CIV/APN/23/2005

IN THE
HIGH COURT OF LESOTHO

HELD AT
MASERU

In the
Matter Between:-

THABISO
THAKASO 1st APPLICANT

JOBO
MAKHALANYANE 2nd APPLICANT

And

LEBOHANG
SEPEPANA 1st RESPONDENT

M.A.
SELEPE 2nd RESPONDENT

STANDARD
BANK OF LESOTHO 3rd RESPONDENT

TROPICAL
INFOTECH SOLUTIONS (Pty) Ltd 4th RESPONDENT

FRED
ISHWU 5th RESPONDENT

REGISTRAR
OF COMPANIES 6th RESPONDENT

ATTORNEY
GENERAL 7th RESPONDENT

JUDGMENT

Delivered
by the Honourable Madam Justice N. Majara on 9th August 2005

Applicants
herein approached this court on an urgent basis seeking an order in
the following terms:

1. Dispensing
   with the periods and modes of service of this Honourable Court on
   account of urgency.

   
   

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2. A
   Rule Nisi be and is hereby issued calling upon respondents to show
   cause (if any) on a date to be determined by this Court
   why:

   
   

1. 1st
   and 2nd Respondents shall not be interdicted from signing any
   documents under the style of Tropical Info Tech Solutions (PTY)
   LTD.

   
   

2. Interdicting
   1st and 2nd Respondents from transacting any business under the
   style of Tropical Info Tech Solutions (Pty) LTD.

   
   

3. Interdicting
   1st and 2nd Respondents from effecting any changes to the name
   Tropical Info Tech Solutions pending finalization
   of this
   application.

   
   

4. Directing
   1st and 2nd respondents from representing themselves as signatories
   to Bank account of Tropical Info Tech Solutions
   with third
   Respondent.

   
   

5. Directing
   3 rd Respondent not to honour cheque and a transaction of Tropical
   Info Tech Solutions (PTY) LTD account signed and
   authorized by 1st
   and 2nd Respondents.

   
   

6. Directing
   4th Respondent to expunge the name of 2nd Respondent as Director of
   Tropical Info Tech Solutions.

   
   

7. Declaring
   the purported change of directors in Tropical Info Tech Solutions
   null and void.

   
   

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8. Reinstating
   1st and 2nd Applicants as directors of Tropical Info Tech Solutions,

   
   

9. Declaring
   purported meeting of 11th November if there had been any meeting at
   all null and void.

   
   

3. Costs
   of suit on Attorney and clients scale against 1st and 2nd
   Respondents and ordinary costs against 3rd, 4th and 5th Respondents

   in the event of opposition.

   
   

3. Prayers
   1, 2, (a) - (e) to operate with immediate effect as interim orders.

   
   

On the
17th January, 2005 applicants were granted the Interim Order by my
brother Peete J and the rule was made returnable on the
20th January
2005. On the return date the rule was extended and this happened for
several times until the 2nd May when Counsel
for applicants, Mr.
Metlae moved an application before this court to go and restructure
his answering affidavit. On the same date
Mr Nathane, counsel for
respondents moved an application for this court to set aside
applicants' notice to discover and to award
respondents costs as he
contended that the former had taken an improper step. I however ruled
in favour of

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applicants
and gave my reasons thereof. The matter was then postponed to the
13th May for hearing and on the date it duly proceeded
before me.

In their
answer to Applicants' claim as stated in the Notice of Motion, and
per 1st Respondent's answering affidavit, Respondents
raised some
points in limine and these were;

1. That
   applicants herein have no locus standi in judicio to bring the
   present proceedings inasmuch as they were not members of the
   4th
   respondent in terms of Section 27 (1) and (2) of the Companies Act
   No 25 of 1967.

   
   

2. That
   applicants further lack locus standi in judicio in that even if they
   are assumed to be Directors of the 4th Respondent herein,
   4th
   Respondent has not resolved to authorize them to institute the
   present proceedings.

