CIV/APN/288/82

IN THE HIGH COURT OF LESOTHO

In the matter between:

TEBOHO DAMBHA   
Applicant

FREDERIK BEATRIX PRETORIUS N.O. 
1st Respondent

HENDRIK JACOBUS FREDERIK STEYN N.O.     
2nd Respondent

R.P.B. ERASMUS N.O.     
3rd Respondent

THE MASTER OF THE HIGH COURT OF

LESOTHO 
4th Respondent

E.G. COOPER & SONS      
5th Respondent

Coram:

COTRAN CJ

UNTERHALTER AJ

JUDGMENT

Filed by the Hon. Chief Justice, Mr. Justice

T.S. Cotran and the Hon. Mr. Acting Justice

J. Unterhalter on the 3rd day of December 1982

Cotran CJ,

On 27th September 1982 Maseru Discount Centre(Pty)Ltd

was placed in final liquidation in terms of s.173 of the

Companies Act 1967 (CIV/APN/195/82). The liquidator is 1st

respondent.

On the same day the estate of Mr. T. Dermbha was placed

in final sequestration apparently in terms of s.8(g) end s.11 of

the Insolvency Proclamation No. 51 of 1957 (CIV/APN/213/82).

The trustee is 2nd respondent.

On the 14th October 1982 two separate applications were

launched by the liquidator of Maseru Discount Centre(Pty)Ltd-

1st respondent-and the trustee of the estate of T. Dambha-

2nd respondent-for orders to join the liquidator as co-trustee

of the estate of T. Dambha and for the trustee of the estate

to join as co-liquidator of Maseru Discount Centre(Pty)Ltd.

Both applications were granted.

Later the same day an application (CIV/APN/263/82) was

launched by the joint liquidators-1st and 2nd respondents-

of Maseru Discount Centre(Pty)Ltd seeking an enquiry in terms

of s.204 of the Company's Act 1967 and for the appointment of

/a Commissioner

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a Commissioner to conduct such enquiry in terms of s.262 of the

Act. Only one name was submitted for the Court's consideration.

The application was granted subject however to the submission

of the names of more than one candidate, in accordance with

practice (see Lipkie and another v Bloemfontein Auctioneers and

Agencies(Pty)Ltd 1960(4) SA 672) to enable the Court to make

a selection. No other candidates were available and on the

25th October 1982 the original nominee was appointed as

Commissioner.

The Commissioner embarked upon the enquiry on the 9th

November 1982. Amongst the persons summoned to give evidence

was Mr. T. Dambha.

Whilst the enquiry under s.204 of the Companies Act

1967 was in progress the Master of the High Court invoked the

provisions of s.152(2) of the Insolvency Proclamation 1957 to

conduct an investigation into the insolvent estate of Mr.Dambha

and summons was issued for his interrogation accordingly.

Prior to the commencement of the enquiry on the 9th

November counsel for 1st and 2nd respondents (Mr. Edeling) and

counsel then appearing on behalf of an alleged creditor called

Mr. Osman (Mr. Rottanburg) came to a "gentlemen's agreement".

The exact terms of the agreement are not clear but its effect

was that the creditor's then counsel (Mr. Rottanburg) should

somehow look after the "interests" of Mr. T. Dambha. The

Commissioner having noticed that counsel of the creditor Osman

was protecting Mr. T. Dambha's interests more than his client's,

he ruled that Mr. Dambha was not entitled to representation

in en enquiry under s. 204 of the Companies Act.

