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LESOTHO
IN THE COURT OF APPEAL OF LESOTHO
HELD AT MASERU C OF A (CIV) NO. 01/2025
In the matter between:
TŠEPONG (PTY) LTD APPELLANT
And
NETCARE HOSPITALS (PTY) LTD 1ST RESPONDENT
NETCARE HOSPITALS LESOTHO (PTY)LTD 2ND RESPONDENT
BOTLE FACILITIES MANAGEMENT (PTY) LTD 3RD RESPONDENT
CORAM: MOSITO P
VAN DER WESTHUIZEN AJA,
MATHABA AJA
HEARD: 17 APRIL 2025
DELIVERED: 02 MAY 2025
FLYNOTE
Company Law – De Facto Directorship – Validity of Round Robin Resolution – Procedural Standing – Security for Costs – Appeal Procedure – Judicial Discipline – Companies Act 2011 (Lesotho), ss 56, 58 – Court of Appeal Rules 2006, Rule
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8(1) and Rule 15 – Effect of Non-notification of Directors – Majority and Dissenting Opinions.
A company resolution authorising litigation was challenged on the basis that not all directors had been notified. The High Court dismissed an application to rescind default judgment on the ground that the resolution authorising it was invalid for failure to notify a de facto director and two de jure directors. On appeal, the majority of the Court of Appeal held that the High Court erred in finding Dr Chris Smith to be a de facto director without sufficient evidentiary basis, and in treating that status as established by a prior judgment without res judicata or issue estoppel being properly pleaded or applied. The Court further held that, in the absence of any challenge by the omitted de jure directors themselves, the failure to notify them could not be relied on by others to invalidate the resolution. The appeal was thus upheld and the matter remitted for adjudication on the merits before a different judge.
The majority also dismissed a procedural objection that the appeal should be struck off for non-compliance with Rule 8(1), on the ground that it had not been properly brought by notice of motion and affidavit, reaffirming the need for procedural rigour and evidentiary discipline in appellate litigation.
In a dissenting opinion, Van der Westhuizen AJA agreed with the majority on the de facto directorship and procedural matters but disagreed on the treatment of the de jure directors. He held that the failure to notify them rendered the resolution objectively invalid, regardless of their absence from the proceedings, and would have dismissed the appeal on that basis.
Held, per MOSITO P (MATHABA AJA concurring), appeal upheld; High Court’s judgment set aside; matter remitted for determination on the merits; costs awarded to appellant.
Per VAN DER WESTHUIZEN AJA (dissenting): Appeal should have been dismissed with costs due to the invalidity of the resolution arising from non-notification of de jure directors.
JUDGMENT
MOSITO P
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Background
[1] This appeal arises from a judgment of the Commercial Division of the High Court delivered on 5 December 2024 by Mokhesi J, dismissing an application by the present appellant, Tšepong (Pty) Ltd, to rescind a default judgment. The judgment was entered against the appellant at the instance of the respondents, Netcare Hospitals (Pty) Ltd and its affiliates, for services rendered under a suite of interrelated commercial agreements connected to the operation of Queen Mamohato Memorial Hospital.
[2] The dispute is in a complex and longstanding public-private partnership (PPP) arrangement between Tšepong and the Government of Lesotho. Under the PPP Agreement, Tšepong was to provide a range of clinical, operational, and facilities management services to the State. Tšepong entered into management and service agreements with the respondents to fulfil its obligations under the PPP arrangement.
[3] Following the collapse of the PPP framework and the cessation of Tšepong’s operations, the respondents instituted proceedings in the Commercial Court on 5 February 2024, claiming contractual compensation for services previously rendered. When Tšepong failed to respond to the summons, a default judgment was granted on 23 April 2024. Tšepong thereafter applied for rescission of that judgment, contending, among other things, that it had not been properly served with summons, that it was not in wilful default, and that it had a bona fide defence, including substantial counterclaims exceeding M200 million
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allegedly arising from mismanagement and misappropriation of funds by the respondents.
[4] The core procedural controversy in the court below centred on the authority of one Professor Mosotho, a director of Tšepong, to have initiated the rescission proceedings on behalf of the company. The respondents challenged that authority, arguing that the round robin resolution purportedly authorising the institution of the application was invalid, as not all directors had been given notice thereof. Specifically, they contended that Dr Richard Friedland and Mrs May Moteane—both de jure directors—had not been served with the resolution. Furthermore, the respondents argued that Dr Chris Smith, whose status as a director had been confirmed by the court below as a matter of precedent, had also not received notice of the resolution, thereby vitiating its legal effect.
[5] The High Court, relying inter alia on its earlier decision in Richard Friedland and Others v Lehlohonolo Mosotho and Others CCA/0063/2020, held that Dr Smith was a de facto director of Tšepong and was entitled, as a matter of law and good corporate governance, to be informed of any decision of the board, including a resolution authorising litigation. It concluded that the failure to notify Dr Smith made the round robin resolution fatally defective. Consequently, the court held that Professor Mosotho lacked authority to launch the rescission application, and that the application accordingly stood to be dismissed. The court further held that the confirmatory affidavits belatedly filed in support of the respondents’ answering papers—meant to cure evidentiary
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deficiencies concerning the authority of directors—were irregularly filed and could not be admitted.
[6] At the commencement of proceedings before this Court, Mr Fiee, appearing with Advocate Lerotholi for the appellant, identified the dispositive issue as whether the court a quo had correctly determined that Dr Smith was a de facto director and, if so, whether he was legally entitled to be given notice of the round robin resolution. Advocate Stais SC (with Adv Motseki) raised two further preliminary objections for the respondents. First, the appeal should be struck off for want of security for costs, in contravention of the Court of Appeal Rules. Second, the round robin resolution was invalid because it had also not been served upon Dr Friedland and Ms Moteane, who are admittedly de jure directors of the appellant company.
