CIV/APN/242/02

In the matter between:

stated as there is a
counter application it is the counter application that is
before
court in which applicants are seeking a declaratory.

Mr. Mda had submitted applicants were seeking
membership and
directorship of the 2^nd respondent, the
declaratory relating to 1^st and 2^nd
respondents.
After Mr. Mda had taken a few preliminary points the court
had
decided because of the complexity of the case it was not possible
to
decide it on paper and it had been converted into a trial in
particular relating
to the validity or otherwise of share
certificates. The matter had then been
postponed to 27-30 April,
2004 for hearing on the understanding that
potential witnesses
would be those who have filed affidavits and should
other
witnesses be required, 14 days notice of such a requirement would
be
filed with the court.

On 29 April, ’04 appeared Mr. Mda and Mr.
Buys the one claiming
matter on the roll and the other
disclaiming this. It appeared however the
crucial question was
whether a witness intended to be called was ready to
give evidence
and appearing that she would not be available presently the
matter
had been postponed to 30 April, 2004.

Before the matter
started Mr. Buys had drawn the courts attention to
the fact
that because of misunderstanding between himself and Mr.
Fischer
SC, the latter was not able to attend and he would
stand in for him. Because
of the unsatisfactory condition of
transcription of the court, it was ordered
that cassettes be made
available to both counsel for transcription.
Unfortunately until
the drafting of this judgment, transcription has not been
made
available to court.

It was rather amusing to note how a witness called
neither counsel
was prepared to claim responsibility for calling
her.

P.W.1 ‘Mamocha Moruthane sworn and led by Mr. Mda
had stated
she is an advocate of the court and before her
retirement from the civil
service she was legal adviser to the
Ministry of Finance and Adjudicator of
the Public Service. She
qualified in 1983. She had come across both
applicants and 1^st
respondent, and what brought them together was
formation of the
company Lesotho Precious Garments (2^nd respondent)
a
company registered by herself in October, 1988 whose
shareholders were 1^st
respondent, 1^st –
5^th applicants who were subscribers and on company
being
registered became members with 100 shares each. Sometime in
1999 there

were changes to the
company regarding transfer of shares. Transferors had
not signed
any document. She prepared the documents to which there were
no
witnesses to the transferors. She says 1^st respondent
signed as transferee
and this was witnessed. The 3 witnesses were
only witnesses. Tsai Chun-
Hsia has not signed the document and
she does not know who this Tsai
Chun-Hsia is. It is to be noted
that Tsai Chun-Hsia appears on p.39 of the
Counter Application.

The witness has testified GML⁵ on p.40 is
exactly the same as GML⁴
in relation to transferors and
transferees for she did not know this Pai Yung
Hsia the signature
being that of 1^st respondent who was forging
the
signatures. She says she had no authority from applicants to
act as she did.
She says she got involved with 1^st
respondent in process of training. She
says the documents are
fraudulent and share certificates were issued as a
result of the
transfers aforesaid. The signature on share certificates was hers
as
secretary. Now she says she was never secretary of the 2^nd
respondent
and she falsely claimed to be secretary. She says the
other signatures to
annexures “B”, “C” and “D” are
hers. She has testified the signature of
Director is 1^st
respondent’s on all the annexures. She says “D” is
1st
respondent’s signature in English. She had no authority to
sign the

documents. She says
she was undergoing training under 1^st respondent and
she
was given a training allowance. As for GML⁶ on p.41, she
does not
even know people in the document as she was given the
names and to sign
the document. She says though it is shown
directors resigned, they had no
resigned, they had not resigned
for the document is fraudulent. The newly
appointed directors had
not been properly appointed and to date had not met
them. She had
registered the document at the law office though it had not
been
made after the company’s meeting. There was never a meeting
of
shareholders to appoint 1^st respondent as Managing
Director. As for p. 42
GML⁷, being resolution of
members, there never was such a resolution
though it is a document
she filed with the Registrar of Companies. She says
the signatures
are false being hers and 1^st respondents. She has
testified
applicants never purported to sell their shares and
divest themselves of the
running of the company and the company is
not defunct.

Cross-examined by Mr. Buys she says the company
had certificate to
commence business and this is in the record at
p.43 titled “Licence to
Manufacture.” She says this is a
certificate. She says the licence does not
say to commence
business but the dates are 16 April, 1999 this is being the
style
adopted by those who issued the licence. Put to her annexure 8 is not

authority to
commence business in accordance with Company’s Industrial
Act of
1967, she says this is how it is styled by the Ministry of Trade.
Put
to her a licence to manufacture has nothing to do with a
licence to trade, she
says she has nothing to say though she is an
advocate of this court and as
advisor to the Ministry of Trade.

As for sec.87 (3) of the Companies Act, the company did
not issue a
prospectus. She says she has not come across a company
which has not
issued a prospectus. Asked whether the certificate
was issued by the
Registrar she says the only certificate issued
is GML⁸ on p.43. As to
whether there is a difference
between a licence and a certificate she says she
does not know and
put to her there’s a difference namely; licence to
manufacture
and certificate to trade she says she was given authority to
apply
for licence by applicants and 1^st respondent. She says
there was no
minute book though there was a resolution to apply
for a licence and
minutes were taken by Mr. Lets’oara and the
meeting was informal. She
says there were no meetings in which
resolutions were recorded.

Put to her she could not act for 2^nd
respondent without a resolution of
company, she agrees. Put to her
Lesotho Precious Garments and Precious

Garments is not the
same thing, she says it is the same. She says after
registration a
subscriber becomes a member automatically. She says there is
no
difference between a subscriber and a shareholder. She says
share
certificates issued are fraudulent. Apart from securing a
share certificate
members have to have meetings and there were no
meetings to decide the
issue of share certificates. She says along
with 1^st applicant they were being
trained by Lesotho
Hawk to gain experience in textile industry and
production. She
says she prepared the lists and the document was given her
at the
Registrar’s office and she forged the signatures and signatories
were
purportedly signing as directors. She agrees the document is
quite
nonsensical though the intention was to defraud. She says
the Court is not
to ignore the probability that the document was
to defraud other people.
She says except the typing error on the
document she made no changes. She
says she has not seen second
respondent’s signature. She says signature by
first respondent
was made in her presence and knows first respondent from
1998-99
and she did not know if he knew company law though he said she
was
to prepare company documents and where to sign. She agrees there
is
no signature by transferors, something that is a requirement of
the law. She
says the document complies with the articles except
that transferors have
not signed. She says transferors were to
sign but how could they because

the documents were
fictitious? She says she forged but to an extend as the
whole
process was against her conscience. She says 1^st
respondent
instructed her what member of shares to transfer. She
says the document
wrong for transfer of fictitious shares not the
same as member of shares
transferred. Put to her she was expected
to do certain things but did others
she says she had a job and
cannot deny that the building was previously
occupied by Lesotho
Hawk; 1^st respondent was saying he would give her
an
allowance to cover her expenses since Lesotho Garments had not
started
operations. 1^st respondent was prepared to
provide the capital though it was
to be strictly between her, the
Chinese and 1^st respondent who agreed to
accommodate
her. She says she acted as she did for she trusted 1^st
respondent.

