CIV/APN/220/93 IN THE HIGH COURT OF LESOTHO

In the Matter of :

LESOTHO BANK Applicant

and

LESOTHO HOTELS INTERNATIONAL (Pty)

LTD
IN JUDICIAL MANAGEMENT 1st Respondent

THE MASTER OF THE HIGH COURT
OF
LESOTHO .................. 2nd Respondent

JUDGMENT

Delivered by the Hon. Mr. Justice B.K. Molai on the
26th day of September, 1995.

On 13th May, 1993, the applicant herein filed, with the
Registrar of the High Court a notice of motion, in which it moved the
court
for an order framed in the following terms:

"1. Granting (in so far as may be necessary) the
applicant leave to sue the 1st Respondent for relief set forth in
prayers 2,
3, 4 and 5 below;

2. Declaring that the lease (annexed to the petition as
Annexure F thereto) has been cancelled, alternatively hereby
cancelled;

3. Ejecting the 1st Respondent from the premises known
as "VICTORIA HOTEL" situate at Kingsway, Maseru (the
Victoria premises)
and all other persons, corporations and other
legal entities of whatsoever nature who occupy the Victoria
premises

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through the 1st Respondent;

4. 
   Directing the 1st Respondent to
   pay the costs
   of this
   application;

   
   

5. 
   Granting the Applicant further
   and/or alternative
   relief."

   
   

The 1st Respondent intimated intention to oppose this
application. The 2nd Respondent did not. Affidavits were duly filed
by both
the applicant and the 1st Respondent.

It is, perhaps, convenient to mention, at this juncture,
that on 8th June, 1993 another application styled "Notice of
Motion
Incorporating Urgent Relief" was filed by S.C. Buys N.O.
against the Lesotho Bank as applicant and Respondent, respectively.
Although the Respondent intimated intention to oppose and affidavits
were duly filed by the parties, the application was not pursued
at
the hearing of this matter. Wherefor I need not concern myself with
this application in the present judgment.

It is, however, worth mentioning that at the
commencement of the hearing, on let August, 1995, the 1st Respondent
filed, with the
Registrar of the High Court, a notice in which it
proposed to raise a number of legal points in limine.
The notice bad been served upon the applicant on 17th July, 1995. The
Court was asked for a ruling as to whether arguments should
be

3

heard first on the points in limine and
then on the main application or on both the points in limine
and the main application simultaneously.

After a brief argument, the court considered the matter
and took the view that there were two alternatives. The court could
properly
either hear arguments on the points in limine
separately or on the main application and the points in limine
simultaneously. Even in the second alternative i.e. where it had
heard arguments on the main application and the points in
limine simultaneously, the court would still have to make a,
decision first on the points in limine. If, in either
alternatives, the points in limine were upheld then
that would be the end of the matter. In that eventuality the
arguments on the main application would have been a
waste of time
inevitably resulting in unnecessary costs. Consequently the court
ruled that arguments should first be heard on the
points in
limine and only in the event of the points in limine
being dismissed would arguments on the main application be heard.

By the consent of both counsels the only point in
limine which really required to be argued before dealing
with the main application was:

"1 Has the applicant made out a case for the
relief in paragraph 1 of

4 the notice of motion?

2. If so, is Applicant entitled to leave to institute
the ejectment proceedings?"

It is common cause from the affidavits that prior to
30th July, 1982 a certain Antonio Mario Florio acquired the hotel
keeping business
of Lesotho Hotels (Pty) Limited (in liquidation)
which the latter conducted amongst other places, at a place called
"Victoria
hotel" here in Maseru. On 30th July, 1982,
applicant and Antonio Mario Florio entered into a written lease
agreement (annexure
"F" to the founding affidavit) whereby
the former inter alia, let to the latter "Victoria hotel"
premises for a period of 20 years commencing on 1st August, 1982. In
terms of Clause
9 of the lease agreement (annexure "F")
Antonio Mario Florio was entitled to cede his rights and obligations
under the
lease. Subsequent to the conclusion of the lease agreement
(annexure "F") Antonio Mario Florio, therefore, sold the
business
of the Victoria hotel which he had acquired from the Lesotho
Hotels (Pty) Limited (in liquidation) and ceded his rights and
obligations,
under the. lease agreement, to the 1st respondent.

,It is not in dispute that after Antonio Mario Florio
had sold the business of Victoria hotel and ceded hie rights and
obligation,
under the lease agreement, to the 1st Respondent, a
certain Marry

5

Marmaduke Rantenbach caused, presumably in terms of the
provisions of S. 265 of the Companies Act 1967. the 1st
Respondent to be placed under provisional judicial management. The
provisional management order was confirmed by the High
Court on 18th
November, 1988.

It is significant that paragraph 7 of the final judicial
management order provided that:

"7. while the judicial management orders are in
force, all actions and execution of all writs, summons and other
processes against
the companies be stayed and be not proceeded with
without leave of the above Honourable Court first being obtained."

The above cited paragraph 7 of the final judicial
management order is in accordance with the provisions of the
Companies Act. 1967. of which paragraph (d) of Section 266 (1)
clearly provides, in part:

"(d) ..... while the judicial

management order is in
force all actions and
the
execution of all
writs, summons and
other processes against
the
Company be stayed
and be not proceeded -

with without leave of the court first obtained."