An urgent application (on notice) was launched on the

15th November 1982 by Mr. Dambha, now applicant, seeking relief

couched in the following terms :

" 1. Treating this Application as one of urgency

and dispensing with the forms and service

provided for in the Rules of the above

Honourable Court and disposing of this

Application at such time and place and in

such manner and in accordance with such

procedure (which shell in so far as

practicable be in terms of such Rules of

Court) as to the above Honourable Court may

seem meet;

2. Setting aside the summons issued by the

Fourth Respondent under Section 152 of the

Insolvency Proclamation Number 51 of 1957

("the Proclamation") calling for the

appearance of the Applicant at 9 a.m. on

Monday the 14th day of November, 1982;

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a decision in the Chancery Division by ROXBURGH J. That learned

Judge in turn referred to an earlier judgment decided as long

ago as 1866, the case being Re Anglesea Colliery Comneny.(l866) 1

Chancery Appeals 555 which held that holders of paid up shares

in companies to which the Act of 1862 applies fall within the

description of contributories contained in that Act. ROXBURGH J

followed that decision. He declined to follow a decision to the

opposite effect, Re Aidall Limited 1933 Ch. 323 because in that

matter the attention of the court had not been drawn to the

Anglesea decision.

In my view these cases are strongly persuasive and

should be followed by this court. I hold therefore that a

member of a company falls within the description of"contributory"

end may be represented at an enquiry in terms of section 262(1)

of the Companies Act.

The next problem for discussion arises from the

provisions of section 171(2) of the Companies Act. It reads

as follows :

"If a contributory becomes insolvent or assigns

his estate under the law relating to insolvent

estates, either before or after he has been

placed on the list of contributories, then

(a)    
his trustee in insolvency or his assignee,

as the case may be, Shall represent him

for all the purposes of the winding up,

and shall be a contributory accordingly;

and

(b)    
there may be proved against the estate

of the insolvent or of the debtor who has

assigned his estate the estimated value of

his liability to future calls, as well as

calls already made."

What is to be asked,is whether en unrehabilitated insolvent,

such as the applicant, may be represented at the enquiry or

whether he is displaced by reason of the provisions of

section 171(2) of the Companies Act, by his trustee. The

curious situation in the present matter is that the applicant's

joint provisional trustees are also the joint provisional

liquidators of the company. As liquidators they are

concerned to interrogate the applicant in the interests of

creditors. As trustees they represent the creditors in the

insolvent estate but it is conceivable that conflict situations

may arise.

For many years the courts have inclined to the view

that an insolvent be allowed to be represented by counsel and

/solicitor.

-7-

solicitor. In Shamosewitz v Shsmosewitz and others, 1913 WLD

213 De VILLIERS, J.P. at page 219 said that it would be highly

undesirable to allow the trustee or any creditor to be

represented by skilled professional men, and not to allow the

same privilege to the insolvent. He did not agree however,

that this was an absolute and unrestricted right. There is a

more definite view in the case In Re Breech-Loading Armoury

Company, 1867(4) Eq. 454. There, Lord ROMILLY, M.R. said at

page 454:

"Whet reliance could the court place on the

evidence of an unfortunate man shut up in a

room with the Examiner and hostile counsel

without anyone to protect him?"

It was held that he was entitled to be attended by his counsel

and solicitor. Similar views were expressed in Re Merchant's

Company. 1867(4) Eq. at 457, and in Re Cambrian Mining Company,

20 Ch.D. 376-see also Halsbury Laws of England 3rd Ed. Vol.6

para 1219 page 620, and notes.

Counsel for first and second respondents drew attention

to the difference between the provisions of section 204 and

section 205 of the Companies Act. Section 205(3) of the Act

provides that the liquidator and any creditor or contributory

may also take part in the examination either personally or by

attorney or counsel. Such provision does not appear in section

204 of the Act. It was submitted that the reason for this is

that section 205(4) of the Act obliges a person examined to

answer any question even if it may tend to incriminate him,

whereas he is not so obliged if an examination is held in terms

of section 204 of the Act. He submitted that the reason for the

representation was to guide a person in regard to his duty if

incriminating questions were put to him end that as no obligation

arose from section 204 to answer questions of that nature there

was no need for representation of the person examined. It was

maintained that the difference was significant. Similar

reasoning was applied by DOWLING, J. in Appleson v The Master

and others, 1951(3) SA 141 TPD in regard to representation of

an insolvent at an interrogation. There was provision in the

legislation for representation in certain circumstances and not

in others and because of what the learned Judge described as the

pointed omission of the statutory right in the relevant section

the court held that the witness did not have the right claimed.