She has testified how long the training would take it
was not
specified; also they were not able to secure sponsorship
or guarantee. She
had worked for Lesotho Hawk before it was
liquidated and there was no
requirement for purchase of assets and
in any event the amount at the time
was not available. In 1999 2^nd
respondent had neither assets or liabilities
nor was there a share
capital. The witness has testified 1^st respondent had
said
he had a huge order from overseas but did not wish to register a new

company and
preferred to keep the name as it is. She says the things she did
were
surreptitious. 1^st respondent had worked at Lesotho Hawk
and then
with 2^nd respondent. She says she did what she
did hoping 1^st respondent
would accommodate her and was
prepared to lie to protect her interest.

Re-examined the witness has testified 1^st
respondent “got the money
before us” and having done so “drove
us out of the company”. She has
quoted section 232 of the
Companies Act, 1967. She has testified she did
the things she did
at 1^st respondent’s behest and she made the documents
to
enable 1^st respondent to cheat Basotho shareholders.
As to whether there
were minutes of the company, the witness has
said there were times when
they met informally. She says there
were directors at the formation of the
company and after
subscribing to the Memorandum and Articles of
Association there is
nothing required of subscribers to become members.
Applicants in
the counterclaim had closed their case and respondents in the
counter
claim had done the same.

Counsel had then urged the Court to incorporate the viva
voce
evidence into the rest of the case including Heads of
argument and to
adjudicate first the counterclaim. The court had
found, however, that

treating the
applications piecemeal would be a cumbersome exercise and
that the
best option was for the Court to decide the two applications
together
or as it were, pari passu. Be this as it may in
their Founding papers
applicants in the counterclaim and
respondents in the counterclaim have
taken certain points in
limine. I have checked my record and Heads of
Argument and
find that in addressing me and in the Heads point in limine
were
not specifically pressed. However, mindful of the fact that counsel
has
urged the court to consider the applications as a whole, I am
inclined to
consider points in limine taken though not pressed.
Mr. Buys for
respondents in the counter claim took quite a
number of points, namely:-
IN LIMINE

4.1

There is no urgency in this matter and there are no
allegations which
support the speculative and argumentative
reasons which are set out
in the Founding Affidavit. As will more
fully appear from this
Affidavit, both the 1^st and 5^th
Respondents have known, on their own
Affidavits, that the 2^nd
Respondent was trading since at least June,
1999 and they were not
involved in the trading activities of the 2^nd

Respondent. They
took no action whatsoever.

4.2

There is no evidence of the nature and extent of the
damages the
Applicants stand to suffer.

4.3

The applicants are not entitled to a Declaratory Order
as they have no
future or contingent rights to rely on and there
are no allegations to
support an allegation that such rights
exist.

4.4

The application is itself fatally defective in that none
of the
Applicants have any right in law to relief sought in the
Application
and there is no evidence to support such contention.

4.5

All the applicants are estopped from claiming to be
either
shareholders or directors of the 2^nd Respondent
or to be declared as
such.

4.6

There are no allegations which could support the Order
sought
declaring the Applicants as directors or that they should
be appointed
as directors.

4.7

1^st applicant failed to disclose vital
information to this Honourable

Court which may influence this court in coming to a fair
decision.
4.8

The applicants have no clear right in law to the assets
of the company.
4.9

The 5^th applicant is coming to court with
dirty hands on her own

admission, and is not entitled to any relief.
4.10

The applicants have misjoined the 5^th
applicant as a party to these

proceedings. This applicant should have been jointed as
a

respondent.
4.11

The application cannot be a Counter Application as the
5^th respondent

is not an applicant in the main application.

I was at this stage a little confused by use of terms
applicant and
respondent which are used interchangeably in the
main counter application
even after the counter application. I am
well aware though that times have
changed in preference in favour
of simple easier expression instead of

clogging the mind
with difficult terms and expressions; be this as it may, for
the
sake of convenience and better understanding, I choose to call
applicants
in the main application applicants-in-convention and
respondents
respondents-in-convention, while applicants in the
counter application will
be applicants-in-reconvention and
applicants in the main application
respondents-in-reconvention.

I do not think that points 4.1 to 4.9 have been properly
taken; all of
them except 4.1 are characterized by one common
feature: although taken
preliminarily, some are based on hard
facts and law making it difficult for
the court to decide them on
a single perspective. They cannot be and have
to be decided after
evaluating and taking into account all the evidence in
the
application. My strong view is that they have come
prematurely, except
perhaps 4.10 and 4.11 which I will treat
separately along with urgency.
Otherwise I am of the view that
points raised belong to the merits of this
application. As to
urgency, in so far as applicants-in-reconvention are
concerned, I
note, it does not appear that there is anything which calls
for
urgency on their part for the reason that it is common cause
as I have
observed above that except for subscribing to the
Memorandum and Articles
of Association, there has been no
association with the 2^nd respondent-in-

reconvention
regarding its growth and development. In fact by
applicants-
in-reconvention admission, they contributed nothing
material to the welfare
of 2^nd
respondent-in-reconvention and at this stage I fail to grasp
what’s
there, exactly, that stands to be lost should the
application not proceed
urgently. Indeed except
applicants-in-reconvention applying for funds and
failing, there
was nothing else forthcoming from them save as a result of
P.W.1
and 5^th applicant-in-reconvention’s activities which
actuated the four
applicants-in-reconvention to act against the
1^st, 2^nd and other applicants-in-
convention.
Except for P.W.1 and 5^th applicant-in-reconvention’s
activities
which, by P.W.1’s admission, involved forgery and
fraud, the rest of
applicants-in-reconvention seemed complaisant
and satisfied with the state
of affairs. I am not aware that
should the application not proceed at
urgent
applicants-in-reconvention are likely to be prejudiced or
suffer harm while,
on the contrary, 1^st
respondent-in-reconvention who has associated himself
with and
financially supported and developed the company stands to suffer
harm
should the application not be expedited. On this basis it would
seem
this application could well be thrown out save that this
court is not inclined
to do so just yet.

