Development Options Ltd v General Business Services Ltd

Judge EDWARDS J (Ag.)
Judgment Date10 June 2011
Judgment citation (vLex)[2011] 6 JJC 1002
CourtSupreme Court (Jamaica)
Docket NumberCLAIM. NO. 2007/HCV 1803
Date10 June 2011


CLAIM. NO. 2007/HCV 1803


Mr. Hugh Wilson instructed by Wilson Franklyn Barnes for the Claimant.

Mr. Leon Green and Althea Anderson instructed by Green and Moodie for the


Contract-loan agreement-whether relationship one of debtor and creditor or principal and agent-deemed intention of the parties-lost documents-whether contract enforceable-doctrine of frustration-unconscionable contract.




This is a claim for outstanding balances of principal and interest due and owing on a loan contract. The claimant, Development Options Limited (DO Limited), is a limited liability company incorporated under the Companies Act of Jamaica. It operated and managed the Government of Jamaica's (GOJ) Microfinance Programme (Micro FIN). As such, it acted as wholesale agent for the GOJ for the purpose of lending funds to Micro Finance Organizations (MFOs). The GOJ provided the claimant with funds and permitted it to lend such funds to the MFOs. The MFO's would, in turn, on-lend the said funds to small business operators, herein-after referred to as sub-borrowers.


One aspect of the claimant's duty to the GOJ was to identify suitable personnel, agencies or companies to qualify as MFOs. The idea was to develope an island-wide network of organizations and individuals with the technical capability to grant micro-loans to small business operators.


The defendant, General Business Services (GBS), applied to participate in this programme. At that time it carried on the business of providing support to small and medium sized enterprises by assisting them with company formation, registration, business plans and general accounting and tax compliance services.


In furtherance of its mandate, the claimant approved and designated the defendant as an MFO. They subsequently entered into a formal written agreement, called the Participation Agreement (PA), where DO Limited agreed to lend and GBS agreed to borrow funds for the expressed purpose of on-lending to sub-borrowers.


The claimant now avers that between April 27, 2000 and January 3, 2002, pursuant to this agreement, it lent the defendant a total sum of $19,614,769.00. The PA was executed and monies were forwarded to the defendant and on-lent to sub-borrowers. The defendant on-lent the funds to the sub-borrowers at an interest rate higher than that at which it acquired the funds.


The defendant begun repayments to the claimant; a total of $11,706,425.79 inclusive of interest was said to have been repaid. Subsequently, the repayments stopped. The present claim is for an outstanding balance of $9,977,786. 86, with interest thereon at 11% per annum. There is also a claim for a balance of $32,645.76 on a loan sum of $69,769.00 with interest at 23% per annum.


The defendant is denying liability on the basis that:

  • a. It was not a borrower from the claimant but was merely its agent for on-lending to the sub-borrowers.

  • b. The debt due is owed by the sub-borrowers and not GBS.

  • c. The claimant varied the terms of the contract by removing debt collections from its control.

  • d. Natural disasters affected the ability of sub-borrowers to repay and service the loans.

  • e. The interest rate of 11% was onerous and affected its ability to repay the loans.


The defendant also claimed by way of counter claim an account of:


  • i. Amounts approved and disbursed to small business operators.

  • ii. Interest which has accrued on such amounts.

  • iii. Principal amounts paid by small business operators.

  • iv. Interest paid.

  • v. Whether under the agreement the defendant is entitled to receive any payment from the claimant and if so how much.


The following issues fall to be determined;

  • 1. Whether the agreement between the claimant DO Limited and the defendant GBS was a Loan Contract or an Agency Contract.

  • 2. If it was a Loan Contract was the contract subsequently frustrated? If not;

  • 3. Is there any other relief available to the defendant?


There was an issue raised by the defendant for the first time at the trial. It did not form part of the pleadings. This was by way of a submission complaining that the bringing of this claim was an abuse of process, as there was a previous claim filed by the claimant, regarding the same substantive issues, which had not yet been prosecuted.