[7] This appeal thus invites the Court to consider the legal effect of non-notification of board resolutions in the context of internal corporate governance, the status and rights of de facto directors in companies' decision-making processes, and whether failure to observe such procedural requisites renders a board resolution—and, by extension, legal proceedings instituted pursuant thereto—void and unauthorised. The appeal further raises the procedural issue of whether an appellant’s failure to furnish security for costs is fatal to the continuation of the appeal.
[8] The Court is now called upon to determine whether the learned judge in the court a quo erred in concluding that the rescission application was invalidly launched and, if not, whether
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the consequence of that finding should have been the outright dismissal of the application.
Procedural Commentary and Guidance
[9] Before turning to consider the substantive issues raised in this appeal, I must pause to address, with some emphasis, a matter of serious procedural concern. The scale and form of the record placed before this Court in the present appeal are wholly disproportionate to the questions at issue. The record spans no fewer than thirteen volumes, running to 1,235 pages, supplemented by heads of argument and bundles of authorities which together amount to an additional 848 pages. The appellant’s heads of argument cover 29 pages, supported by a bundle of authorities totalling 512 pages; the respondents’ heads extend to 17 pages, accompanied by authorities occupying 290 pages.
[10] These materials have been submitted in relation to what, upon analysis, are three narrow issues, all of which are capable of being addressed within the confines of a modestly proportioned and properly curated record. This Court has, out of its institutional duty, undertaken the laborious task of reading all 1,810 pages placed before it. However, we do not consider this a responsible or efficient approach to appellate litigation.
[11] The practice of overburdening the Court with excessive and often irrelevant documentation must be deprecated in the strongest terms. It imposes a needless strain on the Court’s resources, frustrates its obligation to deliver timely justice, and obscures the real issues requiring adjudication. Appellate
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advocacy demands discernment, precision, and respect for the judicial process.
[12] The relevant Rules of this Court are explicit. Rule 5(16) of the Court of Appeal Rules prohibits the inclusion in the record of, inter alia, formal documents, discovery affidavits, duplicates, and documents not proved or admitted—unless they are essential to the determination of the appeal and the parties have agreed to their inclusion. These safeguards are not ornamental. They are designed to ensure that appeals are conducted efficiently and with the necessary focus. They are also intended to protect the integrity of the appeal process from precisely the type of prolixity and excess that has occurred in this matter.
[13] Moreover, Rule 15 clearly outlines the consequences of breaching the Rules. It provides that an appeal may be struck off the roll where an appellant fails to comply with the Rules. While the Court retains a discretion to condone such breach upon proper application, the invocation of that discretion cannot be assumed, nor should parties act as though its indulgence is inevitable.
[14] We are compelled to observe that, in this case, no application for condonation was brought to include the voluminous materials that are not plainly essential to the appeal. Nor is there any indication that the parties agreed in writing, as the Rule requires, to include documents that would otherwise be excluded. This appeal has thus proceeded in breach of Rule 5(16), and the conduct of both sides has fallen below the standard expected of litigants in this Court.
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[15] We take this opportunity to caution legal practitioners and litigants alike formally. The Rules of this Court are not to be approached as matters of convenience or optional protocol. They are binding prescriptions, and compliance is not a courtesy but a duty. Parties are reminded that it is their responsibility to ensure that records are properly and tightly compiled, that only essential documentation is included, and that all procedural requirements are scrupulously observed.
[16] In the future, this Court will not hesitate to exercise its powers under Rule 15 to strike appeals from the roll or to impose appropriate costs orders where breaches of the Rules result in the filing of bloated or unmanageable records. The Court may also refer such conduct to the relevant regulatory bodies for appropriate consideration.
[17] In this instance, we have reluctantly elected to entertain the appeal despite the procedural improprieties, in the public interest, and to resolve the questions at hand. But we underscore, with clarity and finality, that this is not an indulgence to be repeated. The administration of justice must be orderly, disciplined, and efficient. The parties to this litigation—and all who appear before this Court—are enjoined to act accordingly.
The facts
[18] Following the termination of a Public-Private Partnership (PPP) Agreement between the appellant, Tšepong (Pty) Ltd, and the Government of Lesotho, the respondents, being entities affiliated with Netcare, instituted proceedings against the appellant for payment of services rendered under several commercial
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agreements concluded during the life of the PPP arrangement. The appellant did not file any response to the summons, and a default judgment was granted in April 2024. Subsequently, the appellant applied for rescission of that judgment, asserting, among other things, that it had not been properly served, was not in wilful default, and had meritorious defences and counterclaims. The application was brought under the authority of a round robin resolution allegedly passed by the board of directors. The respondents opposed the application, arguing that the resolution was invalid as not all directors, including both de jure and de facto directors, had been notified of it. The High Court upheld that objection and dismissed the application because the proceedings had been instituted without proper authority. The correctness of that decision is the subject of the present appeal.
Issues for Determination
[19] The issues that arise for determination in this appeal are as follows:
(a)
Whether Dr Chris Smith is, for purposes of corporate governance, a de facto director of the appellant company, and, if so, whether he was entitled to be notified of the round robin resolution authorising the institution of the rescission application.
(b)
Whether the failure to notify all directors—both de jure and de facto—of the proposed round robin resolution rendered that resolution invalid in law, thereby depriving the appellant of the authority to institute the proceedings in the court a quo.
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(c)
Whether the respondents’ preliminary objection concerning the appellant’s failure to furnish security for costs in accordance with the Rules of this Court ought to result in the striking off of the appeal.
Having identified the issues requiring determination, it is appropriate to set out the applicable legal framework governing the matters raised in this appeal.
Legal framework
[20] The Companies Act 2011 of Lesotho sets out a comprehensive framework governing companies' formation, management, and governance. Central to that framework is the regulation of company directors—those individuals who are legally responsible for overseeing corporate affairs. In the present context, it becomes necessary to examine the Act both in respect of the formal appointment of directors and the extent to which it recognises or accommodates the role and legal consequences of de facto directorship.