As for 4.10, 5^th applicant-in-reconvention is
not the original applicant

or respondent in
the main application and whosoever was desirous of
joining her to
the proceedings is entitled to do so though I am of the view
that
such a step is to be with leave of court. I do not know on what basis
5^th
applicant-in-reconvention was joined as such except
perhaps that she was
joined to bolster applicants-in-reconvention
with an Answering and
Supporting Affidavit and unless I am wrong,
applicants-in-reconvention
case has seemed to hinge on and revolve
around 5^th applicant-in-
reconvention’s evidence.
Accordingly, I am inclined to dismiss 4.10. As
for 4.11, I have
already said that applicants-in-reconvention are entitled to
co-join
parties but with leave of court though, it would seem, if they
are
dependent on a particular party for the sustenance of their
case, they are at
large to join such a party. I am also inclined
to dismiss 4.11.

Mr. Mda in the originating papers has also taken
a couple of points in
limine; they are:-
4.1

“The applicants have irregularly approached this
Honourable Court ex-
parte and obtained an interdict
without canvassing any jurisdictional
facts for such drastic
relief. Consequently, this application ought to be
dismissed with
costs on that ground alone.”

I couldn’t disagree more. 1^st
applicant-in-convention has a vested

right in the 2^nd
applicant-in-convention. 1^st Applicant-in-convention
was
apprehensive for, according to him, judgment by default was
obtained
against him in circumstances it should not have been
obtained against him
considering the defective service of summons.
What has compounded the
situation and increased 1^st
applicant-in-convention’s apprehension is that,
according to
him, and a fact not denied by respondents-in-convention is that
the
same court file in respect of which judgment was granted by default
is
missing and though 1^st applicant-in-convention is
desirous of rescinding the
judgment, as full facts are not
available to 1^st applicant-in-convention, he is
not
able to proceed with rescission of judgment and he fears, while the
court
file is at large respondents-in-convention may proceed with
execution much
to the prejudice of 1^st
applicant-in-convention. I cannot but dismiss this
point in
limine.
4.2

The applicant is guilty of non-disclosure of the
following facts:
That 1^st respondents together with 1^st
applicant and ‘Mamocha
Moruthane were original members of 2^nd
applicant and subscribers of
its memorandum and articles of
association as clearly evidenced by
copies of extracts of same
annexed hereto and respectively marked
G.M.L¹ and
G.M.L². On that ground alone this application ought to

be dismissed with
costs.

Well, since there are several applicants I don’t know
who “the
applicant is guilty of non-disclosure” is being
referred to although we will
give 1^st
respondent-in-convention credit and understand him as referring
to
1^st applicant.

In any event I don’t think so for the parties
mentioned are subscribers
to the memorandum and articles of
association and this is a notorious fact
common to 1^st
applicant and respondents and since the fact is common
knowledge
it does not require to be disclosed for to do so would be to
disclose
the obvious. I have also scrutinized GML¹ and GML²
(pages 65-
68) and nowhere have I found the subscribers and first
directors of the
company designated as “members”. This point
also stands to be dismissed.
4.3

Non-Joinder

The applicant has irregularly omitted to join ‘Mamocha
Moruthane as
a necessary party in these proceedings. Consequently
this application
is on this ground alone fatally defective and
flawed and ought to be

dismissed with
costs.

I will, like I did supra, assume that 1^st
respondent-in-convention is
referring to the 1^st
applicant-in-convention. In any event, I see no necessity
for the
1^st applicant-in-convention to have joined ‘Mamocha
Moruthane
since she is not a necessary party in 1^st
applicant-in-convention’s case and at
no stage of the
proceedings have applicants-in-convention joined ‘Mamocha
Moruthane
as one of them. There was no reason whatsoever and I don’t
think
there was any justification to foist ‘Mamocha Moruthane as one
of
applicants-in-convention’s group. People who laid a claim
against 1^st to 4^th
applicants in convention
were 1^st to 4^th respondents-in-convention
who
elected to join ’Mamocha Moruthane as a defendant in
CIV/T/45/2002.
That respondents-in-convention treated ‘Mamocha
as a defendant in no way
obliged applicants-in-convention to treat
her as such and this was testified
to by applicants-in-convention
omitting her in all their suits. Besides at no
stage did ‘Mamocha
Moruthane lay a claim against the applicants-in-
convention or
align herself with applicants-in-convention. How, then,
would
applicants-in-convention treat ‘Mamocha as one of them? It is
the
reason to dismiss this point.

I come now to the
merits of the counter application which reads as
follows:-
That
Rule Nisi be issued returnable on the date to be determined
by
the above Honourable Court calling upon 1^st, 2^nd,
3^rd, 4^th, 5^th and 6^th
Respondents
to show cause if any, why an order in the following terms shall
not
be made:-
(a) That the rules of Court as to form and service
be dispensed with on
account of the urgency of this matter.

That 1^st, 2^nd, 3^rd and
4^th Applicants be declared as bona fide members
of
the Board of Directors on 2^nd Respondent.

That 1^st and 2^nd, 3^rd
and 4^th Respondents be restrained from interfering
with
Applicants exercise of rights as members and directors of the
2^nd
Respondent.

That 1^st, 2^nd 3^rd and
4^th Respondents be restrained from interfering
with
Applicants exercise of rights as members and directors of the
2^nd
Respondent.

That 1^st, 2^nd, 3^rd and
4^th Respondents and (or any relevant

officials/employees
of the 2^nd Respondent be directed to account
to
Applicants/or Applicants authorized agent) for the amounts of
money
received and expended by them on behalf of the 2^nd
Respondent with effect
from 1999 to date of judgment of this
matter.