   
   

3. Applicants
   herein are not shareholders in the 4th Respondent inasmuch as no
   shares have been allotted to them in accordance with
   the provisions
   of Sections 51 to 56 of the Companies Act No 25 of 1967 and thus,
   lack the necessary authority even on this facet,
   to institute these
   proceedings.

   
   

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In his
replying affidavit, 1st Applicant denied that he has no locus standi
because as he alleged, after 1st Respondent invited
him to join 4th
Respondent as a shareholder, he agreed as per Annexure A and he thus
became a shareholder. The said annexure which
was attached in the
court file evidences the disposal of shares by 2nd and 5th
respondents as well as an agreement allocating shares
to 1st
Applicant. These averments were acknowledged by 1st Respondent in his
Answering Affidavit. 1st Applicant added that he did
not need
authorization from 4th Respondent because the present proceedings
were not instituted on its behalf hence why it was cited
as a co-
Respondent herein.

It was
also 1st Applicant's case that 1st Respondent had also not purchased
any shares in 4th Respondent because as the latter readily
admitted,
he did not have to purchase any shares as he was contributing his
skills to the company. It was Applicants' contention
that per the
provisions of the Companies Act, no shares can be purchased by
discount and that contribution of skills amounts to
purchasing shares
by discount.

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I now
proceed to deal with the points raised by both Applicants and
Respondents respectively. I may however add that some of the
points
that Applicants raised also touched on the actual merits of this
application.

Lack of
Locus standi in Judicio.

In my
humble opinion, in casu, applicants would have locus standi if they
were either members and/or directors of 4th Respondent.
A member is
described under Section 27

(1) and
(2) of the Companied Act No 25 of 1967 in the following terms;

"The subscribers to the memorandum of a company shall be deemed
to have agreed to become members of the company, and on its

registration shall be entered as members in its register of members.

Every other person who agrees to become a member of a company, and
whose name is entered in its register of members, shall be a
member
of the company"

On the
question of directorship, Section 140 in turn provides that;

"Every company not being a private company shall have at least
two directors and every private company at least one director,
and
every company shall have a secretary."

Bearing
the above provisions in mind, in the court file, there are inter alia
two documents, Annexures A and B respectively. The
former is a
document titled Memorandum of Agreement For Disposal of Shares in
which 5^th

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and 2nd
Respondents signed to offer and dispose of their entire shareholding
in 4th Respondent and 1st Applicant and 1st Respondent
acquired
shares to the value of M500.00 each. This document was signed on the
15th September 2003. I however found that there was
no properly
effected subscription nor registration in accordance with the
provisions of Section 27 (!) and (2) as cited above.
Because of these
reasons I find that Applicants herein are not lawful members of 4th
Respondent.

Annexure
B in turn is titled Tropical Info Tech Solutions (Proprietary) Ltd
Reg. 03/364 Register of Directors, Managers and Secretaries.
It is
adocument styled in pursuance of Section 158 of the Companies Act.
Per the contents of this document, 1st Respondent, and
the two
applicants herein were appointed on the 29th September 2003 whilst
both 5th and 2nd Respondents resigned on the same day.
On the face of
it, this document appears to have been registered with the Registrar
of Companies as per the attached date stamp
of the 13th October 2003.

The way I
see it, Annexure B is proof that Applicants herein were appointed as
Directors and/or managers of 4th Respondent. This
however does not
mean that where one is a director, one is necessarily a shareholder.
It

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happens
all the time that companies appoint non-members to become directors
of their companies, sometimes for administrative and
other purposes,
especially where the shareholders themselves do not possess the
know-how to run a company. Even 1st Respondent
acknowledged this fact
i.e. that applicants are at best Directors, as per the contents of
paragraph 10 of his answering affidavit.
This is further reinforced
by the provisions of Section 141 of the Act viz; "the acts of a
director or manager shall be valid
notwithstanding any defect that
may afterwards be discovered in his appointment (my underlining) or
qualification."

