CIV/APN/242/02

IN THE
HIGH COURT OF LESOTHO

In the
matter between:

JOHN
CHING FANG LEU 1stApplicant

LESOTHO
PRECIOUS GARMENTS

(PTY)
LIMITED 2ndApplicant

PAIYUN-HSIA
3rdApplicant

TSAI CHUN
HSIA 4thApplicant

AND

GRAHAM
MAKHAMISE LETS'OARA 1stRespondent

DR. TSIU
MAKAKOLE 2nd Respondent

SEBALA
LETS'OARA 3rd Respondent

THULARE
MORUTHANE 4th Respondent

DEPUTY
SHERIFF FARO 5th Respondent

JUDGMENT

Delivered
by Honourable Mr. Justice G. N. Mofolo On the 17th day of March. 2005

This
matter commenced on 16 February, 2004 but was postponed to 25th
February, 2004 as the instructing attorney Mr. Buys was desirous
of
instructing senior counsel. The matter was postponed with wasted
costs to applicants.

On 25
February, appeared both Mr. Mda and Mr. Fischer who stated as there
is a counter application it is the counter application
that is before
court in which applicants are seeking a declaratory.

2

Mr. Mda
had submitted applicants were seeking membership and directorship of
the 2nd respondent, the declaratory relating to Ist
and 2nd
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,

3

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 1st respondent, and what brought them
together was formation of the company Lesotho Precious
Garments (2nd
respondent) a company registered by herself in October, 1988 whose
shareholders were 1st respondent, 1st - 5th 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 1st respondent signed as transferee and
this was witnessed The 3 witnesses were only
witnesses. Tsai
Chun-Hsia has not signed the document and

4

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 1st 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 1st 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 2nd 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 1st 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 1st 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

5

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 1st 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 1st 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

6

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
1st 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 2nd 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 1st 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

7

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 1st 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; 1st respondent was saying he would give her
an allowance to cover
her expenses since Lesotho Garments had not
started operations. 1st respondent was prepared to provide the
capital though it was
to be strictly between her, the Chinese

8

and 1st
respondent who agreed to accommodate her. She says she acted as she
did for she trusted 1st 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 2nd respondent had neither assets or
liabilities nor was there a share capital. The
witness has testified
1st 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. 1st respondent
had worked at Lesotho Hawk
and then with 2nd respondent. She says she
did what she did hoping I1st respondent would accommodate her and was
prepared to lie
to protect her interest.

Re-examined
the witness has testified 1st 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 1st respondent's
behest and
she made the documents to enable 1st respondent to cheat Basotho
shareholders. As to whether there were minutes of the
company, the
witness has said there

9

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:-

10

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 1st and 5th Respondents have known,
on their own
Affidavits, that the 2nd Respondent was trading since at least June,
1999 and they were not involved in the trading
activities of the 2nd
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

11

All the applicants are estopped from claiming to be either
shareholders or directors of the 2nd 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

1st 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 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 5th applicant as a party to these
proceedings. This applicant should have been jointed as a respondent.

4.11

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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

13

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 2nd respondent-in-reconvention
regarding its growth and development. In
fact by
applicants-in-reconvention admission, they contributed nothing
material to the welfare of 2nd 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 foiling, there was
nothing else forthcoming from them save as a result
of P.W. 1 and 5th
applicant-in-reconvention's activities which actuated the four
applicants-in-reconvention to act against the
1st, 2nd and other
applicants-in-convention. Except for P.W. 1 and 5
applicant-in-reconvention' s activities which, by P.W.l'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, 1st respondent-in-reconvention who has
associated himself with and financially supported

14

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.

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 5th
applicaut-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 5th 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
lea\e 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:-

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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. 1st applicant-in-convention has a vested
right in the 2nd applicant-in-convention. 1st 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 1st
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 1st applicant-in-convention is desirous of rescinding the
judgment,
as full facts are not available to 1st
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 1st 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 1st respondents together with 1st applicant and 'Mamocha

Moruthane were original members of 2nd applicant and subscribers

16

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 1st respondent-in-convention credit and
understand him as referring to 1st 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 1st 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

17

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 1st respondent-in-convention is
referring to the 1st applicant-in-convention. In any event,
I see no
necessity for the 1st applicant-in-convention to have joined 'Mamocha
Moruthane since she is not a necessary party in
1st
applicant-in-convention's case and at no stage of the proceedings
lave 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 1st
to 4 applicants in convention were 1st to 4th
respondents-in-convention
who elected to join 'Mamocha Moruthane as a
defendant in CrV7T/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.

