Books written by Ray Sullivan

Saturday, 11 January 2014

The £250,000 Laptop

You may have read recently about the court battle going on in the UK, one that is about to be heard in the UK Supreme Court.  It involves a laptop computer bought for £1500 in 1998 that resulted in a disputed bad debt, tarnished credit ratings and escalating legal challenges.

The man at the centre of this bought the laptop from PC World in Aberdeen.  The model he bought was in a sealed box and apparently it was store policy to not allow boxes to be opened unless bought. He was concerned because he wanted a built in modem and it wasn't clear from the box whether the model contained one or not - for £1500 in 1998 I'd expect a personal carrier pigeon, but that's just me. The sales assistant said that if he found the model didn't have a modem fitted he could return it the next day and get his deposit back. The man, an off-shore worker, agreed, paid a £50 deposit, signed up for a £1450 loan with HFC, a subsidiary of HSBC, and left the store.

Of course there wasn't a modem fitted - what do you expect for only £1500, probably nearer £2000 in today's money? He went back, assistant wasn't there, and the store manager refused to honour the spoken agreement. The laptop owner left the laptop at the shop and stormed off to a two week spell on the rigs. On his return he found the laptop had been delivered back to his home address so he popped back to the Granite City for round two. After a discussion PCWorld gave him his £50 deposit back - they have since insisted this was an ex Gracia payment, that is there was no admission of liability on their behalf - and the man left without the laptop but satisfied. Nobody told the loan company, though.

Over time it became clear that HFC wanted the monthly repayments to be made, the man they were expecting to pay didn't do so because he had returned the laptop and presumably PC World had an unforeseen £1450 boost to their top line as they had the cash from HFC and the laptop to sell. Obviously, and correctly, HFC pursued the person who appeared to have borrowed from them. It has been alleged that they didn't show any interest in the specifics of the sale, including the return of the laptop, and eventually resorted to putting black marks on the man's credit references.

There's been a slew of court cases since then, with each case going to a higher court, and with the various judges oscillating between the lender and the apparent recipient of the loan in terms of who they think has been wronged. A couple of years ago one court ruled that the man, who claims the black marks prevented him getting a mortgage to buy a second home in Spain and other inconveniences, was wronged and awarded him damages. A higher court overruled this more recently. On the 28th of this month the UK Supreme Court will make the final decision.

If the court rules in favour of the man he stands to receive a considerable amount of compensation for his trouble. If the ruling goes the other way the man, despite having pro-bono work being carried out for him by top notch barristers and support from at least one charity no doubt using this as a consumer issue test case, will go bankrupt. In all, the laptop will have cost in the region of £250000. And it doesn't even run Windows 8.

Initially I was right behind this man and his case, but now I have mixed views. For one thing, it could be argued that if he had been allowed to get the mortgage on the Spanish property then he would have suffered significant losses subsequently. So if the black marks did that, then they probably saved him some money. However the defence team are suggesting that it was the man's overall approach to leveraging credit that spoiled his chances and affected his other credit woes. It appears that this man was one of those people who racked up huge debts to buy stuff they couldn't actually afford, using notional equity from a bursting house price bubble fuelled by the same bankers who loaned him £1450 against a £1500 laptop. One report suggests he had over £40000 of unsecured debt at one point. Of course we all make our own decisions on fiscal affairs but a quote from the man, that if the court case goes against him, then he will simply declare himself bankrupt sums up his attitude.

I would suggest that there are precious few victims in this story. PC World don't come out particularly well because their store policy at that time sucked (and I experienced it in action around that time when I wanted to check the specification of speakers I wanted to buy but wasn't allowed to open the box to read the spec sheet unless I bought them - I went elsewhere).  But they're not in the dock.

HFC and their parent company HSBC exhibited the greedy fiscal approach that has resulted in years of financial constraint (I refuse to use the word austerity - there are parts of this planet that experience way worse financial conditions decade in, decade out).  They were prepared to loan 97% of the value of a laptop that would lose 10% - 20% on the open market the minute it was unpacked in a heartbeat. But then the man who wanted to spend money he didn't have shared the same recklessness as the bank - the current financial mess has a certain Newtonian element of equal and opposite reactions about it. His attitude is that if he wins he gets a windfall for his trouble, if he loses then he cuts his losses and declares himself bankrupt, wiping a quarter of a million pounds of costs off.  Of course, those costs are real, it's money paid or owed to people or organisations.  It will be recouped in other ways, not from him but from us, those who actually try to live within our means and choose not to declare ourselves bankrupt when we overspend.

I don't know which way the Supreme Court will swing, because it's a thorny problem inspired by greed and foolishness by both the bank and the person buying the laptop. Me, I'd find them as guilty as each other and refuse to allow either a soft option like voluntary bankruptcy.

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