ALTERNATIVELY: Only in the event of the above
Honourable
Court rescinding the order in CIV/T/45/2002:
1^st, 2^nd, 3^rd, and 4^th
Respondents
be directed to give Applicants (or Applicants’ authorized
agent)
access to 2^nd Respondents’ books of account, bank
statements and all
documents reflecting 2^nd Respondents
financial status and day to day
transactions; on such dates and
time as may mutually be agreed upon
between the parties or
appointed by the 5^th Respondent in the event of
the
parties failing to agree thereto pending the determination of
CIV/T/45/2002.

That 1^st, 2^nd, 3^rd and
4^th Respondents be restrained and interdicted
from
removing and/or transferring any of the assets or documents of
2^nd
Respondent from the jurisdiction of this Honourable
Court other than in the
normal course of 2^nd
Respondents’ business pending the determination of
this
application.

That 1^st,
3rdand 4^th Respondents be directed to pay costs of
this
application and 5^th and 6^th Respondents
to pay costs only in the event of
contesting the same.

That Applicants be granted further and/or alternative
relief.

2. That prayers 1(a) and (g) operate with
immediate effect as an interim

interdict.

As remarked above, I now wish to traverse the above
application
much as it seems to me applicants-in-reconvention have
largely depended
on P.W.1 and 5^th applicant ‘Mamocha’s
testimony and evidence as a whole.
This witness was to
applicant-in-reconvention a kingpin, a battering ram so
much so
that, but for her, I doubt this application would have seen the
light
of day. As for her evidence, it was false, I found her to be
liar, a cheat, a
self-confessed forgerer, fraudster, manipulator,
simulator, perfidious with
machinations of a Cassius. I have not
believed her evidence a whit and
have thrown it out with the
contempt it deserves.

Mr. Mda for the applicants-in-reconvention has
submitted at least 1^st
applicant-in-convention should
have been called to contradict P.W.1, 5^th

applicant-in-reconvention.
He has also submitted applicants-in-
reconvention by virtue of
having subscribed to the Memorandum and
Articles of Association
this made them full members and shareholders of the
2^nd
Respondent-in-reconvention and they needed do nothing more in
terms
of the Companies Act, 1967.

Mr. Mda in his Heads of Argument and before me
has contended that
applicants-in-reconvention right to the
membership and shareholding of the
2^nd
respondent-in-reconvention has not been disturbed and since they have
a
clear right, an injury actually committed or reasonably
apprehended and
having no other satisfactory remedy, that their
counter application be
granted as they are interested parties in
the company, entitled to the
administration, assets and dividends
of the Company. He has also
submitted there was no waiver by
applicants-in-reconvention of their rights
in the 2^nd
respondent-in-reconvention.

In the first place, I must answer whether
applicants-in-reconvention
were deprived of their shareholding in
2^nd respondent-in-reconvention. My
answer to this is
that they were not for I have not believed P.W.1 ‘Mamocha
a
liar, cheat and forger who, by her own admission, lied to protect own

interest as she
testified. I may add that not only applicants-in-reconvention
were
purportedly deprived of their alleged shareholding including
P.W.1
‘Mamocha, but that 1^st
respondent-in-reconvention was also purportedly
deprived of his
shareholding and have wondered how, in allegedly
depriving others
of their shareholding 1^st respondent-in-reconvention
can
also turn on himself and deprive himself of his shareholding.
This is the
reason, amongst others, to reject P.W.1 and 5^th
applicant-in-reconvention’s
evidence that in her scheme she was
in complicity with 1^st respondent-in-
reconvention for,
instead, it is patently clear that P.W.1 ‘Mamocha engaged
in the
insidious exercise alone, lied and forged “to protect own
interests” as
she claimed in her evidence. I may add I do not
comprehend how anybody
could have been called upon to contradict a
self-confessed liar. I am not
repeating myself, this is for the
sake of emphasis.

A cursory look at GML⁴ at p.39 of the record
shows that not only was
there an attempt to deprive
applicants-in-reconvention of what shareholding
they had, and
attempt was also made to deprive 1^st
respondent-in-
reconvention and P.W.1 and 5^th
applicant, how could 1^st respondent-in-
reconvention
submit to depriving his confidant (5^th applicant) and
himself of
his shareholding? It’s all spoof and P.W.1’s and
5^th applicant-in-

reconvention’s
allegations against the 1^st respondent-in-reconvention
are
rejected with the contempt they deserve. I also do not
comprehend the
relationship between P.W.1 ‘Mamocha and the
applicants-in-reconvention.
1^st
applicant-in-reconvention does not say who provided or furnished
him
with information of ‘Mamocha’s and 1^st
respondent-in-reconvention’s
scheme to deprive them of their
shareholding, and yet both P.W.1 and 1^st
respondent-in-reconvention
were reported to the police the result of which
was
applicants-in-reconvention (without ‘Mamocha) issuing
summons
against respondents-in-reconvention and yet, by all
accounts, had
‘Mamocha not acted as she did, chances are the
status quo regarding the 2^nd
respondent-in-reconvention
vis-à-vis 1^st respondent-in-reconvention
could
have been maintained. The question is also why did
applicants-in-
reconvention at first ignore ‘Mamocha and
suddenly accept her in their fold
relying on her Answering
Affidavit and Supporting Affidavit for the
sustenance of their
counter application? Why was the fact that
1^st
respondent-in-reconvention was being deprived of
his shareholding gloated
over making it look as if he was
interested only in applicants-in-
reconvention shareholding?

As for waiver, I have no doubt in my mind that
applicants-in-

reconvention had
waived whatever interest or rights they had in the
2^nd
respondent-in-reconvention for from the time of
registration and when
applicants-in-reconvention failed to raise
the capital sum required plus
security they seem to have been
inactive and passive their interest suddenly
ignited by P.W.1 and
‘Mamocha’s machinations, indeed but for her antics it
does not
appear that applicants-in-reconvention would have risen to
the
occasion as they did. It is this business of running with the
hares and
hunting with the hounds that surprises one in the
relationship between
P.W.1 ‘Mamocha and 1^st
respondent-in-reconvention on the one hand,
and
applicants-in-reconvention on the other.

I must now answer the crucial question whether
applicants-in-
reconvention are members, shareholders and
directors of the 2^nd respondent
and entitled to the
relief they seek. It is common cause that applicants-in-
reconvention
subscribed to a Memorandum of Association and Articles
of
Association. Mr. Mda has contended this entitles them
not only to
membership of the company but also to its shareholding
and as they have a
clear right, an injury committed or reasonably
apprehended with no
alternative satisfactory remedy, they are
entitled to the relief they seek.

