Header illustration: an interpretation of my bright, modern, Italian-style penthouse home office.
I’ve never been particularly good at accepting that something must be done a certain way simply because that was how everybody else did it.
Running our pawnbroking business in Subiaco was no exception.
I was always looking for ways to improve the operation: make better use of our money, reduce unnecessary costs and offer customers something that suited their circumstances.
Not by breaking the law. Before entering the business, I had read both Acts carefully, from beginning to end. The Pawnbrokers Act and the Second-hand Dealers Act were separate pieces of legislation, and I took considerable trouble to understand the requirements of each.
Reading legislation was hardly my idea of entertainment. Nevertheless, if I was going to operate under it, I wanted to know what it said.
And, just as importantly, what it didn’t say.
Money Sitting on a Shelf
The conventional arrangement was straightforward.
A customer brought in an item of value, we lent money against it, and the item remained with us as security. If the customer returned within the required period and paid the principal and interest, they got their property back.
If they didn’t, there was a prescribed process for disposing of it.
As I remember the rules we were operating under, that involved holding the goods for three months and then selling unredeemed items by public auction, rather than simply putting them up for sale in the shop.
There were holding costs, auction costs and money tied up in stock.
Sometimes, the customer had no intention of returning. They wanted as much money as possible and regarded the transaction as effectively selling the item, even though we had recorded it as a pawn.
Other customers had quite different needs.
Someone might only require money for a few days, until their wages arrived. Another might have an electricity bill that needed paying before the supply was disconnected.
The circumstances varied enormously. The conventional arrangement seemed rather less flexible.
I began wondering whether there was another way.
Buying Rather Than Lending
Take a watch as an example.
These are illustrative figures, rather than the details of a particular transaction. Suppose somebody brought in a Rolex worth about $5,000. Under an ordinary pawn arrangement, we might offer a loan of $1,000.
The customer would almost invariably prefer more.
I considered a different proposition: instead of lending against the watch, we could buy it outright for, say, $1,500 or $2,000.
Alongside that purchase, I would give the seller a written option to buy it back.
The agreement stipulated a deadline and a repurchase price. The period might be three days, a week or a fortnight, depending on what we agreed.
I signed the agreement. During the option period, we were committed to keeping the item available for the seller to repurchase.
They knew how much money they would receive, how long they had and exactly what it would cost to get their property back.
I should be clear about that last point. The difference between the purchase and repurchase prices would generally be greater than the interest on a conventional pawn. This was not necessarily a cheaper arrangement for someone intending to recover their goods.
What it offered was more money upfront and an agreed period that could fit their immediate needs.
If the seller exercised the option, we sold the item back at the agreed price.
If they didn’t, my understanding was that the purchase stood, the option expired, and we could deal with the goods as our own stock.
A System That Worked
From the business’s perspective, the attraction was obvious.
We could turn stock over sooner, rather than holding it for months, and sell through the shop instead of incurring auction costs.
For customers who had effectively wanted to sell their goods anyway, the higher purchase price was attractive. For those hoping to buy them back, the written agreement set out the terms.
The arrangement worked well commercially.
We made a better return, customers could receive more cash, and the business became more efficient.
I was rather pleased with it.
Naturally, that was when the Dealer Squad took an interest.
An Unwelcome Difference of Opinion
During their visits to inspect our books, the officers could see that we were recording fewer conventional pawn transactions.
They also became aware of the purchases accompanied by option agreements.
How they first heard about those arrangements, I don’t know. I had my suspicions at the time, but suspicions are not facts.
What I do remember is their objection.
They told me that I could not operate that way. In their view, the transactions were not lawful.
I disagreed.
My position was that we were buying goods and granting the seller an option to repurchase them. I regarded that as second-hand dealing, rather than lending money against goods held in pawn.
To me, the distinction mattered.
To the officers, apparently, my explanation was not sufficient.
They made it quite clear that they wanted me to stop.
By then, my dealings with certain members of the squad had already left me deeply distrustful of their motives. Against that background, I saw their intervention as another attempt to exert pressure on the business.
That was how it felt to me. The separate question of how the transactions should be classified was the point we were arguing about.
I believed I had found a lawful and practical alternative to conventional pawnbroking.
They believed—or at least told me—that I had not.