[21] Under section 58(1) of the Companies Act 2011, the appointment of directors must be effected in accordance with the company’s constitution or the provisions of the Act. Where the constitution is silent, the default rule is that directors are appointed by ordinary resolution of the shareholders. Section 58(2) provides that a director must consent in writing to act as such and that such consent must be lodged with the Registrar. These formalities are essential, as they establish legal status and activate the commencement of statutory duties and liabilities.
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[22] However, the Act goes further. It does not treat formality alone as determinative of status. Section 56 of the Companies Act introduces a broader and more purposive dimension through which the identity and responsibilities of directors may be viewed. It defines a "director" as including not only those validly appointed to the board (de jure directors), but also those who, though not formally appointed, occupy the position of director or perform the functions of a director in practice. This formulation aligns with modern company law’s concern for substance over form, and seeks to hold accountable those who act in the governance of companies regardless of procedural irregularities in their appointment.
This gives rise to the category of de facto directors—individuals who, though not formally appointed in terms of section 58, have assumed and discharged directorial functions. The inclusion of such persons within the statutory definition of "director" ensures that they are subject to the same fiduciary and statutory duties, as well as potential liabilities, as their formally appointed counterparts. It also entitles them to participate in the board's affairs as directors in substance, particularly where their role has been recognised, tolerated, or relied upon by the company over time.
[23] The jurisprudence of the High Court of Lesotho, as well as persuasive authorities from comparable Commonwealth jurisdictions, has accepted that a de facto director is a director for all intents and purposes, save only that the foundation of their authority is rooted in conduct and acquiescence rather than formal resolution. This recognition is not without limit. A de facto director
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must be shown to have actively participated in the company's governance, been held out or accepted in that capacity by the company, and exercised decision-making powers akin to those of a de jure director. The test is functional and factual.
[24] Significantly, section 58(5) of the Act provides that directors' decisions are valid notwithstanding any defect in their appointment, unless otherwise ordered by a court. This statutory recognition further affirms that the legitimacy of board actions may survive technical flaws in the appointment process, provided that the director concerned acted bona fide and the company held him or her out as part of the governing structure. This provision implicitly supports the legal existence of de facto directors, at least insofar as it guards against the invalidation of board decisions by virtue of appointment defects.
[25] Thus, the Companies Act 2011 reflects a balanced approach. It affirms the importance of proper appointment procedures while simultaneously recognising and regulating the practical reality of de facto directorships. Individuals who assume and exercise the powers and functions of directors, with the knowledge and acquiescence of the company, are bound by the obligations imposed on directors and must be accorded the corresponding rights. Accordingly, in matters such as board resolutions—whether passed in formal meetings or by round robin—all directors, including de facto directors, must be notified and allowed to participate, lest the resolution be rendered legally infirm for want of collective deliberation.
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[26] This statutory scheme underpins the principle that corporate governance must be inclusive, participatory, and procedurally sound. It reinforces the expectation that companies must act consistently with the letter and the spirit of their governance obligations.
[27] Notifying all directors of an upcoming board meeting or round robin resolution is not a mere matter of administrative formality; it lies at the heart of corporate decision-making's legal and constitutional integrity. A board of directors functions not as a collection of individual actors, but as a collegial body, entrusted collectively with the governance of the company. The law, therefore, recognises that the validity of board decisions depends not only on the presence of a quorum or the support of a majority, but also on the procedural regularity and fairness of the process by which such decisions are reached.
[28] When a company fails to notify one or more of its directors—de jure or de facto—of a board meeting or a proposed resolution to be passed by written consent (a so-called round robin resolution), the consequences may be grave. It is a well-established principle of company law that each director is entitled to receive reasonable notice of all meetings of the board or circulations of board resolutions. This is not merely a personal entitlement; it reflects the broader legal expectation that decisions of the board will be taken after proper deliberation and in the exercise of collective wisdom.
[29] The courts have repeatedly affirmed that the non-notification of even a single director, particularly where that director has a
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right and duty to participate, renders any decision taken at such a meeting, or by way of that resolution, liable to be declared invalid. In Novick and Another v Comair Holdings Ltd and Others 1979 (2) SA 116 (W), the court emphasised that a company is entitled to the benefit of the collective judgment of its entire board. The absence of notice denies the director not merely the opportunity to vote, but more fundamentally, the opportunity to contribute to the decision-making process—to question, to propose alternatives, and to influence the deliberation of others. That is the very essence of collective governance.
[30] In Lesotho, the position is reinforced by the Companies Act 2011, which, as discussed, recognises both formally appointed (de jure) and functionally acting (de facto) directors. Both are entitled to be treated as directors for governance purposes, and the failure to notify a de facto director is no less serious than the failure to notify one formally appointed. Indeed, section 58(5) of the Act clarifies that decisions taken by a board are valid despite defects in appointment—yet it says nothing to immunise decisions taken in breach of the duty to notify. In other words, where no procedural irregularity affects a director's status but rather the deliberation process, the board decision is susceptible to being set aside for want of due process.
[31] The failure to notify a director becomes particularly serious where the resolution in question is of a substantive or strategic character, such as the decision to institute litigation on behalf of the company. Such a resolution carries legal and financial implications for the company and engages the board's collective
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fiduciary judgment. Excluding a director from that process—whether by omission or design—undermines the legitimacy of the resolution and invites judicial scrutiny.
[32] In sum, the legal effect of failing to notify directors of a board meeting or a round-robin resolution is that the resultant decision may be rendered invalid or voidable, depending on the nature of the omission and its consequences. The courts will not readily uphold a board resolution that is the product of a procedurally defective process, particularly where there is no evidence of waiver, acquiescence, or ratification by the excluded director.
[33] This principle powerfully reminds us that the procedural integrity of board processes is not ancillary to corporate governance but central to it. Decisions affecting the company must be reached through inclusive, lawful, and transparent procedures. Where that standard is not met, the law will not lend its authority to shield the outcome.