18

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 1st, 2nd, 3rd, 4th,
5th and 6th
Respondents to show cause if any, why an order in the following terms
shall not be made:-

1. That
   the rules of Court as to form and service be dispensed with on
   account of the urgency of this matter.

   
   

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

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

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

That 1st,
2nd, 3rd and 4th Respondents and (or any relevant officials/employees
of the 2nd Respondent be directed to account to
Applicants/or
Applicants authorized agent) for the amounts of money

19

received
and expended by them on behalf of the 2nd 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: 1st, 2nd, 3rd, and 4th Respondents
be directed to
give Applicants (or Applicants' authorized agent) access to 2nd
Respondents' books of account, bank statements and
all documents
reflecting 2nd 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 5th Respondent in the event
of the parties foiling to agree thereto pending
the determination of
CTV/T/45/2002.

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

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

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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.I and 5th 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
applicant-in-convention should have been called to contradict
P.W.I,
5th 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 2nd Respondent-in-reconvention and they
needed do nothing more
in terms of the Companies Act, 1967.

21

Mr. Mda
in his Heads of Argument and before me has contended that
applicants-in-reconvention right to the membership and shareholding

of the 2nd 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 2od
respondent-in-reconvention.

In the
first place, I must answer whether applicants-in-reconvention were
deprived of their shareholding in 2nd respondent-in-reconvention.
My
answer to this is that they were not for I have not believed P.W.I
'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.I 'Mamocha, but that 1st
respondent-in-reconvention was also purportedly deprived of his

shareholding and have wondered how, in allegedly depriving others of
their shareholding 1st 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

22

and 5th
applicant-in-reconvention's evidence that in her scheme she was in
complicity with 1st respondent-in-reconvention for, instead,
it is
patently clear that P.W.I '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 1st
respondent-in-reconvention and P.W.I and 5th applicant, how could
1st
respondent-in-reconvention submit to depriving his confidant (5th
applicant) and himself of his shareholding? It's all spoof
and
P.W.l's and 5th applicant-in-reconvention's allegations against the
1st respondent-in-reconvention are rejected with the contempt
they
deserve. I also do not comprehend the relationship between P.W.I
'Mamocha and the applicants-in-reconvention. 1st
applicant-in-reconvention
does not say who provided or furnished him
with information of 'Mamocha's and 1st respondent-in-reconvention's
scheme to deprive
them of their shareholding, and yet both P.W.I and
1st respondent-in-reconvention were reported to the police the result
of which
was applicants-in-

23

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 2nd
respondent-in-reconvention vis-a-vis 1st 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 1st 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
2nd
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.I 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.I
'Mamocha and 1st respondent-in-

24

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 2nd 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 1st
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 1st and 2nd
respondents-in-reconvention is

25

concerned.
It has been represented on behalf of applicants-in- reconvention that
as soon as 1st respondent-in-reconvention secured
funds for the
running of the 2nd 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 2nd 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 2nd 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 2nd
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

26

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 2nd
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
Rl 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 Rl 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 2nd

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

27

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

28

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 3rd and 4th respondents-in-reconvention
respectively and
yet the so-called shares allocated (p.34 of the Counterclaim)
applicants-in-reconvention and 1st 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

29

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.I '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 2nd respondent-in-reconvention,
cautions of the
concession as I am, they are nevertheless not shareholders of the 2nd
respondent-in-reconvention at all. This decision
would, it would
seem, also count against the Is1 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 2nd respondent he is to be treated as
shareholder and director of 2nd respondent-in-reconvention
(cf Ex
parte

30

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 2nd 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 docs 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

31

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

32

tools
down expecting that as they had subscribed to the Memorandum and
Articles of the 2nd respondent-in-reconvention they were,
afterall,
members and shareholders in 2nd respondent-in-reconventioa

According to authorities quoted by Caney J. onp.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

33

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 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 2nd respondent-in-reconvention

applicants-in-reconvention took no shares at all in the 2
respondent-in-reconvention. If applicants-in-reconvention took no
shares
in 2nd 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 2nd 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 2nd
respondent-in-reconvention and not issued
with share certificates
could transfer their

34

shares to
the 3rd and 4th 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 2nd
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 then-owner to a
certain interest in the company, its assets and dividends."

