Prosecutors said neighbour Paul Meehan gave Tia Sharp's family "false hope" by telling police he had seen the dead schoolgirl.
Jocelyn Ledward, prosecuting, told the court: "He described her outfit and person in detail."
Miss Ledward said Meehan's claim had the result of "compounding the family's false hope" that she was still alive.
But she told the court: "There is absolutely no suggestion Mr Meehan was in league with Stuart Hazell."
She suggested that he made the report "perhaps in order to increase his importance in the investigation".
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Matalan said: "It is with great sadness we can confirm...both victims worked at our Cardiff branch."
Police believe a tree currently growing near the farmhouse where the 21-month-old toddler was last seen in 1991 was not there at the time.
The 21-year-old was using a portable toilet in Sydney when he was bitten near to the same area as in a previous incident in April.