In his founding affidavit, the applicant averred

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that the above cited Clause 7 of the final judicial
management order was directed at granting the 1st Respondent a
moratorium, whilst
under judicial management, against existing
summons and other court processes which were in existence at the time
the judicial management
order was granted. The present application
did not, in the contention of the applicant, fall within the purview
of Clause 7, a fact
which was, however, denied by the 1st Respondent
in the answering affidavit.

I was referred to Volume two of Henochsberg Company
Act by Henochsberg where at p.760 the learned Author had this to
say on the issue:

" The directions, if given, relate to proceedings
in existence at the date of the order and to future proceedings..;."

See also the head note, in the decision of Samuel
Osborn (S.A.). Limited v. United Stone Crushing Company
(Ptv) Limited (under judicial management) 1938 WLD 229 by
Greenberg, J.P. which reads, in part:

"The power given to the court ... to stay
proceedings against a company, under judicial management refers to
future as well as
pending proceedings"

On the authority of the above cited work of

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Henochaberg and the decision in Samuel Osborn (S.A.)
Limited v. United Stone Crushing Company (Pty) Limited (under
judicial management) 1938 WLD 229 it seems to me that the
proceedings which the applicant wants to institute against the 1st
Respondent do fall within the purview
of Clause 7 of the provisional
judicial management order confirmed by the court on 18th November,
1988. The applicant's contention
that they did not, does not,
therefore, hold water. That being so, the applicant must first obtain
leave of court before it can properly
institute proceedings against
the 1st Respondent. In the event of the court finding as it does,
that the proceedings which the applicant
wants to institute against
the 1st Respondent fall within the purview of Clause 7 of the
judicial management orders, the applicant
applies for leave to sue
the 1st Respondent for relief set forth in prayers 2, 3, 4 and 5 of
the notice of motion.

It is, perhaps, significant to mention that, on 2nd
March, 1992 and whilst the judicial Management Order was still in
force, the applicant
addressed the letter (annexure "G" to
the founding affidavit) to the 1st Respondent advising that the lease
agreement (Annexure
"F") was thereby cancelled and the
latter required to vacate the "Victoria Hotel" premises by
the 31st March,
1992. The ground upon which the applicant took the
move to cancel the lease agreement

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(annexure "F") and require the 1st Respondent
to vacate "Victoria Hotel" premises was that the latter had
breached
the conditions of the lease agreement. The 1st Respondent
denied, however, that it had breached any of the conditions of the
lease
agreement (annexure "F") and did not, therefore,
vacate the "Victoria hotel" premises. Hence the institution
of the present proceedings, by the applicant, for an order as
aforesaid.

It is clear from the affidavits that 1st Respondent
conducts business at "Victoria hotel" premises. However,
the applicant's
letter of 2nd March, 1992 had the effect of
preventing the 1st Respondent from conducting business at "Victoria
Hotel"
premises and thus destroy the company which was under
judicial management. As it will be shown in a moment, the applicant
could not
properly take such an action, against the 1st Respondent,
without first obtaining leave of the court.

It is not in dispute that the court has a discretion
whether or not to grant the applicant leave to sue the 1st
Respondent, which
is under judicial management, for relief sought in
prayers 2,3, 4 and 5 of the notice of motion. Such discretion must,
however, be
exercised judicially. To do so, it is, in my view,
important that the court bears in mind the

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purpose of a judicial management order. In the decision
of Millman, N.O. v. Swartland Huis Menbleerders BPK 1972(1)
S.A. 741 Baker, A,J. stated, at page 744B:

"The objectives of a judicial management order are
to postpone a liquidation of a company which is in difficulties and
to provide
a moratorium for that company for a period long enough (it
can be either a period fixed by the court or an indefinite period) to
enable that company to meet its obligations and to become a
successful concern."

From the above cited passage in the decision of Millman.
N.O v, Swartland Huis Menbleerders BPK 1972(1) S.A. 741
there can be no doubt that the purpose of a judicial management is to
preserve, and not destroy, a company which is capable of becoming
a
successful concern. In the present proceedings, the applicant seeks
leave to sue the 1st Respondent, which is a company under judicial
management orders, for cancellation of the lease agreement (annexure
"F") and the letter's ejectment from the place on
which it
conducts business viz. "Victoria hotel" premises. This is a
drastic action against the 1st Respondent. If the
applicant were to
obtain judgment, the 1st Respondent would obviously be unable to
carry on business with the inevitably result of
aborting the purpose
of the judicial management order. To succeed in such a drastic move
against the 1st Respondent, the

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applicant must, in my opinion, satisfy the court that
the former has no chance of trading out of its financial
difficulties.

As it has been stated, earlier in this judgment, the
ground upon which the applicant seeks leave to sue the 1st Respondent
for cancellation
of the lease agreement (annexure "F"} and
ejectment from the "Victoria hotel" premises is that the
latter has
breached the conditions of the lease agreement. There is
no allegation in the applicant's affidavits that the 1st Respondent,
admittedly
a company under judicial management orders, is incapable
of trading out of its financial difficulties and has, therefore, no
chance
of becoming, once more, a successful concern.

In the circumstances, I am unable to find that the
applicant has made out a case for the relief in paragraph 1 of the
notice of motion.
Consequently, I come to the conclusion that the
point in limine was well taken and ought, therefore, to
succeed with costs (of two advocates) to the 1st Respondent.

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It is accordingly ordered.

JUDGE

26th September, 1995.

For
Applicant : Advacates : G.H. Penzhorn S.C.

H.P.
Jefferys

For 1st Respondent: Advocates : S. Alkema S.C.

S.
Alberts