As to
applicants-in-reconvention including the 5th
applicant-in-reconvention 'Mamocha Moruthane, as they have no right
in action
— jura in personam entitling them to any interest in
tie 2 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.

   
   

35

2. Directing
   that any execution of an Order of this Honourable Court dated the
   29th April, 2002 in CIV/T/45/2002 be stayed pending
   the outcome of
   this application, criminal proceedings instituted against the 1st
   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 2nd 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 2nd
   Applicant, or to perform any act or duty or omit to do so as a
   director of the 2nd 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 defeult 2002 on the 15th 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 1st applicant-in
convention was lodged in personal capacity of the 1st applicant-in-

36

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
2nd applicant his authority emanating from his position as Managing
Director of the 2nd applicant to attend to day to day
business
affairs of the 2nd 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 2nd
applicant and is in charge of daily manufacturing process
and
complete business of the 2 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

37

leaving
court he had found a document at the factory of 2nd 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).

1st
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-

38

20).
According to 1st applicant the Summons was not properly served for
the reason that:

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

   
   

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

   
   

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

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

   
   

3. The
   Return of Service does not allege service took place at 1st
   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.

   
   

3. The
   alleged service on 2nd applicant is defective not having been
   effected by delivering a copy of process to some responsible

   employee at the registered head office of the 2nd applicant the

   
   

39

Return of
Service failing to identify the person upon whom service was effected
(paras 21-22).

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

At
paragraph 25 1st 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 2nd applicant and
Board of Directors and applicants not barred
from taking decisions in
respect of the business of the 2nd 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 1st applicant expresses the view that criminal
proceedings are pending before court in respect of himself
and

40

'Mamocha
and it may take time before the criminal case is heard and fete 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
2nd applicant. At paragraph 30 he says 2nd
applicant employs 4000
employees for the manufacture of clothing and other textile products
for the export market and interruption
with the business of 2nd
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

41

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 1st,
2nd, 3rd and 5th defendants by delivering summons upon the
receptionist
at their respective work place on the registered offices
of the

42

applicant
on behalf of the rest of the applicants (defendants therein. At
paragraph 3(b) he says on the 14 February, 2002 accompanied
by 1st
respondent he had proceeded to premises of 2nd applicant to effect
service in CIV/T/45/2002 and they were escorted to the
registered
office of 2nd applicant where a Chinese lady was in control of the
office and on the basis of 1st applicant's explanation
as to their
relationship with 2nd 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 1st to 4th applicants. I cannot
accept this mumbo jumbo, it's if anything, farcical.
Why did he not
serve the summons on 1st 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 2nd applicant. On this ground
alone I reject the contention that
service was effected on 1st, 2nd,
3rd and 5th defendants.

43

5th
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 6th and 7th defendants at their respective
offices, I served 4th defendant by delivering process upon 'Mamating

an adult who resides in same premises as 4 defendant at Lower Tharnae
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
1st, 2nd 3rd and 5th 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 , 6
and 7th 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
2nd respondent's premises to the latter's registered office manned by
an adult Chinese
lady and having explained purpose of their visit she
called 1st applicant from some office. After some explanations
Leraisa had
served summons upon the 1st

44

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, 1 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 2nd applicant-in-convention (2nd
respondent-in-reconvention), its assets and dividends and accordingly

the counter application is dismissed with costs to the 1st and 2nd
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.

45

G.N.MOFOLO

JUDGE

For the
Applicants : Mr. Buys

For the
Respondents : Mr. Mda