[34] It is appropriate, in light of the respondents’ preliminary objection, to consider the scope and application of Rule 8(1) of the Court of Appeal Rules, which provides:
“Where the judgment appealed from in a civil matter has not been carried into execution by the respondent, the appellant shall, before lodging with the Registrar copies of the record, enter into security to the satisfaction of the Registrar for the respondent’s costs of the appeal.”
[35] This provision, while procedural in form, is substantive in effect. It reflects a long-standing and pragmatic principle of appellate practice—namely, that an appellant who seeks to bring a civil appeal must, where execution of the underlying judgment
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has not occurred, provide security for the respondent’s costs. The rationale is clear: the respondent, having secured a judgment in their favour which remains unexecuted, should not be exposed to the expense and inconvenience of appellate proceedings without a basic assurance that, in the event of success, their costs will be met.
[36] The rule is mandatory, subject only to the satisfaction of an explicit jurisdictional precondition—namely, that “the judgment appealed from has not been carried into execution by the respondent.” In such cases, the appellant must enter into security to the satisfaction of the Registrar. The rule is imperative: “shall, before lodging… enter into security.” This makes compliance with the rule a precondition for regularisation of the appeal record, and by necessary implication, for the hearing of the appeal itself.
[37] The provision also vests discretion in the Registrar as to whether the form and amount of the security provided are satisfactory. The Registrar acts not as a judicial officer but in an administrative and supervisory capacity, ensuring that the procedural rights of the respondent are safeguarded without unduly burdening access to appellate remedies.
[38] The practical operation of Rule 8 may be clarified by dividing it into two sequential components:
(a)
The triggering condition: Whether or not the judgment appealed from has been carried into execution by the respondent.
(b)
The procedural obligation: Whether the appellant, once that condition is met, has entered into adequate security for the respondent’s costs.
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[39] The first of these—whether the judgment has been executed—raises a factual jurisdictional question, and it is incumbent upon the party asserting the application of the rule to establish that fact. Thus, where a respondent seeks to rely upon Rule 8 to argue that the appeal is irregular or liable to be struck off, it is for the respondent to show, on a balance of probabilities, that the judgment in question remains unexecuted.
[40] This aligns with general principles of civil procedure, whereby the party raising a procedural objection bears the evidential burden of establishing the facts necessary to sustain it. The appellant is then required to show either that the judgment has been executed, or, if not, that security for costs has in fact been provided to the Registrar’s satisfaction, or that sufficient reasons exist for the delay or omission—typically through an application for condonation under Rule 15.
[41] Once the jurisdictional threshold is crossed—namely, once it is shown that the judgment has not been executed—the duty shifts to the appellant to demonstrate compliance. If the appellant fails to do so, or has failed to obtain condonation, the appeal may be liable to be struck off the roll.
[42] It bears emphasis that Rule 8 is not a mere technicality. It reflects a deliberate policy balance between the appellant’s right to pursue an appeal and the respondent’s right to avoid unwarranted exposure to legal costs. The failure to provide security when required is a procedural default of substance, which may disentitle the appellant to be heard.
[43] In summary:
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(a)
Rule 8(1) imposes a mandatory obligation on an appellant to furnish security for the respondent’s costs where the judgment has not been executed.
(b)
The burden lies initially on the respondent to demonstrate that the judgment remains unexecuted and that the rule is engaged.
(c)
Once that is shown, the appellant must establish that proper security has been furnished, or else seek condonation for non-compliance.
(d)
Failure to comply with the rule, without condonation, exposes the appeal to dismissal or striking off, subject to the Court’s discretion under Rule 15.
[44] This interpretation safeguards procedural fairness while maintaining discipline in appellate proceedings.
[45] Where Rule 8 of the Court of Appeal Rules is invoked—either by a respondent objecting to the regularity of an appeal on the ground of non-compliance, or by an appellant seeking to justify compliance or secure condonation—the obligations imposed upon each party must, in principle and in practice, be discharged through formal applications supported by affidavit evidence, rather than by bare oral assertions from the bar.
[46] This conclusion flows from the nature of the issues at stake. The question of whether a judgment has been executed is a question of fact, as is the question of whether security for costs has been provided, or whether a party has just cause for failing to comply. The resolution of such questions cannot rest on mere argument or unverified representations. They require proof. And the proper vehicle for placing proof before the Court in civil appellate proceedings is by affidavit.
[47] For the respondent, who raises the point in limine that security has not been provided in terms of Rule 8(1), the duty is to
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place before the Court sufficient factual material—by way of affidavit—to demonstrate that the judgment appealed from has not been carried into execution. That affidavit need not be elaborate, but it must clearly and unambiguously establish the factual basis for invoking Rule 8. Where appropriate, it should also be accompanied by a notice of motion seeking the striking off of the appeal or such other relief as may be just.
[48] Likewise, for the appellant, once the factual foundation for the operation of Rule 8 is established, it becomes incumbent upon them to respond through affidavit evidence, showing either:
(a)
that security has in fact been furnished to the satisfaction of the Registrar (with supporting documentation); or
(b)
that an application for condonation has been filed and is pending under Rule 15, duly supported by an affidavit explaining the delay, its cause, and demonstrating good faith and prospects of success on appeal.
[49] This evidentiary requirement is not merely a matter of technical preference. It ensures that the Court exercises its judicial discretion on a properly constituted record, grounded in facts subject to the procedural safeguards of motion proceedings—including notice to the other side and the opportunity to reply. In the absence of such affidavits, the Court is left in the unenviable position of adjudicating a jurisdictional challenge on the basis of speculation or inference.
[50] Moreover, it is worth noting that Rule 15(3) of the Court of Appeal Rules provides that an application for condonation must be brought “by notice of motion delivered to the respondent and to the Registrar not less than seven days before the date of hearing.” This underscores the formal character of such applications and
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confirms that affidavit evidence is required as a matter of procedural law.