In forming the
Company, applicants-in-reconvention including
1^st
respondent-in-reconvention subscribed to Memorandum
and Articles of
Association and the subscribers became, as is
usually the case, first directors
of the company. With respect, it
does not appear that meetings of the
company were held for
official administration of the company save
that
applicants-in-reconvention sought capital for the development
of the
company. Actually after this failure
applicants-in-reconvention seem to
have disappeared from the scene
in so far as their relationship with the 1^st
and 2^nd
respondents-in-reconvention is concerned. It has been represented
on
behalf of applicants-in-reconvention that as soon as 1^st
respondent-in-
reconvention secured funds for the running of the
2^nd respondent-in-
reconvention,
respondents-in-reconvention made things difficult
for
applicants-in-reconvention by sidelining them or kicking them
out of the
administration of the 2^nd
respondent-in-reconvention.

I cannot disagree more for if so
applicants-in-reconvention should
have appealed to the Registrar
of Companies for resolution of their problem.
I have said that
applicants-in-reconvention claim to be both members and
shareholders
of the 2^nd respondent-in-reconvention. It could well be
they
are members; but I doubt they are shareholders. Strange
things appear to

have taken place in
the formation of the 2^nd respondent-in-reconvention.
To
Memorandum of Association is annexed a document (page 34)
showing
subscribers and number of shares taken and against each
subscriber appears
“Number of shares taken by each subscriber”
and they are 100 against each
subscriber. I doubt the format.
Normally in the formation of a company
subscribers subscribe to
Memorandum and Articles of Association by
allotting themselves any
number of shares to obviate registration of the
company and once
registration has been completed administrative
requirements as
envisaged by the Companies Act take place such as keeping
a
register of members and a minutes book. Members are reflected in
the
Register of Company, directors are chosen e.g. the Chairman,
Managing
Director and Secretary who is in charge of the minutes.
It is in Company
meetings that business of the company is
transacted such as allocation of
shares and payment of shares
taken in cash or kind. All these do not appear
to have featured in
the business of the 2^nd respondent-in-reconvention.
Apart
from this, shares are as a rule allotted as to number taken and
the
value thereof, e.g. 10 shares of R1 each. The allottee would
then prefer to
pay the shares allotted for cash or only for a
portion of the original allotted
shares. If he does so, he is a
shareholder in the proportion of shares paid
for, otherwise he is
not a shareholder. Shares in a company are not paper

shares, they are
debentures and stock denoting that it’s so many shares of
R1
each as the case may be. Shares are of value. The reason they are
sold.
You cannot sell or be deprived of something that is not of
value in money
terms in a company constituted as the 2^nd
respondent-in-reconvention.

The dictionary meaning of subscribe (Oxford Illustrated)
is: “write
(one’s name) at foot of document, sign one’s name
to document, signify,
assent or adhesion by signing ones name, put
one’s signature to in token of
assent, approval; express one’s
agreement; enter one’s name in list of
contributors; make or
promise a contribution, contribute (specified sum) to
or to common
fund, society, etc., or for common object, raise or guarantee
raising
of by subscription thus; subscribe to, undertake to buy
(periodical)
regularly.” Subscription to Memorandum and Articles
is no more than an
agreement, and undertaking by subscribers to
buy shares at some future time
if they have not been purchased on
subscribing to the Memorandum and
Articles aforesaid. It has to be
to augment capital of the company for if not
how can a company
operate and function without capital? In this
application, it is
the same subscriber who became first directors of the
2^nd
respondent-in-reconvention and it stands to reason
that if they did not
contribute a specified sum of money to the
common fund or capital of the

2^nd
respondent-in-reconvention, they cannot be and are not shareholders
of
the 2^nd respondent-in-reconvention.

The problem with applicants-in-reconvention’s case is
that the shares
taken, not only were they of no value and not
indicating the rate at the time
of subscription to the Memorandum
and Articles of Association, there was
also no indication of when
they became due. How could they be for
applicants-in-reconvention
simply subscribed to nameless and faceless 100
shares? As I have
said above, the while applicants-in-reconvention
subscribed to the
Memorandum and Articles of Association, this was merely
an
agreement, “token of assent and approval to form a company with
no
shares offered as is contemplated by the Company’s Act. It is
hardly
surprising applicants-in-reconvention names don’t appear
in the Register of
Companies. The shares, if any, were never
deprived nor were they
transferred for the reason that, in my
opinion, no such shares worthy of
transfer were in existence. This
is so because 100 shares is quite
meaningless nor has the
deficiency been cured by P.W.1 ‘Mamocha’s
evidence who kept on
referring to 100 shares.

Annexures GML⁴ and GML⁵ were a
hopeless mess for the attempt

was to transfer
M600.00 to 3^rd and 4^th
respondents-in-reconvention
respectively and yet the so-called
shares allocated (p.34 of the
Counterclaim)
applicants-in-reconvention and 1^st
respondent-in-
reconvention were “600 shares”. How could 600
alleged shares suddenly
became 1,200 shares? In any event how can
100 shares in page 34 suddenly
become M600.00 or “fully paid
shares of M2 (two Maloti) when the
founding document (p.34) made
no reference to the value of shares taken?
How can purely 600
shares (p.34) suddenly materialise into “M600.00 or
fully paid
shares of M2? When were these shares paid and where’s the
evidence
that they were paid? In my view annexures GM⁴, GM⁵,
and C
have done nothing to cure the defect in the subscribers
document on page 34
aforesaid. This court is not prepared to read
in between lines or draw
inferences for these cannot be drawn in
circumstances where there should
have been evidence or evidence is
available. Contents of document on page
34 aforesaid and contents
of annexures GML⁴, GML⁵, B and C are
so
conflicting, they are irreconcilable.

There is, indeed, authority for the proposition that, as
Mr. Mda has
correctly submitted, once a Memorandum and
Articles of Association have
been subscribed to and shares
allotted that is all that is required for where

subscribers have
been allotted specific shares it could well be that they have
paid
these before the subscription aforesaid and not having paid them
calls
are made for payment and failing payment share are
forfeited. In the instant
case there were no specific identifiable
shares issues for which calls could
be made and no wonder P.W.1
‘Mamocha engaged in her skewed feats of
manipulation and deceit.
I am of the view that while applicants-in-
reconvention by virtue
of signing the Memorandum and Articles of
Association may be
termed members of the 2^nd
respondent-in-reconvention,
cautions of the concession as I am,
they are nevertheless not shareholders of
the 2^nd
respondent-in-reconvention at all. This decision would, it
would
seem, also count against the 1^st
respondent-in-reconvention or does it? I
don’t think so for I am
of the view that by reason of his capital injection in
2^nd
respondent he is to be treated as shareholder and director of
2^nd
respondent-in-reconvention (cf Ex parte
Liquidators Curlewis Citrus
Growers’ Co-operative Co.
Ltd., 1935 T.P.D. 389).

