CIV/APN/260/85

IN THE HIGH COURT OF LESOTHO
In
the Application of

LESOTHO NATIONAL DEVELOPMENT Petitioner
CORPORATION

v

ATLANTIS FOOTWEAR (Proprietory) Respondent

LIMITED

JUDGMENT

Delivered by the Hon. Mr. Justice B.K. Molai on the
25th day of April, 1986.

On 11th November, 1985, the Petitioner herein moved the
Court for a Provisional Liquitation order couched in the following
terms

"1. That the Respondent company be placed in
Provisional Liquitation in the hands of the Master of the High Court,

2, Calling upon Respondent company to show cause, if
any, at 09h30 on Monday 2nd December, 1985 why this provisional order
should
not be made absolute,

3. That service of this order shall be placed
in the
comet,

4. That service of this order shall be effected
on
the Respondent at its registered office,

5. The Master of the High Court is hereby
directed to
appoint Stephanus Andreas
Redelinghus a Provisions Liquidator of

the Respondent to take immediate control of the
company's assets and granting him the powers provided for in Section
188(2)(a)(b)(c)(e)
(f) (g) and (h) of the companies Act 1967 as
amended,

6. That costs of this Petition be paid out of

the assets of the Respondent company's estate,

7. Granting such and/or alternative relief as the
above
Honourable Court may deem meet."

2/ The founding

-2-

The founding affidavit was deposed to by one Brendam
Joseph Martin who was authorised so to do per annexure "A"
(Special
Power of Attorney dated 31st October, 1985) by the
Petitioner's Managing Director pursuant to the pro­visions of
annexure "B"
(the General Power of Attorney duly registered
in the Deeds Registry).

The order was granted as prayed, in terms of prayers 1 -
6 of the Petition, by Levy A.J. on the same day, 11th November, 1985.
It
was duly published in the comet on 7th December, 1985 and served
on the Respondent company at its registered office on 26th November,
1985. Stephanus Andreas Redelinghus was duly appointed by the Master
of the High Court as the Provisional Liquidator to exercise
powers in
terms of the provisions of S.188(2) of the Companies Act 1967.

On 10th February, 1986, the Respondent company intimated
its intention to resist confirmation of the order, and duly filed the
answering
affidavit which was deposed to by one Perumal Muthusamy
Naidoo, the Managing Director of the Respondent company, persuant to
a special
resolution taken by the Directors of the Respondent company
on 8th February, 1986. A replying affidavit was also filed by the
Petitioner.

Briefly the facts disclosed by the affidavits are that
the Respondent company is indebted to the Petitioner in the sum of
M180,750.94
which amount is made up as follows

M135.000.00 being in respect of.a medium term loan
bearing interest at the rate of 12% per annum, advansed by the
Petitioner to the
Respondent company and which amount together with
interest as aforesaid is presently due and payable by the Respondent
company in
view of the failure, despite proper demand to make
payment. As security for the repayment of this loan, the Petitioner
holds a Notarial
General Cover-ring Bond , duly registered under
No.17176 in the Deeds Registry, Maseru on the 12th day of September
1984 (Annexure
'C '),

M26.719.79 being in respect of an amount which the
Petitioner paid to the Standard Chartered Bank Africa PLC on behalf
of the Respondent
company in terms of a loan guarantee dated 27th
March, 1984, issued by the Petitioner in favour of the

3/ Bank

-3-

said Bank pursuant to the loan gurantee entered into
between the Petitioner and the Respondent company. As security for
the repayment
of this amount, the Petitioner holds a Notarial
Indemnity Bond, duly registered in the Deeds Registry, Maseru, on the
12th September,
1984 (Annexure 'D') and

M19.031 25 being in respect of arrear rental due to the
Petitioner by the Respondent company by virtue of an agreement of
sub-lease
entered into between the Petitioner and the Respondent
company on the 14th May, 1984 which amount is presently due and
payable. The
Petitioner's claim in respect of the above is secured by
virtue of the Landlord's Hypothec which exists over the movable
assets of
the Respondent company to the extent thereof.

On or about the 19th August, 1984, the business premises
of the Respondent company was extensively damaged by fire. In
consequence
of the fire, the machinery had to be replaced, stock in
trade, fixture, fitting and work in progress were totally destroyed.
Although
the Respon­dent company was insured against distruction
of, or damage to its property by fire, a dispute had arisen between
the
Respondent company and its insurer, Lesotho National Insurance
Company (Pty) Ltd, with regard to the settlement of the Respondent
company's claim. The Respondent company was forced to cease operating
its business and had been unable to commence work since August,
1984.
Consequently the Respondent company had not been able to honour its
obligations for payment nor was it likely to do so in view
of the
fact that" the business was not generating any income. Indeed,
it was clear from annexure "BJM4", the Auditor's
report
dated 20th August, 1984, that even before its destruction by fire,
the business of the Respondent company had financial difficulties
for
its expenses were higher than the profits.