The defendant's attorney, Mr. Green, submitted that the present claim was an abuse of process as the first claim was the same as the second. Citing Allen v Alfred McAlPhine and Sons Ltd. (1968) 2 QB 229 and Paul Collins v Air Jamaica Ltd. Suit No. CL1995/C203, he argued that the identical claim subsisted and was still pending. However, the claimant's attorney, Mr. Wilson, indicated that there was indeed a previous action filed prior to the new Civil Procedure Rules in 2002; but the claimant having failed to apply for a Case Management Conference under the new rules, the claim was automatically struck out. In support of his argument he cited Norman McNaughty et al v Clifton Wright SCCA No. 20/2005 delivered May 25, 2005. That case looked at the meaning and application of Rule 73.3 (7). Based on that, he said, there was no abuse of process in re-filing the claim within the relevant limitation period.


Ms. Joan Jonas, the sole witness for the claimant, gave evidence that the first claim had been abandoned; the submission is that it was automatically struck out under the CPR 2002. In either event nothing would prevent the claimant from filing a new claim within the relevant limitation period. There was no abuse of process and I will say nothing further on this aspect of the submissions.


The resolution of the substantive issues in this case must be found in the true construction of the agreement signed by the parties in this claim. Both sides agreed to certain correspondence between them as well as a loan report, all of which were admitted into evidence. Also admitted into evidence were the PA, the application by GBS to be an MFO and what is said to be an on-lend agreement.



The contractual terms and conditions governing the agreement between the claimant and the defendant are to be found in the PA. It also refers to a Promissory Note and a Letter of Commitment as forming an integral part of the agreement. Only the PA was presented to the court. The other two documents, according to the claimant, could not be located. The defendant denied knowledge of their existence.


The claim is that this was a loan contract. The defendant countered that it was a contract of agency at most and in the event that it was, indeed, a loan contract, it had been frustrated. It is trite that calling an agreement a loan contract does not necessarily make it so, if the intrinsic terms and conditions under which it was granted showed it to be some other type of contract. Therefore, the terms of the agreement between the parties which governed their activities, are relevant to defining its status. So before embarking on the construction of the agreement, it might be convenient to set out, what I consider to be, the relevant provisions.

Terms of the Agreement


The agreement was made on March 27, 2000 between GBS Limited and DO Limited. In the preamble to the said agreement GBS is referred to as the ‘Borrower’. Paragraph 1 of the recital is very instructive. It provides;


The ‘BORROWER’ is desirous of applying to DO Limited for funds to on-lend to micro entrepreneurs (hereinafter called SUB-BORROWERS) under a micro-enterprise revolving credit programme known as Micro FIN. The purpose of Micro Fin is to provide micro entrepreneurs with increased access to credit.


In paragraph 2, DO Limited agreed to provide such funds to the borrower for the above stated purpose, under the terms and conditions appearing in the agreement. The agreement purports to have been made pursuant to or in contemplation of other agreements. The two which are relevant to these proceedings are a Letter of Commitment and a Promissory Note to be executed by the borrower.


It may be useful to set out the main terms contained in the body of the agreement. These were as follows:


  • 1. Upon application by the Borrower, DO Limited will review and without any obligation on its part so to do approve financing to the Borrower for on-lending to a SUB-BORROWER to such extent and on such terms and conditions as DO Limited may from time to time stipulate (hereinafter referred to as the ‘On-Lending Agreement’).

  • 2. Funds approved by DO Limited shall be disbursed to and repaid in accordance with the terms and conditions stipulated in this Participation Agreement and the Letter of Commitment as accepted by the Borrower. The terms of the Letter of Commitment shall constitute an integral part of the Agreement.

  • 3. Funds disbursed shall bear interest at the rate prevailing at the date of approval (hereinafter called ‘the effective Rate’) unless otherwise varied by DO Limited.

  • 4. DO Limited reserves the right to vary the rate of interest payable from time to time by notice in writing.


Clause 5 of the Agreement carried certain covenants. I will only set out those that I consider to be relevant to these proceedings.

  • 5. The Borrower HEREBY COVENANTS with DO Limited:

    • (i) That under the laws of Jamaica with powers to execute and deliver this Participation Agreement, the Letter of Commitment and Promissory Note to which it expressed to be a party and to exercise its rights and perform obligations hereunder and all corporate or other action required, if applicable to authorize the execution of this Participation Agreement by it and the performance by it of its obligations...

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