nothing therein deflects me from this view. 93 I should add that the defendants placed reliance upon the fact that there was an undoubted increase in business sent by Classic to Inchcape from the commencement of November 1997. There is no doubt that this increase was largely due to the introduction of the Purchall transactions. The increase included vehicles, it was submitted, of a type that would not ordinarily have been sold by Classic, at prices which did not accord with the usual prices of Classic’s second hand vehicles, and at interest rates not ordinarily achieved in financial contracts with Classic’s customers. It is submitted that these factors would have readily indicated to both Mr Foster and Mr Noye that the transactions were of a third party nature. It was submitted that their failure to realise the obvious was indicative of the fact that they already knew the transactions were third party Purchall deals. These matters were of course put to them in cross-examination. I do not think that the point is a telling one. Mr Thompson himself indicated that a variety of vehicles came to Classic by way of trade-ins, some of the vehicles being low quality. Also his customer base was far wider than the Sydney North Shore. Moreover, as Mr Foster pointed out, the increase in this retail business coincided with the course of apparently successful negotiations which he was conducting for the purpose of widening Inchcape’s business relations with Classic, at the expense of AGC. It would not be surprising to him if some of AGC’s retail business was being directed to Inchcape in this period. Agreement in principle, subject to proper legal documentation, had been reached in October as shown by the document Exhibit J signed by Mr Thompson. The defendants made a great deal of the increase in business, the type of business, the type of customer and the interest rates in argument. However, when viewed against the totality of the evidence I am not prepared to attribute to it the weight that they submit it should be given. 94 Moreover, as I have already mentioned, there was nothing in the evidence to suggest that either Mr Foster or Mr Noye had anything to gain in orchestrating this plan of deception, as against what they stood to lose. Neither had the power to approve the transactions within Inchcape, a fact of which I am satisfied Mr Kevern and Mr Purchall would have been well aware. Neither could control the ultimate outcome of any of the transactions. If substantial default occurred in any one of the transactions, with the result that an enquiry would be made, it would readily come to light that the transaction was not as represented. This is precisely what occurred when the Jimmy Lee transaction was exposed in May 1998. It is not really conceivable, in my opinion, that either of these men would have risked their jobs and their career by entering into such a potentially dangerous situation from which they had nothing substantial to gain. The evidence which has been offered falls far short of satisfying me that they did. 95 Accordingly, in my view, the factual basis upon which Classic seeks to defend the claim under s. 52 of the TPA has simply not been established. Therefore the plaintiff must succeed. I should add that, had I been satisfied of the complicity of Messrs Foster and Noye, there would, nevertheless, have been considerable legal problems confronting the defendants. Leaving aside the relatively lowly position occupied by Mr Foster in the decision-making hierarchy of Inchcape, there would have been a significant question as to whether he, having been involved in a fraudulent enterprise against his employer, could infect the employer with knowledge of that enterprise. I find it unnecessary to enter upon a consideration of the authorities which have been cited to me, including the decision of von Doussa J. in Beach Petroleum N.L. v Johnson (1993) 115 ALR 411. The questions considered by his Honour in that case simply do not arise here. 96 I am satisfied that the plaintiff is entitled to succeed against Classic. I turn now to the question of whether the second defendant, Mr Thompson, is also liable to the plaintiff, pursuant to s. 75B (1) of the TPA.

Liability of the second defendant
I have already voiced some criticism of Mr Thompson as a witness. I regarded him, generally, as a poor witness. He tended to be argumentative and unresponsive. At times, when in a tight corner in cross-examination he resorted to bluster. To this extent he did his cause little good. He had obviously fully embraced the concept that his company had been led into difficulty and danger through the machinations of Messrs Foster and Noye. He fairly regularly, in his evidence, imposed upon the cross-examiner and the Court, by way of unresponsive assertion, the statement that “Inchcape knew all about it.” His efforts to bolster Classic’s case against Inchcape by this forensic behaviour were counter-productive. However, it does not follow from this that the case brought against him personally must succeed. It is a significantly different case from that brought against the company. Before considering the evidence, it is convenient to refer to the relevant requirements of s. 75B (only part of the section is relied upon). The headnote to the leading case of Yorke v Lucas (1985) 158 CLR 661 provides a sufficient indication of the essential requirements of the section and its relationship to other sections of the TPA. which are relevant for present purposes. The headnote, relevantly, reads as follows:
“Section 52 of the Trade Practices Act 1974 (Cth) prohibits a corporation from engaging in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 82 allows a person who suffers loss or damage by conduct of another person that was done in contravention of s. 52 to recover the amount of the loss or damage against that other person or against “any person involved in the contravention”.
Section 75B provides that a reference to a person involved in a contravention shall be read as a reference to a person who - “(a)…; (b)…; (c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d)…
Held: (1)…
(2) Before a person can be said to have been party to a contravention within par. (c) of s. 75B, he must be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention.
Per curiam . The word “knowingly” in par. (c) qualifies only the words “concerned in” and not also the words ‘party to’.”

