Mahlaha and Others v Lesotho Public Motor Transport (Pty) Ltd (C of A (CIV) 10 of 2014) [2014] LSCA 32 (24 October 2014)

1 IN THE COURT OF APPEAL OF LESOTHO HELD AT MASERU In the matter between: MOEJANE MAHLAHA KHOTSO LEBAKENG TSEKELO MONARE THABISO JUSTINUS SELLO MOTSOAHAE MOTSOAHAE PHAFOLI JULIUS PHAFOLI THATO EDWIN MAQALIKA MOTEBELE MABATHOANA NAPO SIMON KAPA C OF A (CIV) NO: 10/2014 CCA/005/2014 1ST APPELLANT 2ND APPELLANT 3RD APPELLANT 4TH APPELLANT 5TH APPELLANT 6TH APPELLANT 7TH APPELLANT 8TH APPELLANT 9TH APPELLANT LIKOME STEPHEN MABULA 10TH APPELLANT and LESOTHO PUBLIC MOTOR TRANSPORT COMPANY (PTY) LTD RESPONDENT CORAM: HOWIE, JA THRING, JA LOUW, AJA HEARD: 8th October 2014 DELIVERD: 24 October 2014 SUMMARY Company – appointment of directors – final interdict – alternative remedy – attorney and client costs. JUDGMENT LOUW, AJA [1] This is an appeal against the judgement delivered and orders made by Mokhesi, AJ in the High Court on 7th February 2014. [2] The respondent, who was the applicant in motion proceedings in the court a quo, is a private company and I shall refer to it herein as the company. The appellants were the first to tenth respondents in the court a quo and I shall refer to them herein as the respondents. [3] The respondents are in occupation of the company’s offices and premises in Maseru where they control the business affairs of the company by virtue of their claim that the second to tenth respondents constitute the duly appointed board of directors of the company. I shall for ease of reference refer to this board of directors as the new board. [4] The company instituted the proceedings in January 2014, authorised by a rival board of directors to which I shall refer as the old board. The court a quo granted the relief sought by the company, in the following terms: 1. Restraining and interdicting the 1st to 10th Respondents from interfering with the business and management of the applicant company at Main Bus Stop Area. 2. Restraining and interdicting the 1st to 10th respondents from acting and/or purporting to act as, or holding themselves out as the directors, officers, officials, management of the applicant company. 3. Consequentially, ejectment of the 1st to 10th respondents from the premises and offices of the applicant company, being premises described as plot No. 13283-011, Main Bus stop area, Maseru. 4. Restraining and interdicting the 1st to 6th respondents from entering and/or being on the applicant company’s offices and premise described as plot no- 13283-011, Main Bus Stop Area, Maseru. 5. Directing the 11th respondent to release and/or cause to be released to the applicant company or its authorised agent all the rentals remitted to its offices by the tenants of applicant company subject to the terms of the deed of settlement in CCA/84/2013. 6. 12th respondent and/or any police officer subordinate to him is ordered and directed to ensure strict compliance with the above orders against the 1st to 10th respondents. 7. Costs against the 1st to 10th respondents on attorney and client scale. [5] The company was incorporated in July 1979 when the Lesotho Bus and Taxi Owner’s Association (the association) required a corporate entity to enable it to enter into a business relationship with the Shell Petroleum Company with a view to the development of its premises in Maseru. [6] After its incorporation, the directors of the company on 13 October 1979 resolved that 1. The company be run to serve the interests of the association; 2. Trustees of the association shall hold all the issued shares in the company; and 3. The directors of the Company shall only be members of the association who shall be appointed in the manner prescribed in the constitution of the association. [8] In the founding affidavit made by Makalo Ismael Monare (MI Monare) he alleged that the institution of the proceedings was authorised by a resolution of the old board taken on 13 January 2014. The old board was, so he alleged, constituted pursuant to an order made by Molete, J in case CIV/APN/395/2011, in the High Court on 5 September 2013 (case no 395), in the following terms “1. The following shall remain directors of the company in terms of Form L filed on the 14th June 2011. (1) Maosala Mokitimi (2) Motlatsi Mabote (3) Mahakane Mosala (4) ‘Mapai Lebeko (5) Moeketsi Tsatsanyane (6) Limema Pholo (7) Thabo Ntabe (8) Tsepang Phangoa” [9] In the main answering affidavit on behalf of the respondents, made by Tsekelo Manare (T. Monare), the third respondent, he raised lack of urgency, lis pendens relating to a matter pending in the magistrate’s court and lack of jurisdiction by the High Court to hear the matter because the company had failed to seek the leave of the High Court in terms of s 6 of the High Court Act, 1978. At the hearing of the appeal Mr. Letsika, who appeared on behalf of the respondents, did not rely on these points. [10] Two further defences that were raised in the answering affidavit remain. The first is that the institution of the application was not authorised by the company because the new board and not the old board was the current board of the company. The resolution taken by the old board to authorise the institution of the proceedings was therefore without any legal effect. [11] The second point taken by the respondents is that the company had, for two reasons, not made out a case for a final interdict. 