CIV/APN/433/2005

IN THE
HIGH COURT OF LESOTHO

In the
matter between:

MONAHENG
LETOOANE Applicant

and

MALUTI
WHOLESALERS (PTY) LTD 1st Defendant

MASTER OF
THE HIGH COURT 2nd Defendant

JUDGMENT

Delivered
by the Hon. Mrs Justice A. M. Hlajoanc on 3rd November, 2006.

This is
an Application to put the first Respondent under Judicial Management
in terms of section 265 (2) of the Company's Act No.25
of 1967.
Applicant is alleging mismanagement of the Affairs of the Company. He
is a shareholder in first Respondent's Company.
The Application is
opposed.

An
answering affidavit has been filed by one Peter Letsota who declared
himself as secretary of Board of Directors of the first
Respondent.
He has raised three points in limine:-

2

1. Urgency

   
   

2. Non-compliance
   with section 265 of Companies Act 1967

   
   

3. Notice
   of set down. On urgency the first Respondent showed that no grounds
   for urgency have been stated in the founding affidavit.
   It was not
   enough to have just stated the grounds of urgency in the certificate
   of urgency only. The Court of Appeal has repeatedly
   emphasized that
   the discretion to allow an application to be heard on an urgent
   basis requires a discriminating exercise of judicial
   discretion. The
   court went on in Vice Chancellor NUL & NUL vs Putsoa C of A
   (CIV) No.28/2002 to say that a proper case for
   urgency has to be
   made out in the founding papers, and that the certificate of urgency
   states the grounds.

   
   

In casu
counsel for the Applicant has filed a certificate of urgency showing
his grounds for urgency. The Applicant has signed as
petitioner
making out a case for such urgency and even filed a verifying
affidavit to such petition- surely that satisfied the
requirements
stated above in NUL v Putsoa. Para 6 of the Petition proclaimed
urgency. See also Qhobela & Another v BCP &
Another 1999 -
2000 LLR & LB 243.

The first
Respondent has also shown that the Company had been operating in the
manner it is operating now since 1985. But the reading
of the present
application shows that 1985 March, was when the lease for Company's
premises was registered. At paragraph 5 of the
Petition, it has been
stated that the Lesotho National Development Corporation only handed
over the premises to first Respondent
after it had recovered funds it
had used for developing the site. This happened years after first
Respondent's incorporation. So
that it could not be true that first
Respondent started operating in 1985.

On the
issue of Prejudice the first Respondent showed that they were
prejudiced by an order that was given ex parte, but because
I have
already indicated above that grounds for urgency have been stated and
a case made out in the petition for such urgency,
the applicant was
justified to move the Court as he did as one of the shareholders of
first Respondent. Section 265 (2) of Companies
Act 1967.

Non-Compliance
with Section 265 of the Act

First
Respondent is saying that Applicant has not complied with the
provisions of Section 265 of the Companies Act 1967 in that

1. Salary
   for Judicial Manager has not been fixed

   
   

4

2. Not
   stated period for which company should be under judicial management
   in terms of Section 265 (1)

   
   

3. Judicial
   Manager has not fixed security bond.

   
   

Section
265 has not made a specific reference to salary of a Judicial
Manager. Subsection (8) of that Section is the only one

dealing
with costs. It reads:-

"The Court may make any order it considers just for the payment
of the costs of any investigation or inspection made under
this
section, including the costs of the report."

Again
Section 265 (1) clearly shows that the Court may grant an order of
judicial management for a stated period or for an indefinite
period.
This gives the Court the discretion of whether or not to fix such
period.

It was
also not for the Judicial Manager to have fixed the security bond.
The section referred to does not say that, but such could
be taken
care of by the Master of the High Court after the matter will have
been referred to him for that specific purpose.

Notice of
Set Down

First
Respondent is saying that the Notice of Set Down was not filed
together with the petition. The Applicant has rightly pointed

5

out that
since the notice of motion already provided a date on which the
petition would be moved on an urgent basis, there was therefore
no
need to file a separate notice of set down as the date on the
petition operated as a set down to the Registrar. The points in

limine have all been dismissed.

On the
merits, the Applicant is saying that the object of the first
Respondent has been to operate as a wholesale in Thaba-Tseka,
but
contrary to that part of it operates as a retail business for Chinese
nationals. Another part has been leased out to businesswomen
who have
brought shacks and caravans to run a variety of businesses. Applicant
further alleges that the place is ill-maintained,
dirty, ugly and
noisy.

Applicant
has also given other reasons which prompted him to bring this
application. That shareholders have not been issued with
share
certificates, failure to register with the tax authorities, in this
case the Lesotho Revenue Authority, no annual returns,
forms,
resolutions and statutory meetings. He is also alleging embezzlement
of the company's funds and an increase in the number
of shareholders
beyond the maximum limit in the Memorandum and Articles of
Association. Applicant is thus

6

asking
that the company be placed under judicial management as it is
operating outside the objects of the company.