97    Reference to the majority judgment in the case (Mason ACJ, Wilson, Deane and Dawson JJ) indicates the accuracy of the headnote. It is not necessary to cite from the judgment itself. 98    I am satisfied that the question for my determination is whether Mr Thompson was concerned in the contravention that I have held to be established against Classic with knowledge of the essential elements of the contravention. Alternatively, was he an intentional participant in that contravention with knowledge of the essential elements of it. I am also satisfied that the knowledge in question must be actual knowledge and not constructive knowledge, except that if “wilful blindness” be established then knowledge will be imputed (Giorgianni v The Queen (1985) 156 CLR 473). 99 The evidence satisfies me that, as a matter of practice, Mr Thompson left the day to day running of the financial affairs of Classic to Mr Kevern, acting through Janafe Pty Limited. Put simply, his position is that after his initial discussion with Mr Kevern about accepting Mr Purchall’s third party business and conducting it in accordance with Inchcape’s requirements, he took no further part in either the setting-up of the arrangements or in their conduct. He became aware of problems only when the Jimmy Lee matter was brought to his attention. Accordingly, it is submitted on his behalf that he was not knowingly concerned in or party to, any of Classic’s contraventions. 100 There is no evidence to indicate any participation by Mr Thompson after his initial conversations with Mr Kevern and Mr Purchall. Those conversations have already been referred to. They did not contain any information as to how the proposed transactions were to be carried out. There is no evidence from Messrs Kevern and Purchall, Ms Whyte or any witnesses called on behalf of the plaintiff to indicate that Mr Thompson participated in any way in the organisation of the transactions or in their conduct. The question, therefore, in my opinion, is whether there is any other evidence in the case which indicates that, without his actual participation in the transactions, he was nevertheless directly or indirectly aware that the conduct of them involved Inchcape’s being misled, in the way that I have held. 101 To determine this question it is necessary to have regard to the evidence of the conversations held with Mr Thompson after the Jimmy Lee problem had emerged and also of evidence given by him in these proceedings. 102 The first conversation was with Mr Foster. Evidence relating to it was given by Mr Thompson and by Ms Whyte. I consider that Mr Foster has a clearer recollection of it. I accept his evidence. The meeting took place on 18 May 1998 at about 10.00 am. Mr Foster told Mr Thompson about the problem with the account, that it was in arrears and that Jimmy Lee could not be located. He asked for help. Mr Thompson told Ms Whyte to bring in the Classic file for Jimmy Lee. She did so. Mr Foster reviewed the file and said to Mr Thompson “What’s this documentation in the file here? We have no documentation about this coming from a person by the name of John Purchall.” Mr Thompson, who considered the file at that time, told Mr Foster that Mr Purchall was forwarding business to the dealership and that the Jimmy Lee transaction was one forwarded by Mr Purchall and then on-forwarded to Inchcape. Mr Foster said that he was unaware that the transaction was of that nature and Mr Thompson said that he would call John Purchall, which he did. He spoke to Mr Purchall on the telephone and advised Mr Foster that Mr Purchall would provide him with documentation relating to the Jimmy Lee matter. This was duly done later in the day at Parramatta. 103 After receiving the documentation from Mr Purchall, Mr Foster had a further meeting with Mr Thompson that day. He had a discussion with Mr Thompson and Ms Whyte as to the contents of the file, advising that it contained material unknown to Inchcape. There is no need to set out the detail of the Jimmy Lee transaction, which is complex, but the indication was clear that it was a very different form of transaction from what had been represented to Inchcape. 104 The next person from Inchcape to speak to Mr Thompson about the matter was Mr Grant. I was impressed with Mr Grant as a witness and I fully accept his version of the conversation that occurred. His evidence was as follows:

“A. I arrived at the showroom and Mr Thompson was downstairs
…… and he headed me towards a couple of seats downstairs and I
said, "John, we need to talk about this, specifically about
the Jimmy Lee case, I think we should go to your office". So
we went upstairs to his office, where his wife joined the
conversation. I said, "John, it's about the Jimmy Lee case.
It's obviously a fraudulent transaction", and he said, "Yes,
I know". He was gesticulating "I know, it's down to me, I'm
John Thompson, I'm an honourable man, I'll sort it out."
And he said, "I cannot pay you the full $180,000, but I will
be able to pay you $10,000 per month", and he said he'd even
commence it in June. I thanked him for his offer. I said,
"In order to show good faith to the other directors, I
would like to take back with me a cheque for the arrears on
the account", which, from memory, was $9,566. I asked him
for that cheque and he said he would pay me that cheque, but
could I collect it tomorrow, and I said, "No, seeing as I'm
here and you and your wife are here, I would want to take
that cheque with me", and he was to prepare it, sign it, and
hand it over.