Two Licences, Two Different Activities
At that stage, I still held both licences.
That is an important detail. I hadn’t yet surrendered my pawnbroking licence. I was licensed as both a pawnbroker and a second-hand dealer.
When the officers questioned the purchase-and-option agreements, I explained that I was conducting those transactions under my second-hand dealer’s licence.
If somebody wanted to pawn an item, we could arrange a pawn. If they wanted to sell it, we could buy it. The written option gave the seller an opportunity to buy it back on the agreed terms.
That was my position.
The Dealer Squad disagreed, and eventually I was charged under the pawnbroking legislation.
Reading the Small Print
I represented myself in court.
I wasn’t a lawyer, but I could read. And I had read the legislation governing the business rather carefully.
To my mind, the question was straightforward: was I lending money against goods held as security, or buying goods under one agreement and granting an option to repurchase them under another?
I explained what we were doing and the distinction on which I relied.
As I remember the outcome, the court accepted my argument and found in my favour.
I had won.
I was pleased, naturally. I could continue operating the system, and the court had accepted the distinction I had been trying to explain.
Unfortunately, that wasn’t quite the end of the argument.
They Changed the Wording
An amendment to the Pawnbrokers Act followed.
I regarded it as a response to the court decision. From where I was standing, it seemed that having failed to stop the arrangement under the existing wording, the authorities had decided to change the wording.
Peter Dowding, who later became Premier, was Consumer Affairs Minister during this period.
I believed that my case had prompted Parliament to amend the law. I was enormously proud of that, and I still am. There was me, running a shop in Subiaco and defending myself in court, apparently giving Parliament a reason to change legislation. That still gives me considerable satisfaction.
When the amendment appeared, I was particularly interested in reading it.
And there, near the beginning of the new provision, were the words that caught my attention:
“A pawnbroker licensed under this Ordinance”.
The provision prohibited such a pawnbroker from buying an article and granting the seller an option to repurchase it at a higher price.
I read it carefully.
Then I read it again.
It referred to a licensed pawnbroker.
Well, there was something I could do about that.
No Longer a Pawnbroker
This was when I surrendered my pawnbroking licence.
I retained my second-hand dealer’s licence and stopped conducting conventional pawn transactions altogether.
We continued buying goods and offering written options to repurchase them.
My understanding was that the new restriction, framed around licensed pawnbrokers, no longer applied to me in that capacity because I was no longer one.
The business continued operating on that basis.
Customers used the arrangement, we found it commercially successful, and it became a profitable part of the operation.
I must admit that I found a certain satisfaction in the result.
The authorities had changed the legislation. I had changed which business I was licensed to conduct.
Reading carefully had proved useful again.
Out Came the Ruler
My relationship with the Dealer Squad did not improve.
The visits continued. Officers inspected the shop and its stock, and on occasions goods were identified as stolen and taken away.
That possibility was an unwelcome part of second-hand dealing. However careful you tried to be, the history of an item was not always apparent when somebody brought it through the door.
Given everything that had happened, I felt that the attention we were receiving had become personal.
Then came another prosecution.
This one concerned the lettering above the shop.
As I recall, the requirement was for our name to appear in letters at least three inches high. The police measured ours and found that they fell short.
After all the arguments about transactions, licences and legislation, we had arrived at the height of the sign.
On this occasion, I did not dispute that the lettering failed to meet the requirement. I corrected it.
But I resented being taken to court over something that could have been put right following a straightforward request.
I had also visited other second-hand dealers and looked at their signs. Several appeared not to meet the required size either, yet, as far as I knew, they hadn’t been charged.
I raised that in court.
It did not alter the fact that our lettering was too small. I received a modest fine and lost half a day dealing with the matter.
The legal argument over our business model had gone my way.
The argument over the sign had not.
Apparently, this time the decisive piece of equipment was a ruler.
Another Chapter Waiting
The business eventually closed for other reasons connected with our holding company, Society Finance.
That is a separate story, and a considerably more complicated one.
For this particular chapter, what stays with me is the sequence: an idea for doing business differently, a court case I defended myself, a change in the legislation, and a final disagreement measured in inches.
I had set out to improve the way we bought and sold goods.
I hadn’t expected to spend quite so much time reading Acts of Parliament.
Still, it was time well spent.