[51] In conclusion, both parties must discharge their respective burdens under Rule 8 and Rule 15 not through oral argument alone, but by formal application supported by affidavit evidence. This approach preserves procedural fairness, enables proper adjudication, and prevents the hearing of appeals from becoming procedurally amorphous or factually uncertain. Where affidavits are not filed, or are filed out of time without leave, the Court may decline to entertain the objection or defence, and may make any order it deems just, including orders as to costs or striking off.
Consideration of the appeal
[52] It is now opportune to consider the first issue before this Court: namely, whether the respondents’ preliminary objection, grounded in the appellant’s alleged failure to furnish security for costs in terms of Rule 8(1) of the Rules of this Court, ought to result in the appeal being struck off the roll.
[53] Though procedurally significant, the objection was raised from the bar during oral argument and was not accompanied by a formal application or supporting affidavit as the Rules and established practice would ordinarily require. The respondents did not file a notice of motion, nor did they place before this Court any affidavit evidence attesting to the relevant jurisdictional fact—that the judgment appealed from has not been carried into execution—nor to confirm whether or not security was furnished, or to contest any representations on the point. In effect, the objection was advanced in a procedural vacuum.
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[54] It is trite that whether Rule 8(1) applies in a given case turns on a factual predicate: namely, that the judgment appealed from remains unexecuted. That is not a matter that may be presumed or assumed. It must be established by evidence. The burden of establishing that jurisdictional fact rests on the party invoking the rule—in this case, the respondents. As this Court has repeatedly affirmed, procedural objections of this nature must be brought formally, by way of notice of motion and supported by affidavit. This ensures fairness to the appellant, allows for reply and rebuttal, and enables the Court to exercise its discretion under Rule 15, where necessary, on a properly constituted record.
[55] Permitting objections of this kind to be raised without formality, notice, and evidentiary foundation would undermine the procedural safeguards that govern appellate litigation. It would also risk procedural ambush and confer upon litigants the benefit of judicial discretion without the discipline of proper proof.
[56] In the present case, no such application was brought. No explanation was offered for the failure to comply with the rules governing the raising of preliminary points. In such circumstances, the objection falls to be dismissed on procedural grounds alone, without the need for this Court to engage with the merits of the alleged non-compliance.
[57] On numerous occasions, this Court has warned of the importance of procedural discipline and the need for parties to present objections per the Rules. It is not the function of the Court to conduct litigation on behalf of the parties, nor to speculate as to facts that are not placed before it on oath.
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[58] As a result, we find that the respondents’ preliminary objection, having been raised informally from the bar and unsupported by affidavit, cannot be sustained. The objection is accordingly dismissed, and the appeal is properly before this Court.
[59] The next issue requiring our attention is whether Dr Chris Smith may properly be regarded as a de facto director of the appellant company, Tšepong (Pty) Ltd, and if so, whether he was accordingly entitled to be notified of the round-robin resolution authorising the institution of the rescission application. In approaching this question, it is necessary first to consider whether there were facts pleaded and established in the judgment of the court a quo that would support the conclusion that Dr Smith was, in substance and in practice, discharging the functions of a director, and whether the jurisdictional requirements of section 58 of the Companies Act 2011 of Lesotho were satisfied.
[60] Upon a careful review of the record, it emerges that Dr Chris Smith was not discharging directorial functions but merely attending board meetings by invitation. If so, that would materially undermine the conclusion reached by the court a quo. The jurisprudence surrounding de facto directorship is clear and well-settled. It requires more than regular attendance or involvement at board meetings. It necessitates active assumption of the role—in substance rather than in form. A de facto director has stepped into the shoes of a director, habitually exercises powers of governance, and conducts, in effect, mirrors that of a formally appointed board member.
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[61] Upon a careful review of the record and the judgment of the court a quo, it is clear that Mokhesi J did indeed find Dr Chris Smith to be a de facto director of the appellant, Tšepong (Pty) Ltd. This conclusion is implicit and expressly stated and reasoned by the learned judge. The court traced its reasoning to the earlier case of Richard Friedland and Others v Lehlohonolo Mosotho and Others CCA/0063/2020, in which the same issue was raised—namely, whether Dr Smith was properly to be regarded as a director of the appellant company. In that judgment, the court held that, although Dr Smith may not have been formally appointed as a director in the conventional sense (that is, by a shareholders’ resolution lodged with the Registrar), his role, functions, and participation in the affairs of the company clearly indicated that he acted in the capacity of a director.
[62] The court a quo reaffirmed that position. The learned Judge held that the governance structure of the appellant had not changed since the Friedland case, and that Dr Smith continued to be involved in the company’s affairs in the same capacity. The judge rejected the attempt by Professor Mosotho, in his affidavit, to distinguish the earlier finding, stating that it was futile to deny the directorship of Dr Smith when the court had already made a factual finding on that issue in Friedland, based on his conduct and responsibilities within the company. In doing so, he erred. I believe there was no proof that Dr Smith continued to be involved in the company’s affairs in the same capacity. Therefore, I cannot find that he is a de facto director of the appellant.
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[63] The court was required to determine afresh whether, on the evidence properly before it, Dr. Smith continued to function as the appellant's de facto director. Upon close examination, the record in this matter does not contain evidence sufficient to support such a conclusion. There is no affidavit from Dr Smith himself, no minutes of meetings evidencing his participation in governance decisions, and no demonstration that he was acting with the authority or in the capacity of a director at the time of the round robin resolution. The suggestion that he may have attended meetings by invitation or in an advisory role does not suffice. A de facto director assumes the director's office and performs its functions with the knowledge and acquiescence of the company. Mere attendance at meetings or involvement in discussions, without actual decision-making authority or control, falls short of that threshold.
