CIV/APN/433/2 005
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. Hlajoane on
3rd November, 2006.
This is an Application to put the first Respondent under JudicialManagement in terms of section 265 (2) of the Companys ActNo.25 of 1967. Applicant is alleging mismanagement of theAffairs of the Company. He is a shareholder in first RespondentsCompany. The Application is opposed.
An answering affidavit has been filed by one Peter Letsota whodeclared himself as secretary of Board of Directors of the first
Respondent. He has raised three points in limine:-(a) Urgency
Non-compliance with section 265 of Companies Act1967
Notice of set down.
On urgency the first Respondent showed that no grounds forurgency have been stated in the founding affidavit. It was notenough to have just stated the grounds of urgency in the certificateof urgency only. The Court of Appeal has repeatedly emphasizedthat the discretion to allow an application to be heard on an urgentbasis requires a discriminating exercise of judicial discretion. Thecourt 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 bemade out in the founding papers, and that the certificate of urgencystates the grounds.
In casu counsel for the Applicant has filed a certificate of urgencyshowing his grounds for urgency. The Applicant has signed aspetitioner making out a case for such urgency and even filed averifying affidavit to such petition- surely that satisfied therequirements stated above in NUL v Putsoa. Para 6 of the Petitionproclaimed urgency. See also Qhobela & Another v BCP &Another 1999 2000 LLR & LB 243.
The first Respondent has also shown that the Company had beenoperating in the manner it is operating now since 1985. But thereading of the present application shows that 1985 March, waswhen the lease for Companys premises was registered. Atparagraph 5 of the Petition, it has been stated that the Lesotho National Development Corporation only handed over the premisesto first Respondent after it had recovered funds it had used fordeveloping the site. This happened years after first Respondentsincorporation. So that it could not be true that first Respondentstarted operating in 1985.
On the issue of Prejudice the first Respondent showed that theywere prejudiced by an order that was given ex parte, but because Ihave already indicated above that grounds for urgency have beenstated and a case made out in the petition for such urgency, theapplicant was justified to move the Court as he did as one of theshareholders of first Respondent. Section 265 (2) of CompaniesAct 1967.
Non-Compliance with Section 265 of the Act
First Respondent is saying that Applicant has not complied withthe provisions of Section 265 of the Companies Act 1967 in that
Salary for Judicial Manager has not been fixed
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 aJudicial Manager. Subsection (8) of that Section is the only onedealing with costs. It reads:-The Court may make any order it considers just for thepayment of the costs of any investigation or inspection madeunder this section, including the costs of the report.
Again Section 265 (1) clearly shows that the Court may grant anorder of judicial management for a stated period or for anindefinite period. This gives the Court the discretion of whether ornot to fix such period.
It was also not for the Judicial Manager to have fixed the securitybond. The section referred to does not say that, but such could betaken care of by the Master of the High Court after the matter willhave been referred to him for that specific purpose.
Notice of Set Down
First Respondent is saying that the Notice of Set Down was notfiled together with the petition. The Applicant has rightly pointedout that since the notice of motion already provided a date on
which the petition would be moved on an urgent basis, there wastherefore no need to file a separate notice of set down as the dateon the petition operated as a set down to the Registrar. The pointsin limine have all been dismissed.
On the merits, the Applicant is saying that the object of the firstRespondent has been to operate as a wholesale in Thaba-Tseka, butcontrary to that part of it operates as a retail business for Chinesenationals. Another part has been leased out to businesswomen whohave brought shacks and caravans to run a variety of businesses.Applicant further alleges that the place is ill-maintained, dirty, uglyand noisy.
Applicant has also given other reasons which prompted him tobring this application. That shareholders have not been issued withshare certificates, failure to register with the tax authorities, in thiscase the Lesotho Revenue Authority, no annual returns, forms,resolutions and statutory meetings. He is also allegingembezzlement of the companys funds and an increase in thenumber of shareholders beyond the maximum limit in theMemorandum and Articles of Association. Applicant is thusasking that the company be placed under judicial management as itis 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 M232,000.00was shared amongst the shareholders including the Applicant. Hehas 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 thefact that he was still able to manage the affairs of the company.
Applicant in replying to all these has shown that first Respondentmakes bare denials in his answering affidavit. One Peter Letsotawho claims to be the secretary of the Board of Directors deposed toan affidavit and showed he has been duly authorized to depose tothat affidavit. He has however attached neither a resolution norminutes for such authorization. Applicant has cited numerousdecisions showing that where a juristic personality such as acompany is concerned there has to be shown a resolutionauthorizing 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 whoclaimed to be members of the Board of Directors, no authority has
been established for the deponent Peter Letsota to depose to theanswering affidavit. The supporting affidavits only confirm whatPeter Letsota has deposed to in his answering affidavit withoutadvancing any further facts in support of Letsotas 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 anartificial person like a company or co-operative society, anobjection may be taken if there is nothing before the Court to showthat a litigant has been authorized to institute proceedings. TheWing-on-Garment supra stated that, unlike an individual, anartificial person can only function through its agents and it canonly take decisions by the passing of resolutions in the mannerprovided by its constitution. Even an attorney who has instructionsto commence proceedings by say, the secretary or GeneralManager of a company would not necessarily know whether thecompany had resolved to do so, nor whether the necessaryformalities had been complied with in regard to the passing of theresolution.
First Respondent does not deny that there is no resolution from thecompany 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 thosesupporting affidavits would be like presuming that there has beenauthorization. Reliance has to be on facts not presumptions.
According to first Respondent its like Applicant ought to haverallied for support in bringing this Application, but section 265 (2)of Companies Act 25 of 1967 allows any member or shareholderof a company to apply for Judicial Management. The sectionreads:
A judicial management order may also be granted by the Court in respect of any company on the application if anymember (my emphasis) or creditor, if it appears to the Courtthat, by reason of mismanagement or any other cause, it isdesirable that the company should be placed under judicialmanagement.It does not require a group of members but any member if he feelsthreatened.
First Respondent submitted that it was still managing well theaffairs of the company and that a given amount was sharedamongst members as dividends. Also that the company still has acredit balance. But the Applicant showed that giving bare denialswithout providing any audited financial statement would not be
permissible. The Bank Statement attached to the answeringaffidavit amounted to hearsay and therefore inadmissible. PeterLetsota was not the one who compiled the statement.
The first Respondent has just also made a bare denial in regard tothe issuance of share certificates to members. Also in regard toregistering with the tax authorities, submitting annual returns,forms, resolutions and statutory meetings. Had he filed an auditedfinancial Statement those doubts which are left lingering in onesmind would have been cleared.
As rightly pointed out by the Applicant, in terms of Rule 20 (4) ofthe High Court Rules first Respondent has not clearly stated thefacts upon which he relies for his defence, except just making baredenials. His answers are framed thus:
Contents denied
Contents not admitted.Rule 20 (5) of the High Court Rules demands that a part denyingan allegation of fact in the previous pleading, he shall not do soevasively but shall answer issuably and to the point.
I have already shown that the Respondent has only made baredenials. 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 accordingto one of the shareholders like the Applicant.
I therefore find that Applicant has made out a case for judicialmanagement as was the right person to have lodged suchApplication. I had an occasion to see the Memorandum andArticles of Association of 1st Respondents company, and I havefound nothing wrong with Applicants counsel being appointed theJudicial Manager of 1st Respondent. The Application is thusgranted in terms of the prayers 1(a) to (i) in the notice of motionwith costs. The appointment is for an indefinite period.
A. M. HLAJOANEJUDGE
For Applicant: Mr Ntlhoki
For Respondents: Mr Nteso