Even if I am wrong that by reason of applicants-in
reconvention
having merely subscribed to the Memorandum and
Articles of Association
while they are members of the 2^nd
respondent-in-reconvention they are not
shareholders thereof, both
Mr. Buys and Mr. Mda have prevailed on me to

advert to Moosa
v. Lallo and Another, 1957 (4) SA 207 (O.P.D.) for a
sound
decision in this application. At first I was a little
skeptical but having read
the case I am to thank them because they
could not have done me a better
boon. According to the case, once
shares have been allotted this is enough
for they would have been
paid before or become due. Caney, J. in the above
case does not
seem to have been influenced by non-compliance with the
Companies
Act regarding the keeping of a register of allotments at
its
registered office for these considerations do not affect the
existence or
validity of the allotment or “issue of shares to
the plaintiff (p.220). Further,
it is normally contemplated that a
shareholder will pay the price of his
shares in cash upon
allotment or before issue of certificate though all this is
a
matter of agreement between the parties. Moreover, there is a also
need
for a shareholder to pay to the company money to meet his
subscription to
the capital of the company (pp 220-221). It is,
having regard to the
judgment in Moosa’s case above that in
order to be a shareholder, it is a
condition precedent that a
shareholder will pay the price of his shares in
cash upon
allotment or before issue of certificate although this is a matter
of
agreement between the parties, between parties meaning, in my
view, in a
meeting of shareholders as I have indicated above.
Applicants-in-
reconvention, did not pay their “shares in cash”
upon allotment nor were

there meetings by
shareholders to determine payment of shares quite apart
from the
fact that shares allotted applicants-in-reconvention were
faceless
and undeterminable; this, notwithstanding
applicants-in-reconvention’s case
that payment of shares was not
called for in terms of the Company’s Act. I
have already
rejected this contention for reasons stated above. In the
unlikely
event applicants-in-reconvention paid their shares, the onus is
on
them to establish the fact and they failed to do so. And,
according to Motor
Fund Corporation (in Liquidation) v. Linden
Bros., 1927 NPD 279 if a
shareholder pays for some only in
cash, to that extent he had, in any event, a
shareholding in the
company. It becomes potently clear that for one to be a
shareholder
in a company, he must pay his shares or some of them in cash
and
only then does he become a shareholder apart from the fact that
by
agreement of parties cash in kind i.e. services or property may
act in lieu of
cash payment. None of these requirements are
associated with applicants-
in-reconvention for in their case
having failed to raise capital or security it
appears it was for
them tools down expecting that as they had subscribed to
the
Memorandum and Articles of the 2^nd
respondent-in-reconvention they
were, afterall, members and
shareholders in 2^nd respondent-in-reconvention.

According to authorities quoted by Caney J. on p.221 of
Moosa’s

case above,
entry on the register has to do with membership of a company
and
compliance with requirements of the Companies Act (a requisite
with
our Companies Act, 1967) though the act must be seen as no
more than
sheer formality for, what makes one a shareholder is
payment of shares. On
the same page, namely p.221, Caney J.
returning to two cases quoted by Mr.
Pretorius being Doornkop
Sugar Estate Ltd. v. Maxwell and others, 1926
WLD, 127 and
Nicol’s case, 29 Ch. 421at pp.426 and 427 said as he
understood
the cases, entry on the register is required to make a person
a
member of the company. He has further said but he does not
understand
“allotment to him to be incomplete, nor that he is
denied the rights inherent
in his shares if, in consequence of the
allotment, he has paid what is due to
them and the company
has issued him with a share certificate ----” (my
emphasis).

I understand the learned Judge to say that entry in the
register though
a sheer formality, it is required to make one a
member of the company
though he does not understand the allotment
to be incomplete nor is he, by
so doing, denied rights inherent in
his shares if, in consequence of the
allotment, he has paid his
shares and been issued a share certificate so that it
seems to me
the first step is allotment of shares. Then comes entry into the

register of members,
payment of shares (if not already paid at time of
registration of
company) and last issuance of a share certificate.

The problem with applicants-in-reconvention is that I do
not take
“number of shares taken by each subscriber as 100” or
anything to that
effect as having taken shares in the 2^nd
respondent-in-reconvention because
nothing signals that such
shares were taken since they are neither
identifiable nor of
value. My view is that at time of registration of the
2^nd
respondent-in-reconvention
applicants-in-reconvention took no shares at all
in the 2^nd
respondent-in-reconvention. If applicants-in-reconvention took
no
shares in 2^nd respondent-in-reconvention, how could they
be entered into
a register of members? Even if they took shares,
there is no evidence that at
any stage of 2^nd
respondent-in-reconvention they “paid what is due to
them”,
the reason applicants-in-reconvention were not issued with and
could
never be issued with share certificates. It boggles the mind
how
applicants-in-reconvention having not paid their dues, not
having been
entered into the register of members of the 2^nd
respondent-in-reconvention
and not issued with share certificates
could transfer their shares to the 3^rd
and 4^th
respondent-in-reconvention or anybody else? By their own
admission
though, applicants-in-reconvention have not paid so-called shares

allotted them
because this was not necessary; it follows that not only are
they
not members of the 2^nd respondent-in-reconvention, they
are not its
shareholders either and consequently as was said in
Randfontein Estates Ltd
vs. the Master, 1909 T. S. 978 at pp. 981,
982 shares “are simply rights in
action ---- jura in personam
----entitling their owner to a certain interest in
the
company, its assets and dividends.”

As to applicants-in-reconvention including the 5^th
applicant-in-
reconvention ‘Mamocha Moruthane, as they have no
right in action ---- jura
in personam entitling them to any
interest in the 2^nd respondent-
reconvention, its
assets and dividends, I do not see how their declaratory
order can
be entertained for a declaratory as to ownership must show a
clear
sight on the part of an applicant and where such a clear
right does not exist,
the declaratory cannot but fail.