In the circumstances, the Petitioner addressed a letter
(annexure "BJMI") dated 22nd May, 1985 to the Respondent
company
demanding payment of the debt. Although in its answering
affidavit, the Respondent company denied that the Petitioner had made
any
such demand there could be no doubt from its letter, annexure
"BJMIA", that the Res­pondent company did in fact
receive
the abovementioned letter of demand from the Petitioner.
Notwithstanding the

4/ demand

-4-

demand made as far back as 22nd May, 1985, the
Respondent company has to date not honoured its financial obligations
to the Petitioner
which financial obligations are admittedly far in
excess of M100. That being so, the Respondent company must be deemed
to be unable
to pay its debts for in terms of the provisions of S.172
of the Company Act No.25 of 1967.,

"A company shall be deemed to be unable to pay its
debts -

(a) if a creditor, by cession or otherwise,
to whom
the company is indebted in a sum
exceeding one hundred rand then
due, has
served on the company a demand requiring
it to pay the
sum so due by leaving the
demand at its registered office, and if
the
company has for three weeks thereafter neg­
lected to
pay the sum, or to secure or com­
pound for it to the
reasonable satisfaction
of the creditor, '"

Now, apart from its inability to settle its indebtedness
to the Petitioner, it is common cause that the Respondent company has
suspended
its business since August, 1984, which period is obviously
over a year. That being the case, S.173(c) of the Companies Act,
supra, provides

"173. A company may be wound up by the court -

(a)

(b)

(c) if the company does not commence
its business
within a year from its
incorporation,or suspends its busi­
ness
for a whole year "

(my underlinings)

It has been contented in argument that as Mr. Stephanus
Andreas Redelinghuys had been acting for the Respondent company in
its case
against the Lesotho Insurance company he cannot now be
appointed the liquidator in the case between the Respondent company
and the
Petitioner on the ground of divided interests

It will be observed however, that Mr. Redelinghus filed
an affidavit in which he diposed that in the case between

5/ the Respondent

-5-

the Respondent company and the Insurance company he
merely acted on specific instructions received from the Respon­dent
company's
attorneys Messrs Berkowitz, Kirked and Cohen and had not at
any time consulted with any of the officers, directors, witnesses or
any other person em­ployed by the Respondent company in
connection with its case against the Insurance company. As soon as he
received instructions to attend to the present petition, he
com­municated this fact to Respondent company's attorneys that he
was obliged to withdraw as their correspondent and would give
effect to such instructions in view of the fact that the Petitioner
had been a client of his firm
for a substantial period of time.

I am not convinced that at the time he acted as
correspondent for the Respondent company's attornies in the case
between the Respondent
company and the Insurance company, Mr.
Redelinghuys could have been aware that there was going to be a case
between the Respondent
company and the Petitioner, his client of long
standing. In any event

as soon as he became aware that there was going to be a
case between the Respondent company and the Petitioner his client of
long
standing, Mr. Redelinghuys ought to have ceased to act as
correspondent for the Respondent's attorney. This he did and cannot,
therefore,
be barred from acting as the provisional liquidator in
this case.

It was further argued that as its business was
destroyed
by fire and Lesotho Insurance company delayed to pay
its
claim, the Respondent company had, for reasons beyond
its
control, been unable to resume its operations. The
court
should, therefore, exercise its discretion and discharge
the
provisional liquidation order. I am unable to agree.
As Dowling,
J. put it in Service Trade Supplies Ltd v. Dasco
and
Sons Ltd 1962(3) S.A p.428

"The cases show that the discretion of the court
where unpaid creditors seek a winding-up order against a company
unable to pay
its debts is in reality a very narrow one, just as its

6/ discretion

-6-

discretion to refuse a sequestration order of an
application of en unpaid creditor in an insolvent estate is very
narrow In Effune v. Hancock, 1923 T P D.355. a full
court decision on appea1 by a creditor against a refusal to grant a
final winding-up order, at p 354, De
Waal.J. is reported to have
said, "where a creditor alleges an act of insolvency, and
proves his claim, he has the unfettered
right to choose his form of
execution, one of which is to sequestrate his debtor's estate."
and His Lordship goes on to indicate
that any dis­cretion the
court may have is a narrow one. In the sphere of company law the
same sort of approach is valid. The
great weight of authority is that
generally speaking an unpaid creditor has a right ex debito
justitiae to a winding-up order against a company unable
to pay its debts."

On the evidence disclosed by the affidavits before me it
has been overwhelmingly proved that the Respondent company is
indebted to
the Petitioner and unable to make repayment. On the
strength of the above cited authority, the Petitioner has, therefore,
a right to be granted a liquidation order prayed for in
the papers. In my opinion, the case is not a fit one where the
discretion to refuse
the relief sought for can properly be exercised.

I would, therefore, order that the provisional order be
made final with costs as prayed.

B.K. MOLAI

JUDGE

25th April, 1986.

For Petitioner Mr Edelins,
For Respondent
Mr. Hlaoli.