[64] It follows, therefore, that there was no factual or legal basis, properly established on the record of these proceedings, to support the conclusion that Dr Smith was a director—de jure or de facto—entitled to be given notice of the round robin resolution. Without such a finding, the failure to notify him cannot be regarded as a procedural irregularity capable of invalidating the resolution. The court a quo erred in law in treating the issue as settled by a prior judgment which had not been properly invoked, and in failing to determine the matter independently upon the evidence before it. Accordingly, it must be concluded that Dr Smith was not entitled to notice of the round robin resolution in law, and his exclusion from the process did not, in the circumstances, vitiate the resolution or deprive it of its legal effect.
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[65] The document styled “Notice: Tšepong (Pty) Ltd Board of Directors – Special Meeting,” issued on 21 April 2023 to convene a meeting on 10 May 2023, affords, in my view, cogent confirmation of the appellant’s case. It draws a deliberate and explicit distinction between those persons identified as "Directors" and those described merely as "Invitees." Under the former heading are listed the names of Dr R.H. Friedland, Dr Moji, Professor L. Mosotho, Mr T. Green, and Mrs Moteane; under the latter, Mr C. Smith is recorded in his capacity as “General Financial Manager – Netcare Ltd.” The provenance of the document within the company’s own internal governance machinery, and its content, which differentiates with unmistakable clarity between board members and external attendees, provide compelling contemporaneous evidence that Dr Smith was not, at the material time, a director of the appellant, whether de jure or de facto. It tends irresistibly to the conclusion that his presence at meetings was as a professional invitee, and not as one clothed with the rights or burdens of a director. It follows that he was under no entitlement to receive notice of board resolutions as of right, nor could he claim a participatory role in the formal governance of the company.
[66] Upon a close and measured reading of the judgment delivered by Mokhesi J, it is apparent beyond peradventure that the learned judge found that the round robin resolution purporting to authorise the institution of proceedings on behalf of the defendant was fatally defective not only by reason of the failure to notify Dr Smith, but also because all the directors of the defendant were not notified thereof. This emerges unequivocally from paragraph [30] of the judgment, wherein the learned judge, having traversed the
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position of Dr Smith, states in terms that “all the directors of the defendant were not notified of the proposed resolution.”
[67] Such a finding is material. It indicates that the procedural irregularity afflicting the resolution was not confined to the omission of Dr Smith alone, but extended to a broader failure to give notice to the body of directors as a whole, or at the very least to others whose participation the law would have required. The passage is clear in its terms and admits no ambiguity: the resolution was defective because the board's collective wisdom was not properly engaged, in that not all directors were allowed to participate.
[68] This conclusion is fortified by earlier parts of the judgment, particularly paragraph [16], where it is recorded that Dr Smith, in his affidavit, raised the issue that Ms Moteane and Dr Friedland—both de jure directors—had not been notified of the round robin resolution. Although the plaintiffs belatedly sought to cure this evidential deficiency through the filing of confirmatory affidavits, the learned judge rejected their admission on procedural grounds (paragraph [26]), with the result that the underlying allegations of non-notification in respect of these directors stood effectively uncontested on the evidentiary record. Thus, as a matter of principle and as a matter of record, Mokhesi J’s judgment must be read as finding that other de jure directors, in addition to Dr Smith, were not notified of the round robin resolution, and that this cumulative failure rendered the resolution invalid for want of procedural regularity.
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[69] The final issue requiring determination is whether the failure to notify all directors, whether de jure or de facto, of the proposed round robin resolution rendered that resolution legally defective, thereby depriving the appellant of the authority to institute the rescission proceedings in the court below.
[70] They are not parties to these proceedings, and this Court has not been invited to adjudicate upon their rights or entitlements. The procedural defect alleged in respect of their non-notification has not appropriately been raised by those with legal standing to do so, nor has it been the subject of a competent application or objection from the affected directors. In the absence of a direct challenge by the individuals whose procedural rights are said to have been infringed, the matter remains speculative and collateral.
[71] It is a long-standing principle that a party may not ordinarily assert the rights of another capable of asserting them for themselves, absent some exceptional legal basis or representative capacity. To invalidate a resolution on the basis of procedural omissions affecting directors who are not before the Court, and who have not complained, would risk undermining the principles of standing and due process.
[72] The question that thus arises is whether, in the absence of supporting affidavits from the de jure directors themselves, it was appropriate for the learned judge to find that the round robin resolution was invalidated by want of notice to them, particularly where they had not themselves sought to impugn it. In my judgment, the answer must firmly be negative.
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[73] The fundamental principle is that the right to notice of a board resolution, like the right to participate in the governance of the company, is a personal right vested in each director. It is for the director whose procedural rights are allegedly infringed upon to assert them. If he chooses to acquiesce in the decision, or elects not to challenge its validity, the court ought not, save in the most exceptional circumstances, to arrogate to itself the protection of his private interest. The law does not permit parties who have suffered no legal wrong themselves to assert the rights of others who have full capacity to vindicate those rights but have chosen not to do so.
[74] In the present case, it is common cause that Dr Friedland and Ms Moteane, both de jure directors, were not before the court as litigants. They filed no affidavits alleging that the omission had prejudiced them, nor did they seek to set aside the resolution in their own right. Their silence is telling. In such circumstances, for the court to invalidate the resolution at the instance of a third party was, with respect, to disregard well-established principles of standing and procedural propriety.
[75] In the absence of direct challenge by the affected directors, the alleged procedural irregularity was, at best, collateral and could not be relied upon by others as a ground for vitiating the resolution. It follows, therefore, that the finding of invalidity, based on non-notification of the de jure directors, was impermissible. It lacked evidential foundation, contravened established principles of legal standing, and constituted an unwarranted intrusion into matters which those directors, had they seen fit, were fully capable
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of placing before the court for adjudication. The appeal must therefore be determined upon that footing.
Reflections on the dissenting opinion
[76] Before turning to the formal disposition of the appeal, I wish to offer certain respectful observations on the dissenting judgment delivered by my Brother, Van der Westhuizen AJA. I have read his dissenting judgment with respect and attention. As always, his opinion is characterised by intellectual rigour, clarity of thought, and a commendable concern for the procedural integrity of corporate governance.