Q. Were there any discussions at that meeting about
Mr Kevern or Miss Whyte?
A. Yes, he had said that both Kevern and Whyte had been
sacked.

Q. Did he say anything else about them?
A. He was pretty disparaging about both of them

Q. Could you try and give us the effect of what he said -
if you can?
A. He was as annoyed about the situation with Jimmy Lee as
he was annoyed about David Kevern. He felt that he'd been
duped by David Kevern.”

105    Mr Grant also said:

“A. He was talking about how this could have happened in one
of his dealerships - "I'm John Thompson" - he was huffing and
puffing. He was obviously very upset about the whole affair,
and he just reiterated that he'd sacked Kevern and Whyte.”

106    Mr Grant went on to say that Mr Thompson mentioned an entity called Shola Finance. Mr Thompson wanted Inchcape to take action against Shola Finance because he was convinced that they were involved in the whole fraud. He said Mr Purchall was associated with Shola Finance and wanted to know what Mr Purchall’s involvement in the Jimmy Lee case had been. He was annoyed that Mr Purchall and Mr Kevern had dragged his good name down and he was getting “hot and bothered about the possible effect on his reputation”. 107    I should mention at this stage that evidence in the case indicates that Mr Purchall had a connection with an organisation known as Shola Finance which was a source of some of his transactions. 108    Mr Grant also drew attention to the fact that the Jimmy Lee deal contained an invoice from Classic. He gave the following evidence:

“A. I said to John Thompson,
“Here is the invoice for the Jimmy Lee case, detailing the person and the goods and the price.”
I said it was obvious that this had come from Chatswood and that was one of the reasons that we had actually done the deal.”

109    Mr Grant indicated that he showed Mr Thompson the invoice. He said that Mr Thompson was very emotional and gesticulated with his arms in the air saying again, “I’m John Thompson. I’m an honourable man. It’s down to me. We’ll sort it out.” 110    Mr Grant received the cheque that he had asked for and said that he would fax to Mr Thompson details of the repayment method that had been suggested, namely that repayment be made on the 10th of each month, commencing on 10 June 1998, until the full amount was repaid. He also said that he would visit Mr Thompson when a letter to this effect had been prepared, in order that Mr Thompson might sign it. He then left, taking the cheque with him. 111    Mr Thompson gave a somewhat different version of this conversation. He said that it was all hedged around with the word “if”. He would make a payment only “if” it was established that Classic was liable. I regret to say that I do not accept Mr Thompson’s version. He may well have come to believe it, but I think it is a product of wishful thinking. However, I consider that what he was shown in the Jimmy Lee material, including the invoice from Classic, was a revelation to him. It indicated the way in which the Purchall transactions, which he had authorised, had in fact been carried out. It was also an indication to him that Inchcape had been misled and had certainly not agreed to the transactions being carried out in the way they were. I am satisfied, although he later sought to resile in part from his statement, that Mr Thompson had sacked both Mr Kevern and Ms Whyte because of this. Mr Kevern was rather evasive on this subject but Ms Whyte, in her evidence, quite clearly accepted that their employment had been terminated upon the emergence of the Jimmy Lee problem. 112    I am also satisfied from the contents of this conversation that Mr Thompson had formed the view on the material which he had seen, that he had been duped by Mr Kevern and by Mr Purchall. I consider that his handing over of the cheque was a clear indication that he was satisfied, on the basis of what he had seen, that Inchcape had been misled by Messrs Kevern and Purchall, in circumstances where Classic had been rendered liable to Inchcape. 113    Mr Grant prepared the letter, which became Exhibit P. It amounted to an acknowledgment of liability on the part of Classic and an undertaking to repay the amount involved by instalments. The letter was faxed to Mr Thompson and Mr Grant then rang him to make an appointment to see him on 11 June. He gives the following account of the telephone conversation, which I accept:

“A. I rang him and said that - I’d already faxed the letter through to him and I rang him to make an appointment to see him, and he said:
“Look, I’ve changed my mind, I am not happy with the amount of effort that you are putting into this case to actually recover the money”.
He reiterated the point that if push came to shove, he would pay the money by instalments, as he’d already agreed to, but that he wanted to take more legal action to try and recover the money. He wanted to put an advert in the local paper saying “Dial this number, $5,000 reward for finding this vehicle”. And he said that he knew some people in the police that he could ring up and try and find out exactly where the car was and just give them some money.”