However
where a person has been appointed as a director but is not a
shareholder, my understanding is that he can only possess the
locus
standi to bring legal proceedings concerning the business of the
company if he has been so duly authorized by the company.
With regard
to the contention that Applicants had not been authorized to
institute these proceedings by 4 Respondent and as such
have no locus
standi, I agree with Applicants that they did not need any authority
from 4th Respondent to cite him as one of the
Respondents. However, I
find that as non-members, they still do not have the locus standi to
bring proceedings whereby they are
seeking the prayers as stated in
the Notice of Motion.

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In
addition, as was conceded by 1st Applicant, there was never any call
up by 1st Respondent for them to purchase the shares after
the
initial agreement as per the contents of Annexure A. As a result, no
shares were allotted to them in accordance with the provisions
of
Sections 51 to 56 of the Act.

Furthermore,
upon perusal of the court file, nowhere did 1 find copies of shares
certificates as proof that any of the people whose
names appear in
the two Annexures but for 1st Respondent, are shareholders. Only his
share certificate has been attached in the
court file albeit bearing
the date of 17th September 2004, which was after about a year since
Applicants herein came on board and
conflicts had already started
within the company. The issue of the said conflicts is evidenced by
Annexure C which is a letter
from 1st Respondent's Counsel, dated the
6th April 2004 wherein 1st Respondent was opting to withdraw from the
company on certain
conditions as a result of the said
misunderstandings.

At any
rate, most of the facts herein are common cause in so far as the
invitation to and acceptance by Applicants to join the company,
the
registration of Applicants as directors and the disposal of shares by
5th and

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2nd
Respondents are concerned. What seems to be the bone of contention
aside from the allegations of mismanagement of funds leveled
against
2nd Respondent, is the issue of whether in law, applicants are
shareholders of the 4th Respondent which in turn would entitle
them
to seek the prayers as stated in the Notice of Motion.

In his
Answering affidavit, paragraph 14 thereof, lst Respondent averred
that lst Applicant never bought any shares in the 4 Respondent
and
thus, never lawfully acquired any shareholding in the 4 Respondent.
He went on to state;

...moreso when he admittedly never had any technical expertise which
he could offer in means of payment for the aforesaid shares.
On the
other hand, my shareholding in the Fourth Respondent herein was
secured by my technical expertise, something which is well
within the
ambit of the Companies Act."

Further,
in paragraph 30 of his answering affidavit, 1st Respondent averred
that Applicants cannot be declared as shareholders and
directors
respectively because as per his contention, this court has no power
to sanction illegalities.

Without
necessarily giving a detailed account of the averments as they appear
in all the affidavits which have been filed herein,
suffice is to say
that

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at the
time that the Company was purportedly formed and the subsequent
change in shareholding effected, there never was any compliance
with
the provisions of the Companies Act in so far as subscription and/or
purchase of shares is concerned by all the parties cited
herein. Even
the share certificates which have been annexed came into being long
after the fact and for that reason this court
does not accept them as
legitimate proof of compliance at the material time. Their issuance
clearly did not comply with the requirements
of Section 78 (1) of the
Companies Act as far as the time limits are concerned. In other
words, I find that 4th Respondent does
not exist as a legal entity at
all.

Over and
above this, on the one hand, 1st Applicant acknowledged that he never
paid for the shares because lst Respondent never
called up for same.
On the other hand 1st Respondent also acknowledged that he only
contributed his expertise towards the shareholding
in the 4th
Respondent. Although 1st Responded contended that this is sanctioned
by the Companies Act, nowhere did I find a provision
allowing a
person to purchase shares through contributing his expertise.
Furthermore, 1st Applicant contended that at any rate
2nd and 5th
Respondents could not in law dispose of their shareholding in 4th
Respondent since at the time that Annexure A came
into

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being
they had not yet purchased any shares and therefore could not have
owned any in 4th Respondent.