[77] That said, I am constrained to record my respectful disagreement with certain conclusions he draws regarding the legal consequences of the non-notification of two de jure directors, Dr Friedland and Mrs Moteane, of the round robin resolution in question. My Brother's central contention is that, irrespective of whether the affected directors themselves chose to litigate the matter, their exclusion compromises the objective validity of the resolution. In his view, such procedural irregularity invalidates the resolution as a matter of law.
[78] While I fully share his concern for the rule of law and the principles of collegial decision-making that undergird sound corporate governance, I am not persuaded that the position adopted in the dissent accords with established principles of procedural propriety and legal standing. In our adversarial system, the court does not act of its own motion to protect the personal rights of individuals who are fully capacitated to do so themselves. The law has long recognised that the right to receive notice of board
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deliberations is a personal right vested in each director, and not a generalised institutional prerogative which third parties may invoke at large.
[79] Indeed, as I endeavoured to set out in paragraphs [70] to [75] of the majority judgment, this case does not fall within those exceptional categories where a procedural irregularity, affecting the internal affairs of a corporate body, may be invoked by parties external to the right allegedly infringed. Dr Friedland and Mrs Moteane are not parties to these proceedings. They filed no affidavits alleging prejudice. They brought no application to set aside the resolution. Their absence from the record—both as litigants and as complainants—is not merely a procedural omission; it is a legal vacuum which this Court is not entitled to fill.
[80] My learned Brother suggests that the email attributed to Mrs Moteane provides probative evidence of non-notification. With respect, I find this proposition difficult to reconcile with the rules of evidence and appellate procedure. The email was introduced not as direct testimony, but through Dr Smith’s affidavit—who, it bears repeating, has no standing to assert the procedural rights of his fellow directors. Even were it admissible—which is at best doubtful—the email's contents are limited, ambiguous, and not the product of formal proof. It was only upon enquiry from the Bench, during oral argument, that counsel for the appellant acknowledged that “May” refers to Mrs Moteane. In a matter of this seriousness, concerning the validity of a corporate resolution authorising
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litigation, such equivocal material cannot be the basis for a finding that the resolution is void.
[81] I must also respectfully question the invocation, in the dissent, of what is described as the “objective invalidity” of the board resolution. While that concept is not without precedent in certain branches of public law—particularly in the realm of administrative decisions taken ultra vires—it sits uneasily within the confines of private corporate governance, where standing, participation, and ratification are tightly regulated by statute and common law. As the jurisprudence of this Court and others makes clear, board decisions are not invalidated merely by procedural imperfections; rather, the test is whether there is a legal basis—asserted by a party with standing—on which the court may find the decision ultra vires, unlawful, or unauthorised.
[82] My learned Brother eloquently describes the need for “collective wisdom” in board processes. I agree. However, the law does not presume that the failure to notify directors is fatal per se; it requires that the affected directors be allowed to assert, and if necessary, vindicate their rights. That opportunity was not taken in this case. In the absence of such invocation, the court must act with judicial restraint, lest it transform itself from adjudicator into overseer of boardroom etiquette.
[83] Therefore, I cannot join my learned Brother in concluding that the resolution was invalid. With great respect, his approach risks substituting judicial apprehension for legal foundation. The Court must remain guided by the evidence, the pleadings, and the
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principles of standing and justiciability which are the hallmarks of our procedural law.
[84] Nonetheless, I appreciate the thoughtful dissent. It adds depth to the dialogue within this Court and serves as a valuable contribution to the evolving discourse on corporate governance and the procedural preconditions to valid board action.
Disposition
[85] For the reasons set out above, this Court finds that the court's judgment a quo cannot stand. The learned judge erred in treating as conclusively established the proposition that Dr Chris Smith was, at the material time, a de facto director of the appellant company. That conclusion rested on a finding in earlier litigation that had not been properly pleaded and proven in the current proceedings. Indeed as was stated in Private Sector Foundation of Lesotho v Thabo Qhesi and Others,1 whether the res judicata and issue estoppel approach to the relaxation of the principles will be justified will depend on considering each case's circumstances.
1 Private Sector Foundation of Lesotho v Thabo Qhesi and Others (C of A (CIV) 6 of 2013.In Smith v Porrit 2008 (6) SA 3003 (SCA) at para 10 the following was said:“Following the decision in Boshoff v Union Government 1932 TPD 345 the ambit of the exception rei judicata has over the years been extended by the relaxation in appropriate cases of the common law requirements that the relief claimed and the cause of action be the same (eadem res and eadem petendi causa) in both the case in question and the earlier judgment. Where the circumstances justify the relaxation of these requirements, those that remain are that the parties must be the same (idem actor) and that the same issue (eadem quaestio) must arise. Broadly stated, the latter involves an inquiry whether an issue of fact or law was an essential element of the judgment on which reliance is placed. Where the plea of res judicata is raised in the absence of a commonality of cause of action and relief claimed it has become commonplace to adopt the terminology of English law and to speak of issue estoppel. But, as was stressed by Botha JA in Kommissaris van Binnelandse Inkomste v Absa Bank BPK 1995 (1) SA 653 (A) at 669D, 670J-671B, this is not to be construed as implying an abandonment of the principles of the common law in favour of those of
English law; the defence remains one of res judicata. The recognition of the defence in such cases will however require careful scrutiny. Each case will depend on its own facts and any extension of the defence will be on a case by case basis”. See also, Joy to the World v Malefane (C of A (CIV) 9 of 2016) .
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Scott JA relied on and followed Smith v Porrit in the above decision.2
[86] Moreover, the Court notes that even if the prior judgment in Friedland had persuasive value, it was incumbent upon the court below to determine the matter afresh. The evidentiary foundation necessary to support a finding of de facto directorship was not established in this case. Dr Smith's apparent attendance at meetings by invitation, unaccompanied by authority or participation in governance decisions, does not satisfy the test in section 56 of the Companies Act 2011.