114    Mr Grant went to see Mr Thompson in the afternoon of that day. Mr Grant gives the following account of the meeting, which I accept:

“A. I turned up at the meeting - I turned up at the dealership at about 5 o’clock. I said to John:
“I need to see you about this letter that I have faxed through to you”.
He had a copy of it and it was in his office and we went to his office and he was holding the letter saying - gesticulating,
“I want you to - I want you to pursue Jimmy Lee legally. I want you to get the fraud squad on to Jimmy Lee. I don’t want to have to pay for this and for then you not to do anything about it.”
And I said,
“Well, at our previous meeting you had held your hands up, it’s down to me, I’m John Thompson, I’m an honourable man and you agreed, it was your suggestion, the $20,000 a month because you couldn’t afford anything more, so we agreed to $20,000 a month, you were to sign it, and that was the arrangement, John.”
And he said:
“No, I’m not prepared to sign it. I want to take some other action. I will help you do it but I don’t want to sign this letter. In fact, I regret giving you the $9,500.””

115    Mr Grant told Mr Thompson that it looked as though there were other cases of a similar nature to the Jimmy Lee case. Mention was made of the Reiko matter, one of the transactions in dispute. Mr Grant advised that there was another investigation going on about that. Mr Thompson was emotional. He reiterated that Mr Kevern had been sacked and said that he wanted to take action against Mr Kevern as well. He also said that Mr Kevern had told him that “Rob Foster knew all about this.” Mr Grant denied that Mr Foster had any knowledge of the matter. Mr Thompson said he would make enquiries and offer a reward for information, which he, in fact, did. 116    Again, I accept Mr Grant’s version of this conversation in preference to that of Mr Thompson. Mr Thompson’s version, as sworn in the witness box, was, in my view, unconvincing. However, again, what Mr Thompson said was indicative of a lack of knowledge on his part as to what Messrs Kevern and Purchall had been doing. I infer that, after the previous conversation with Mr Grant, there must have been a conversation between him and Mr Kevern, or someone on Mr Kevern’s behalf, in which Mr Kevern’s self-exculpatory explanation, namely that it had all been done with the knowledge of Mr Foster, had been expounded. Unfortunately, it would appear that Mr Thompson embraced this explanation, with the result that Classic’s defence in these proceedings has been based upon the evidence of Messrs Kevern and Purchall and Ms Whyte. 117    I find it unnecessary to refer further to the evidence of Mr Thompson. Much of it demonstrated that he had become obsessed with the idea that Messrs Foster and Noye were at fault. However, it had an underlying theme which I accept, namely that he believed that Messrs Kevern and Purchall would make arrangements that were acceptable to Inchcape, that being the clear instruction he had given. Also, I accept his evidence that he would not be a party, himself, to anything that was deceptive. 118    In the upshot, I have come to the firm conclusion that although, undoubtedly, Mr Thompson should have been aware of what was going on in the Purchall transactions, he was not. He left it to Messrs Kevern and Purchall to make sure that the deals were safe and proper and in accordance with Inchcape’s requirements. I am satisfied that he had no indication that anything was wrong until the sudden emergence of the Jimmy Lee matter. His first reaction was the proper one, namely to accept liability on behalf of Classic. Unfortunately, it appears that he was induced to change his mind. This fact, however, does not establish that he relevantly knew anything about the true nature of the transactions while they were taking place. 119    In these circumstances I dismiss the plaintiff’s claim against Mr Thompson. However, having regard to all the circumstances of this case, I do not think it appropriate to award him his costs. 120    Damages

I turn then to the question of damages. I do not find it necessary to review the plaintiff’s evidence on damages. I am quite satisfied to accept the material that has been placed before me by way of affidavit evidence. I accept that the principle used in the calculation of the damages is appropriate, namely that the plaintiff should recover from Classic, with interest, all of the monies, including payments of commission, which it outlaid in respect of the twenty-one transactions, less any amounts it has received or recovered in respect of them. A Schedule has been put before me on behalf of the plaintiff which sets out the relevant details of each transaction including the nature of the transaction as it was made to appear and what the transaction in fact was. The Schedule includes a calculation of damages, including interest, in respect of all the transactions which have been finalised either by the recovery of the vehicle in question or its being written off. In some cases, however, the transaction has not been finalised because there is some prospect of the vehicle being recovered. I have been asked to approach those cases, by both sides, on the basis of making a discount rather than making some order for indemnity against future loss. I think that this is an appropriate course in the circumstances. I hold that a discount of 50% should be allowed in respect of those particular matters.

121    The Schedule, together with an additional document prepared by the plaintiff which indicates the matters in respect of which I have held that the discount should apply, will be retained in the Court file. 122    It will be necessary for a re-calculation of damages to be effected, taking into account the discounts and also bringing up to date the calculations of interest. 123    I consider it appropriate that the plaintiff should have the general costs of the action. Accordingly, I order the first defendant to pay the plaintiff’s costs. 124    I direct that the parties bring in Short Minutes based upon these reasons. I list the matter for the purpose of taking those Short Minutes on 16 September 1999 at 10.00 am.

Last Modified: 09/10/1999