Interestingly
enough, even Counsel for 1st Respondent acknowledged in court during
argument that none of the parties have the locus
standi because none
of them are lawful shareholders. In their heads of argument,
Applicants also raised the point that 4th Respondent
has not opposed
these proceedings and 1st Respondent has not been authorized to
depose to these proceedings as evidenced by the
absence of any record
of intention to oppose by 4th Respondent although he purported to
have been deposing to the Answering Affidavit
in his capacity as
Director of the 4th Respondent. Secondly, that there is no resolution
of the 4th Respondent authorizing 1st
Respondent to depose to this
affidavit. In addition, even 1st Respondent himself did not even
attach a copy of the resolution by
4th Respondent to oppose this
application on its behalf as proof that he has been duly authorized
to so oppose it which would give
him the requisite locus standi. See
the case of Mall (Cape) (Pty) (Ltd) v Merion Ko-operasie Beperk 1957
(2) SA 347.

However,
even if such a resolution were attached, this court would still
reject if for the simple reason that 4th Respondent is
not a lawfully

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incorporated
company. As such, I find that none of the parties lawfully purchased
shares in compliance with the requirements of
Sections 51 - 56 of the
Companies Act

This, my
finding is also reinforced by 5th Respondent's supporting affidavit
to 1st Applicant's Replying affidavit. When one would
have thought
that he would file an affidavit in support of 1st Respondent since he
was cited as a co-Respondent, 5th Respondent
acted to the contrary
and filed one in support of 1st Applicant. In that affidavit, he
denied most of the averments made by 1st
Respondent especially as far
as they relate to him ever having been a shareholder in the 4th
Respondent. The only contribution
which he said he made was a
computer and a table. He further denied having signed any of the
attached Annexures which purportedly
bear his signature but for the
Memorandum of Association. I found no reason to disbelief 5
Respondent.

Needless
to say, a lot of illegalities and/or non-compliance with the
provisions of the law seem to have occurred at the time 4th

Respondent purportedly became incorporated. For the reasons as shown
above, I indeed agree with the contention that none of the
parties
herein are legitimate shareholders of 4th Respondent (being a
non-existent entity) as is required by

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the law
and as a result I find that all of them have no locus standi as
parties herein.

I however
wish to note that from the contents of the affidavits, and upon
perusal of the entire court file, 1st Respondent appears
to be a
dishonest person who is more than willing to take advantage of
gullible people for his own self-aggrandizement. I have
no doubt that
on a balance of probabilities applicants herein, as well as 5th
Respondent sincerely believed that when agreeing
to become members of
4th Respondent respectively, they were entering into a bona fide
arrangement with 1st Respondent, only for
them to find out the hard
way that he is an untrustworthy individual. He even had no shame
admitting that despite having asked
people to join him as
shareholding members in 4 Respondent, he took no measures to ensure
that it was lawfully incorporated yet
he wants to use the fact of his
non­performance to his advantage. That cannot be sanctioned by
this court.

However,
at this stage and like I already said, under these circumstances,
this court needs only to determine whether Applicants
herein are
entitled to the prayers as stated in the Notice of Motion.
Unfortunately, I find that the answer must be in the negative
for the
simple reason that from the onset,

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there was
never a legally established company in the nature of 4th Respondent.
But be that as it may, it is my profound belief that
in the interests
of real and substantial justice, 1st Respondent cannot be allowed to
benefit from his fraudulent/dishonest conduct
by this court finding
in his favour either.

For these
reasons, I grant absolution from the instance. Applicants and 5th
Respondent are however free to institute proceedings
against 1st
Respondent and claim damages for any loss they have suffered since
they purportedly joined him as co-shareholders in
4th Respondent.

There is
no order as to costs.

N Majara

Judge

For
Applicants : Mr Metlae

For
Respondents : Mr Nathane

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