These ere undoubtedly significant comments but, in the

/absence

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absence of an explicit prohibition of representation at the

enquiry I do not think that the court should be astute to

deprive en insolvent of the guidance and assistance that ere

available to creditors and the liquidator at an enquiry. A

contributory as a member of the company concerned is an investor

in that company more especially if his shares ere fully paid up.

As such he has a very special financial interest in the affairs

of the company end the investigation into those affairs. He

should have legal assistance if he so desires it when attending

at the enquiry as such assistance may be of great importance in

regard to his investment.

In Mears v Rissik, Mackenzie N.O. and Mears' Trustee

1905 T.S. 303 the court he]d that an insolvent retained an

interest in the due administration of his estate. It had been

argued that as plaintiff in the action the insolvent was not

competent to bring it because he was an unrehabilitated insolvent,

but the court held otherwise. At page 305 INNES, C.J. said :

"As I have said, generally the trustee is the

person to take action in matters connected with

the estate; but if the trustee will not do so,

or whether bona fide or mala fide does not see

his way to take action, is the insolvent on

that ground to be without remedy? I should say

upon general principles he ought not to be; the

law should provide some remedy".

An eloquent illustration of how an insolvent may be

prejudiced if he were deprived of the right of representation

at the enquiry is indeed the present situation where the

applicant's trustees are the co-liquidators of the company.

Although section 17l(2)(a) of the Companies Act gives the status

of a contributory to the trustee of an insolvent I can see no

reason why the insolvent through legal representation should not

have the right to keep a check upon the conduct of his trustee

in regard to his interest in the company as a member and thereby

to allow him to safeguard that interest. If the insolvent, as

a contributory, may be represented at the enquiry by counsel and

attorney, there appears to be no basis for denying him such

representation if, during the enquiry, he is required to give

evidence. Once he has representation that representation should

continue for all purposes.

For these reasons I am of the view that having regard

to the circumstances the tradition of fair play mentioned in the

/cases

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cases to which I have referred should be observed in the courts

of Lesotho,

J, UNTERHALTER

Acting Judge

Cotran CJ

I agree with the Judgment filed by my brother Unterhalter

that the applicant is a contributory and is entitled to

representation in an enquiry under s.204 of the Companies Act

1967, even though he is en unrehabilitated insolvent, but I

wish to add a few comments. The learned Commissioner appears

to have adapted Dowling J's interpretation of s.152(2) of the

Insolvency Act(of South Africa) in the Appelson's case to an

enquiry under s.204 of the Lesotho Companies Act 1967 and this

is what Mr. Edeling urged upon us to follow.

There are however two objections to this. Ex-parte

City Silk Emporium(Pty)Ltd 1947(4) SA 576 at 579 is authority

for the proposition that an examination under s.155 of the

Companies Act (of South Africa) deals with a matter which is

specially provided for by the Companies Act and consequently

the Insolvency Act (of South Africa) is not applicable. Further-

more the text of s.204(2) of the Companies Act 1967 is

different from the text of s.155(2) of the former 1926 Act and

s.417 of the current Act (of South Africa). One of the main

objects of s.155(2) and 4l7(2)(a) and (b) is to "grill" the

officers of the company end those suspected of assisting them in

alienating or disposing of the company's assets and if possible

to dislodge such persons from any unlawful preference or gain.

The enquiry is all embracing. The examinee must answer all

questions even though they tend to incriminate him and these

can thereafter be used in evidence against him. In R. v Raisun

and Pathon 1947(2) SA 881 the whole record was held admissible

against an accused in a criminal trial. Our s.204(2) is silent

on these matters. It is analogous to s.268(2) of the Companies

Act 1948 of England reproduced in Re Rolls Razor Ltd 1969(3)

All E.R. p. 1389. The object in all the three sections, is

probably the same, viz, discovery, but the manner of carrying

it out is different for in Lesotho the examinee (whether or

not he is a contributory) still retains the right to refuse to

answer questions that tend to incriminate him. This principle

/is...

