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Of Pawnbrokers And Interest Repaid

April 10, 2009

Pawnbroker Thomas Mathew writes: Three years ago a friend of mine who lives in north London told me that, in his opinion, Britain was on the verge of slipping into a recession because he had noticed several new pawnbrokers opening in the area. My friend said that it was a sure sign that things were going downhill, adding that the new pawnbrokers were spending serious money on their offices, obviously planning to add some respectability to their operations. ‘Imagine,’ he said. ‘These people actually want to be seen as bankers rather than loan sharks that they are.’

On hearing this I remembered an incident in 1994 when the directors of a pawnbroker T.M. Sutton Limited, which in those days was a wholly owned subsidiary of the Crown Jewellers Asprey Plc., were summoned to appear before the Pawnbrokers Association to explain how they had managed to bring whole industry into disrepute.

The reason for this was because in May and June 1989 I had entered into no less than six contracts with T.M. Sutton to borrow money at the rate of 3% per month in five of them which compounded to an annual rate of 44% after six months and 3.5% per month which compounded to annual rate of 49%. After eighteen months T.M. Sutton sold my pledges through Christies of South Kensington at a public auction. Surprisingly there was a surplus of money left over after deducting the money owed by me. The surplus money was withheld from me for 4½ years. It was eventually released to me in two tranches, but without any interest. I then submitted a bill for interest in equity at the rate of 3% per month and gave them one day to pay it.

No, I did not receive a cheque for the amount I claimed. However, I received not one but two letters from T.M.Sutton’s solicitors informing me that I was not legally entitled to claim interest on the surplus money, nevertheless their client was prepared to pay me a sum considerably less than the amount invoiced on a without prejudice basis.

Undeterred I issued a statutory demand for the sum invoiced and having heard nothing further for over 21 days, I issued a winding up petition against the firm, which, as I have already mentioned, at the time was a wholly owned subsidiary of the Crown Jewellers Asprey Plc. This caused panic to set in and I was eventually persuaded by senior members of the High Court staff to withdraw my petition and to issue a High Court Writ demanding to be paid interest on equity.

On June 17th 1994, Mr Justice Chadwick a gave judgment to the effect that in the absence of contractual terms regulating the position a pawnbroker is liable in equity to pay interest on surplus monies remaining after the discharge of debts out of the proceeds of sale of pawned articles. The judge also ruled that the obligation on the pawnee to pay the pawnor the surplus monies remaining in his hands after discharge of the debt out of the sale of the pawned articles was not in dispute and concluded that the fiduciary relationship necessary to found jurisdiction to award interest in equity did exist between pawnee and pawnor in relation to the surplus, if any, arising on the sale of pawned articles.

This was therefore an appropriate case to direct an inquiry as to what use was made by the defendant of the monies, what return, if any, was obtained by the defendant by its use of the monies and what rate of interest ought to be paid.

Following the publication of this judgment the share price of Asprey’s fell from 230 pence to 98 pence per share.

On inquiry T.M.Sutton had admitted that it had used the surplus money in its business and the judge awarded me interest at the daily rate of 2½ % per month compounding each six-month rest day for 4½ years, plus my costs. Following publication in the Observer newspaper’s business section of this second judgment Asprey’s share price collapsed to 50 pence per share.

In layman’s language, T. M. Sutton had been holding my money as a constructive trustee and by using the surplus money in their business they had breached trust.

So to those of you who have failed to redeem your pledges I say: inquire if there was a surplus of money left over from the sale of your pledges and, if so, demand to find out what the pawnbroker did with it? As humans are creatures of habit, do not be surprised if you learn that the surplus money was used in the pawnbroker’s business, or the possibility that your money is being held in an interest baring account. Either way you might well be receiving an unexpected and most welcome windfall during these difficult financial times.

– End –

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