CIV/APN/242/02

In the matter between:

JOHN CHING FANG LEU
LESOTHO PRECIOUS GARMENTS
(PTY) LIMITED
PAI YUN-HSIA
TSAI CHUN HSIA

1^stApplicant

2^ndApplicant
3^rdApplicant
4^thApplicant

GRAHAM MAKHAMISE LETS’OARA
DR. TSIU MAKAKOLE
SEBALA LETS’OARA
THULARE MORUTHANE
DEPUTY SHERIFF FARO

1^st Respondent
2^nd Respondent
3^rd Respondent
4^th Respondent
5^th Respondent

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

For the Respondents

:

Mr. Mda