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is enshrined in s.23 of the Evidence in Civil Proceedings

Proclamation 72 of 1830 (Vol. I Laws of Lesotho p.773). What

might or might not be incriminating is often a difficult question

to determine and whilst one can always rely on the Commissioner

to prevent oppression, it seems to me that his task is rendered

less onerous if representation is allowed.

The thought did occur to me of course that an unscrupulous

attorney or counsel may attempt to frustrate the task of the

Commissioner (a natter that can be adequately dealt with) but

other self respecting attorneys or counsel (the majority one

would think) would be mindful of the duties entrusted to the

Commissioner by the legislature in s.204(2).

Section 262 gives a right of representation to certain

classes of persons. We held that the applicant qualifies and

that disposes of the matter before us. I am not however

entirely certain in my own mind that the section excludes

representation for other classes of persons and I would have

thought (though I am not deciding) that the Commissioner

still retains a discretion over this. It appears incongruous

for me to hold that because representation under s.205 is

specifically provided for, where such representation is hardly

needed (since the examinee has no alternative but to answer)

that by implication of the law representation must be denied

under s.204 where it may be needed more,

T.S. COTRAN

Chief Justice

For Applicant : Mr. L. Lawrence SC

For Respondents. Mr. C. Edeling

ANNEXURE

IN THE HIGH COURT OF LESOTHO

HELD AT MASERU

In the natter between

TEBOHO DAMBHA   
Applicant

and

FREDERIK BEATRIX PRETORIUS      
First Respondent

HENDRIK JACOBUS FREDERIK STEYN  
Second Respondent

R P B ERASMUS   
Third Respondent

THE MASTER OF THE HIGH COURT OF 
LESOTHO Fourth Respondent

E G COOPER & SOWS       
Fifth Respondent

ORDER

(1)

Applicant hereby withdraws the relief claimed in prayers

5,6,7,8,9, 11 and 12.

(2)

Concerning prayers 1 to 4 this relief is dealt with as

follows

(a)    
The Master's Enquiry will only proceed after termination

of the Enquiry under Section 204 of the Companies Act,

unless the Master considers it desirable that the Master's

Enquiry proceed prior to such termination, and in such

event Applicant will be given notice of three days.

(b)    
Applicant may approach the above Honourable Court within

three weeks from date hereof, to apply to set aside the

sequestration order. In such event notice of at least

three days shall be given to the joint Provisional

Trustees.

/Page two....

Page two

(c) If the Master's Enquiry should proceed, any party may

argue the right to respresentation in terms of Section

152, either before The Master or before This Honourable

Court.

(3)

The costs incurred by the Respondents who opposed this

application, in whatever capacity relating to the claims

which have been withdrawn and relating to the conduct of

any of the Respondents or persons who deposed to Affidavits

on behalf of Respondents, and to defend their integrity and

conduct, shall be borne by the Applicant on a scale as

between Attorney and Client. Such costs shall be taxed by

the Registrar of this Honourable Court, or agreed upon between

the parties.

(4))

The Applicant shall cause acceptable unimpeachable security

to be provided, within ten days, for the payment of the

above costs, in the sum of R20 000,00. Such security shall

be provided to the Registrar of the above Honourable Court.

(5)

In the event of the security being provided as aforesaid,

no Respondent shall proceed against any other person.

(ie other than Applicant ) for recovery of the said costs.

Should the said security not be provided as aforesaid,

Respondents or any of them may proceed against the Applicant

and/or any other person or persons mentioned in Respondents'

papers, for the recovery of such costs. In the event of

such costs not being reasonably recoverable from such other

persons, such costs shall be paid in equal shares, jointly

and severally, by the Company in Liquidation and the insolvent

estate.

/Page three....

Page three

(6)

The costs relating to the argument on representation

shall be paid out of the assets of the company in liquidation.

Such costs shall include the costs of appearance on 22nd

and 23rd November 1982, and shall include the costs of two

counsel for Applicant and for First and Second Respondents

N O.

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