CIV/APN/433/2

005

IN THE HIGH COURT OF LESOTHO

In the matter between:

MONAHENG LETOOANE Applicant

and

MALUTI WHOLESALERS (PTY)
LTD 1^st Defendant

MASTER OF THE HIGH COURT 2^nd
Defendant

JUDGMENT

Delivered by the Hon. Mrs
Justice A. M. Hlajoane on

3^rd 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:-
(a) Urgency

1. 
   Non-compliance with
   section 265 of Companies Act
   1967

   
   

2. 
   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

3. 
   Salary for Judicial Manager has
   not been fixed

   
   

4. 
   Not stated period for which
   company should be under

   
   

judicial
management in terms of Section 265 (1)
(c) 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
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
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 3^rd
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.

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.”

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
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:

5. 
   Contents denied

   
   

6. 
   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.”

   
   

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 1^st
Respondent’s company, and I have
found nothing wrong with
Applicant’s counsel being appointed the
Judicial Manager of 1^st
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.

A. M. HLAJOANE
JUDGE

For Applicant: Mr Ntlhoki

For Respondents: Mr Nteso