I come now to the Main Application or
Application-in-convention in
which applicants have approached this
Court for an order in the following
terms:

1. Directing that the Rules regulating service of
process be dispensed
with and that this Application be heard as an
urgent application.

2. Directing that any execution of an Order of this
Honourable Court

dated the 29^th
April, 2002 in CIV/T/45/2002 be stayed pending the
outcome of this
application, criminal proceedings instituted against
the 1^st
Applicant and the outcome of an action the Applicants intent
to
institute against the Respondents in due course.

3. 
   Interdicting and restraining all the Respondents from
   entering the
   business premises of the 2^nd Applicant
   for any reason whatsoever
   and/or in any way to interfere with,
   obstruct or adversely influence
   the conduct of its business
   pending the outcome of this Application.

   
   

4. 
   Interdicting and restraining any of the Respondents
   from exercising,
   executing or doing anything as alleged
   shareholders or directors of
   the 2^nd Applicant, or to
   perform any act or duty or omit to do so as a
   director of the 2^nd
   Applicant.

   
   

5. 
   Directing that a Rule Nisi be issued calling
   upon the Respondents to
   show cause on a date to be determined by
   this Honourable Court why
   this Order should not be made a Final
   Order of Court and why the
   Respondents should not be ordered to
   pay the costs of this
   Application jointly and severally, the one
   to pay the others to be
   absolved.

   
   

6. 
   Directing that paragraphs 2, 3 and 4 operate with
   immediate effect as
   an Interim pending the outcome of this
   Application.

   
   

7. 
   Granting leave to the Applicants to approach this
   Honourable Court
   on the same papers, duly supplemented where
   necessary for an Order
   rescinding the default 2002 on the 15^th
   April, 2002.

   
   

8. 
   Granting leave to the Applicants to defend the action
   instituted in
   CIV/T/45/2002.

   
   

9. 
   Granting such further and/or alternative relief as this
   Honourable
   Court may deem necessary in the circumstances.

   
   

In support of their case the Founding Affidavit of the
1^st applicant-in

convention was
lodged in personal capacity of the 1^st
applicant-in-
convention who has claimed at paragraph 3 that the
affidavit is deposed to
in his capacity as a director and duly
authorized representative of the 2^nd
applicant his
authority emanating from his position as Managing Director of
the
2^nd applicant to attend to day to day business affairs of
the 2^nd Applicant
and “attending to legal matters of
this nature.”

At paragraph 4 he has said he was not able to convene a
meeting of
directors though he confirms such a meeting will be
held within the next
day or two for verification of his authority
and a Resolution to the effect.

Whilst I am at this juncture, it does appear that a
resolution of
company was passed on 20 May, 2002 with reference to
paragraph 4 above.

At paragraph 9 the deponent has deposed he conducts the
business of
2^nd applicant and is in charge of daily
manufacturing process and complete
business of the 2^nd
Applicant and knows what transpires in the factory on a
daily
basis.

He was called to the CID office and there informed a
case of fraud

was being
investigated against him. He had been told to report at
Magistrates
Court where he reported and was charged (paras. 10-12). On
leaving
court he had found a document at the factory of 2^nd
applicant, as
document purported to be a court order. It surprised
him. He had consulted
his attorneys who informed him some process
must have been served before
the order could be granted. Action
had been instituted against him and
others in CIV/T/282/2001 and
although he defended the action plaintiff had
withdrawn the action
and tendered costs which had not been paid and a
Warrant of
Execution had been issued for recovery of costs. He has claimed
the
dispute before court is the same as in CIV/T/282/2001 which
was
withdrawn and costs were outstanding and he is advised
respondents cannot
proceed with a new case before settling costs
in a previous action and in any
event has preferred “to leave
the matter at that.” I might at this juncture butt
in to say it
appears this is something the applicant is not disposed at present
to
have decided by this Court (see paras 13-17 of Founding Affidavit).

1^st applicant has deposed when his legal
representatives attempted to
find the Court file they could not
find it and to date the file is missing and
applicants have not
been able to peruse the file and establish on what basis
the
judgment was granted. He had caused further investigations and a copy

of the Summons and
Return of Service was found. I will assume that
reference here is
to CIV/T/45/2002 (paras. 18-20). According to 1^st
applicant
the Summons was not properly served for the reason that:

3. 
   The return of service is defective and does not comply
   with Rules
   of Court.

   
   

4. 
   Summons does not set out residential or business
   address of either 3^rd
   or 4^th respondents
   claiming the particulars to be unknown yet 5^th
   respondent
   claiming to have served Summons at the registered office
   of 2^nd
   applicant contrary to provisions of Rule 4 (a) and (b).

   
   

I will also assume that 3^rd and 4^th
respondents is reference to 3^rd and
4^th
applicants.

3. 
   1^st applicant claims the Summons was not
   served personally on him
   but in terms of the Return of Service at
   the registered office of the 2^nd
   Applicant.

   
   

4. 
   The Return of Service does not allege service took
   place at 1^st
   applicant’s place of employment, place
   of business or residence of
   any person who is in charge of the
   premises at the time of delivery
   and apparently of sixteen years
   or over.

   
   

5. 
   The alleged service on 2^nd applicant is
   defective not having been

   
   

effected by
delivering a copy of process to some responsible
employee at the
registered head office of the 2^nd applicant the Return
of
Service failing to identify the person upon whom service was
effected
(paras 21-22).

At paragraph 23 1^st applicant alleges 3^rd
and 4^th applicants were not in
Lesotho and service
could not have been on the reception or receptionist
because 2^nd
applicant has neither of these.

At paragraph 25 1^st applicant asks for
rescission of judgment in that
judgment was erroneously sought and
granted in absence of applicants.
Judgment a patent error and
granted by a mistake common to both parties.
At paragraph 26
because judgment a nullity it does not change the de facto
control
over the affairs of the 2^nd applicant and Board of
Directors and
applicants not barred from taking decisions in
respect of the business of the
2^nd applicant.

At paragraph 27 the deponent has deposed there may be
more
information from the Court file once it is discovered and
applicants may
decide to approach Court with supplementary
affidavits and apply for leave

and are prejudiced
by the fact that the court file is missing.