[87] Without a finding that Dr Smith was a de facto director at the material time, it cannot be said that the failure to notify him of the round robin resolution invalidated that resolution. The learned judge’s reliance on the prior judgment, without reassessing the matter on the record before him, constituted a material misdirection in law and fact.
[88] In relation to the additional claim that two de jure directors—Dr Friedland and Ms Moteane—had not been notified of the resolution, this too must fail. In the absence of such a challenge, this Court is neither entitled nor empowered to invalidate a board decision on grounds which the affected directors themselves have not pursued.
[89] As to the preliminary objection raised by the respondents under Rule 8(1) of the Court of Appeal Rules, that challenge was not properly before this Court.
2 Ibid.
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[90] As a result, this Court finds that procedural irregularities did not invalidate the round robin resolution authorising the institution of rescission proceedings. The appellant was properly authorised to bring the application. Therefore, the basis upon which the court a quo dismissed the rescission application was flawed. The matter must accordingly be remitted to the Commercial Division of the High Court for adjudication of the rescission application on the merits.
Order
[91] The appeal is upheld.
[a] The judgment of the Commercial Division of the High Court in CCT/0079/2024, delivered on 5 December 2024, is hereby set aside.
[b] The matter is remitted to the Commercial Division of the High Court to be heard afresh on the merits of the rescission application before a judge other than Mokhesi J.
[c] The respondents shall pay the appellant’s costs in this Court.
______________________________
K E MOSITO
PRESIDENT OF THE COURT OF APPEAL
I AGREE
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______________________________
R. MATHABA
ACTING JUDGE OF APPEAL
J VAN DER WESTHUIZEN, AJA (Dissenting):
[92] I read the thorough and monumental judgment of my Brother, Mosito P, in this matter. It was an enjoyable learning experience. I agree with the findings on security and the alleged de facto directorship of Dr Smith. The invitatioin to a meeting, in which Dr Smith is listed as an "invitee" whereas others are described as "directors", referred to in paragraph [65] of the judgment by my brother, the President, is particularly telling.
[93] Unfortunately I find myself unable to agree with aspects of the reasoning and conclusion regarding the de jure directors, Dr Friedland and Ms Moteane. Therefore I, respectfully, offer a few thoughts in this regard..
[94] As stated by Mosito P in the beginning of paragraph [70], this Court was not invited to adjudicate on the rights of these two individuals. Yet, the judgment then continues to deal with their rights; their failure to exercise or assert them; and why others (in casu Dr Smith) may not exercise or campaign for their rights on their behalf. This leads to the conclusion that the respondent's submissions regarding the allegation that they were not invited to the meeting amounts to a "collateral challenge", leaving this Court to "speculate".
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[95] The two directors cannot be said to have done nothing in this regard. An attempt was made to file affidavits. For procedural reasons the High Court disallowed that. Of course the contents of the affidavits may not be taken into account. I do not know what those contents were. However, it is not entirely correct that they failed to do anything regarding their rights, unsuccessful as they were. This point is not the high water mark of my reasoning though.
[96] More importantly, as stated in Mosito P's judgment, this case is not about the rights of the two directors. It is about the objective validity of the round robin meeting and the decision taken by the participants.This affects the rights of all who have any interest in the meeting and the resolution resulting from it, whether they are litigants in this particular case, or not. If the meeting was called irregularly, no decision taken could be legally valid. Within the context of company law, as well as administrative and other branches of law,meetings have a purpose. Matters must be discussed by all who participate. There must be a quorum. Of course invitees may be absent, with or without apology or excuse, but they must be notified or invited. What the High Court referred to as the "collective wisdom" of those with the right to be present, participate in debates and vote is crucial. Otherwise a decision, regardless of whether it was taken unanimously or by a majority vote, would have no legal or moral value.I dare to say that the rule of law is at stake.
[97] Do we know whether the two de jure directors were invited to or notified of the meeting? If not, any conclusion would indeed be
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speculative. Many questions in litigation cannot be determined with absolute certainty. That is why proof on a balance of probabilities is required in civil matters.
[98] I have been unable to find in the papers before us any positive assertion by the appellant that the two individuals were indeed notified or invited. The respondent relied on (paragraph 122.of) Dr Smith's answering affidavit. He states that the other directors have not not received any communication notifying or inviting them. This would be mere inadmissable hearsay evidence, of course, if it were not for the rest of that paragraph. The deponent refers to an email, attached as Annexure AA 19. In it Ms Moteane states that she has not received any notification of the board meeting. So, this is not the evidence of Dr Smith, but of Ms Moteane.
[99] As argued on behalf of the respondent, this is not disputed by the appellant.The replying affidavit confirms that they were directors. Then it is stated: "In any event, Netcare Group was notified of the round-robin resolution but they decided to sabotage us by not signing same." It is remarkable that the deponent only states that they were notified of the resolution. Notification of the meeting is not mentioned. It would have been easy for the deponent to state directly, clearly and honestly that the two individuals were indeed notified.
[100] The validity of the email was not attacked from the appellant's side, until during the oral reply by its counsel in this Court. It was pointed out that the email was sent by one "May" and submitted that it was unknown who May was. In response to a question from the Bench, counsel for the appellant consulted with
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the respondent's counsel, looked at the papers and conceded that May was indeed Ms Moteane.
[101] I respectfully disagree on the basis of Mosito P's approach to the rights of the de jure directors and the significance of notice of the round-robin meeting; am of the view that on a balance of probabilities these individuals were not notified of or invited to the meeting; and conclude that the meeting and decision taken by it are invalid in law. I would have dismissed the appeal with costs.
______________________________
J VAN DER WESTHUIZEN
ACTING JUSTCE OF APPEAL
FOR THE APPLICANT: MR E T FIEE AND
ADV M H LEROTHOLI
FOR THE RESPONDENT: ADV P STAIS SC
AND ADV M MOTSEKI