In
response to this first Respondent has denied everything and indicated
that during September, 2005 an amount of M232,000.00 was
shared
amongst the shareholders including the Applicant. He has also shown a
credit balance of M61,974.23 as at 3rd February, 2006.
He has
attached the bank statement to that effect. According to the first
Respondent all these were indicative of the fact that
he was still
able to manage the affairs of the company.

Applicant
in replying to all these has shown that first Respondent makes bare
denials in his answering affidavit. One Peter Letsota
who claims to
be the secretary of the Board of Directors deposed to an affidavit
and showed he has been duly authorized to depose
to that affidavit.
He has however attached neither a resolution nor minutes for such
authorization. Applicant has cited numerous
decisions showing that
where a juristic personality such as a company is concerned there has
to be shown a resolution authorizing
a litigant to represent it or
depose to an affidavit. See Nqojane v NUL 1985-89 LAC 369 at 383 and
Wing-on-Garment v LNDC &
Another 1999-2000 LLR &LB 72.

7

Though
there have been several affidavits filed by people who claimed to be
members of the Board of Directors, no authority has
been established
for the deponent Peter Letsota to depose to the answering affidavit.
The supporting affidavits only confirm what
Peter Letsota has deposed
to in his answering affidavit without advancing any further facts in
support of Letsota's assertion.

In Mall
(Cape) (Pty) ltd v Merino Ko-operasie Beperk 1957 (2) S.A 347 (c)
cited in Wing-on-Garment above, Watermeyer J (delivering
a judgment
of the full bench) showed that with an artificial person like a
company or co-operative society, an objection may be
taken if there
is nothing before the Court to show that a litigant has been
authorized to institute proceedings. The Wing-on-Garment
supra stated
that, "unlike an individual, an artificial person can only
function through its agents and it can only take decisions
by the
passing of resolutions in the manner provided by its constitution.
Even an attorney who has instructions to commence proceedings
by say,
the secretary or General Manager of a company would not necessarily
know whether the company had resolved to do so, nor
whether the
necessary formalities had been complied with in regard to the passing
of the resolution."

8

First
Respondent does not deny that there is no resolution from the company
but says the supporting affidavits indicate that there
was
authorization to defend the case. But on the authority of
Wing-on-Garment supra that would not be good enough. Relying on those

supporting affidavits would be like presuming that there has been
authorization. Reliance has to be on facts not presumptions.

According
to first Respondent its like Applicant ought to have rallied for
support in bringing this Application, but section 265
(2) of
Companies Act 25 of 1967 allows any member or shareholder of a
company to apply for Judicial Management. The section reads:

"A judicial management order may also be granted by the Court in
respect of any company on the application if any member (my
emphasis)
or creditor, if it appears to the Court that, by reason of
mismanagement or any other cause, it is desirable that the
company
should be placed under judicial management."

It does
not require a group of members but any member if he feels threatened.

First
Respondent submitted that it was still managing well the affairs of
the company and that a given amount was shared amongst
members as
dividends. Also that the company still has a credit balance. But the
Applicant showed that giving bare denials

9

without
providing any audited financial statement would not be permissible.
The Bank Statement attached to the answering affidavit
amounted to
hearsay and therefore inadmissible. Peter Letsota was not the one who
compiled the statement.

The first
Respondent has just also made a bare denial in regard to the issuance
of share certificates to members. Also in regard
to registering with
the tax authorities, submitting annual returns, forms, resolutions
and statutory meetings. Had he filed an
audited financial Statement
those doubts which are left lingering in ones mind would have been
cleared.

As
rightly pointed out by the Applicant, in terms of Rule 20 (4) of the
High Court Rules first Respondent has not clearly stated
the facts
upon which he relies for his defence, except just making bare
denials. His answers are framed thus:

Contents denied

Contents not admitted.

Rule 20
(5) of the High Court Rules demands that a part denying an allegation
of fact in the previous pleading, "he shall not
do so evasively
but shall answer issuably and to the point."

10

I have
already shown that the Respondent has only made bare denials. The
section under which the Applicant relied for bringing this

Application does not say should only be when company seems not able
to pay its debts. It also covers mismanagement according to
one of
the shareholders like the Applicant.

I
therefore find that Applicant has made out a case for judicial
management as was the right person to have lodged such Application.
I
had an occasion to see the Memorandum and Articles of Association of
1st Respondent's company, and I have found nothing wrong
with
Applicant's counsel being appointed the Judicial Manager of 1st
Respondent. The Application is thus granted in terms of the
prayers
1(a) to (i) in the notice of motion with costs. The appointment is
for an indefinite period.

1. M.
   HLAJOANE
   

   
   

JUDGE

For
Applicant: Mr Ntlhoki

For
Respondents: Mr Nteso