At paragraphs 28 and 29 1^st applicant
expresses the view that criminal
proceedings are pending before
court in respect of himself and ‘Mamocha
and it may take time
before the criminal case is heard and fate of the
accused is
decided and in the meantime respondents may attempt to levy the
order
which they obtained and take over the business of the 2^nd
applicant.
At paragraph 30 he says 2^nd applicant
employs 4000 employees for the
manufacture of clothing and other
textile products for the export market and
interruption with the
business of 2^nd applicant could cause much loss
to
shareholders and employees and paragraph 31 prays that
execution be
stayed pending the result of the present application
and the criminal
proceedings instituted. He has said at paragraph
32 that balance of
convenience favours applicants that execution
be stayed as respondents
cannot be prejudiced by stay of execution
and that stay of execution also
favours respondents. So far as
rescission of judgment is concerned, it could
seem applicant is
disposed to have the matter heard not now but in due
course.

I have already dealt with preliminary objections and at
paragraph 8.1
the deponent Makhamisa G. Lets’oara says there was
proper service in

CIV/T/45/2002. All I
have to decide in this application is in my considered
opinion
whether in CIV/T/45/2002 there was proper service on defendants
for
if the service was proper I have no reason to grant orders prayed
for; on
the other hand if service is irregular there is reason to
grant the application
as in the application for rescission of
judgment applicants may well succeed.

What is disturbing though is pagination in this
application. It is of
the utmost importance that original
documents be filed together and copies
together. More often than
not original papers are not filed at all. The
problem is where
this happens the court may inadventurously deal with
copies with
little information as to precise information as contained in
original
documents. Perhaps the problem in the instant application is
that
some documents were unearthed when a paginated record had
been
compiled; even so, an effort is to me made to ensure that
original documents
are incorporated. The result could have been
shattering had the court not
fortuitously stumbled on the original
Return of Service, for otherwise the
Court would have depended,
for its judgment, on a copy of the return of
service instead of
the original return. Moreover, what appears to be copy of
the
Return of Service is filed with the paginated record in the
main
Application and original Return of Service is not paginated
but filed with

summons in
CIV/T/45/2002 and the Court Order. The original Return of
Service
should have been filed with the paginated record as I have said.
The
original is endorsed at the back, writing on both the original and
copy
appears to be the same though for my inquiries I will prefer
to depend on the
original copy which reads: I served 1^st,
2^nd, 3^rd
and 5^th defendants
by
delivering summons upon the receptionist at their respective
work place on
the registered offices of the 5^th
defendant situated at site. The date is 14
February, 2002 and the
Return of Service is signed 12/03/02. The
endorsement at the back
of the Return of Service reads:-
“Whereas I served 6^thand
7^thdefendants at their respective offices, I
4^thdefendant
by delivering process upon ‘Mamating an adult
who resides in
same premises as 4^thdefendant at Lower Thamae urban
area.”

I have no quarrel with the later service for it appears
proper and in
accordance with rules appertaining to service of
process. As for face of the
Return of Service, I am wondering why
service in respect of 1^st, 2^nd 3^rd
and
5^th defendants was on the undisclosed receptionist
and why, unlike service
at the back of the Return of Service T.
Faro the Deputy Sheriff did no record
on whom service was effected
and his/her age was not shown as he did in
respect of service to
4^th, 6^th and 7^th defendants. In any
event, if defendants
were present, why was service not effect on
them personally instead of
substituted service? It is resorted to
where the whereabouts of defendants or

parties is unknown
or cannot be found. And yet in his Supporting Affidavit
the Deputy
Sheriff Ts’olo Faro has deposed at paragraph 3(a) that on 30
July,
2001 he was in company of his colleague T. Leraisa who had gone
to
serve a process on applicants and were escorted from the gate
of 2^nd
respondent’s premises to the latter’s
registered office manned by an adult
Chinese lady and having
explained purpose of their visit she called 1^st
applicant
from some office. After some explanations Leraisa had served
summons
upon the 1^st applicant on behalf of the rest of the
applicants
(defendants therein. At paragraph 3(b) he says on the
14 February, 2002
accompanied by 1^st respondent he had
proceeded to premises of 2^nd
applicant to effect
service in CIV/T/45/2002 and they were escorted to the
registered
office of 2^nd applicant where a Chinese lady was in
control of the
office and on the basis of 1^st
applicant’s explanation as to their relationship
with 2^nd
applicant coupled with the fact that the Chinese lady
(receptionist)
was in control of the office he served the summons
on her on behalf of 1^st to
4^th applicants. I
cannot accept this mumbo jumbo, it’s if anything, farcical.
Why
did he not serve the summons on 1^st applicant as he had
done in
presence of Leraisa? In any event what’s mysterious or
unacceptable about
mentioning the name of the Chinese lady he
served the process on? The law
requires the name and age of the
person on whom process is served for the

reason that should
there be a squabble about the individual on whom
process was
served, he or she can always be called to testify. The only
reason
Ts’olo Faro withholds or withheld the name of the so-called
Chinese
receptionist is because there is no such Chinese
receptionist at premises of
the 2^nd applicant. On this
ground alone I reject the contention that service
was effected on
1^st, 2^nd, 3^rd and 5^th
defendants.

In so far as the counter application is concerned, I
have already said
that it is not a question of subscription to the
Memorandum and Articles of
Association and allotment of shares
that make one a shareholder in a
company but payment of a specific
number of shares that make one a
shareholder. As I have already
remarked, I wonder what sort of certificate
would be issued
applicants-in-reconvention since they have not purchased
shares
entitling them to the issuance of a share certificate?

I repeat, in Randfontein Estates Ltd. vs. The Maser,
1909 TS 978
pp. 981 982 Innes, CJ, as shown above, is said to have
found “shares” are

simply rights of action – jura in personam
entitling their owner to a

certain interest in the company its assets and
dividends. Since applicants-
in-reconvention namely Graham
Makhamisa Lets’oara, Dr. Ts’iu Makakole,

Sebala Lets’oara,
Thulare Moruthane and ‘Mamocha Moruthane have not
paid their
shares, they have no rights of action jura personam entitling
them
to certain interest in the 2^nd
applicant-in-convention (2^nd respondent-in-
reconvention),
its assets and dividends and accordingly the counter
application
is dismissed with costs to the 1^st and 2^nd
applicants-in-
convention (respondents-in-reconvention
respectively). The main
Application or Application in-convention
is granted with costs though such
costs are to be costs in the
counter application.

G. N. MOFOLO
JUDGE

For the Applicants : Mr.
Buys