1. The second to tenth respondents constitute the current board of directors of the company and are thus entitled to control the conduct of the affairs of the company. The company has consequently failed to establish a clear right to an interdict. 2. The company in any event has a satisfactory alternative remedy, namely, an action for damages which would afford it adequate protection. [12] The respondent s’ case is that the new board was appointed in accordance with the articles of association of the company and the respondents were thereafter registered in the Companies Register on 26 June 2013 as the directors of the company. [13] As indicated above, the directors of the company resolved in 1979 that the directors of the company shall be appointed in the manner prescribed in the constitution of the association. [14] The constitution of the association provides as follows in regard to the election of trustees and the appointment of directors of the company: “(vii) bis, Shareholders and Directors of Lesotho Public Motor Transport Company (Pty) Ltd (a) The Association shall elect two persons to hold the shares in the above Company as Trustees for the Association, which Trustees shall not be Directors of the said Company …. . Such Trustees shall hold the said shares for as long as the Association directs, and the Association shall have the power to direct, for any reason whatsoever, that any Trustee shall relinquish and transfer such shares to any other Trustee who may be elected in his stead ………… (b) At each Annual/Special General Meeting, the Association shall also nominate such number of persons as it may deem fit as Directors of the said Company, to be elected by the Trustees of the said Company, existing Directors being eligible for re- election. The persons thus nominated as Directors may, but need not be members of the Executive Committee of the Association, but shall not be a Trustee of the Company.” [15] T. Monare and the first respondent set out the procedure followed in the appointment of the new board in the answering affidavits. An annual general meeting was held on 21 April 2013. It appears from the minutes of the meeting that two trustees, the first respondent (Mahlaha) and Matumelo Patose were elected by the newly appointed executive committee in a private meeting and not by the members of the association in open session. T. Monare does not say and the minutes do not reflect that any persons were nominated at the meeting as directors to be elected by the trustees, as is prescribed in clause (vii) bis (b) of the constitution of the association. Instead, according to T. Monare’s account of the procedure followed, the trustees were authorised in the meeting to appoint directors in accordance with the requirements of the Companies Act. Later, following on the annual general meeting, the trustees reported that they had appointed the directors who were to constitute the new board. The first respondent confirmed that the directors were appointed by him and his co-trustee on 21 April 2013. [16] Since the directors who were appointed by the trustees had not been nominated by the association, the appointment of the new board did not follow the procedure laid down in the constitution of the association. Mr. Letsika submitted that a benevolent approach should be adopted in construing the provisions of the constitution of the association. He in this regard referred to Motaung v Makubela and Anor NNO 1975 (1) SA 618 (0) 626 J-627 D. In National Executive Committee and 9 Others v Majara Jonathan Molapo C of A (CIV) 34/2011 at 7, delivered 21 October 2011, this court, per Farlam, JA, held that a practical common sense approach should be adopted in construing constitutional provisions of a voluntary a association where a strict approach would make it unnecessarily difficult and sometimes impossible to carry out the constitution. [17] In this case, it was not suggested that it would be difficult or impossible to require of the association to first nominate the persons it wished to become the directors of the company. This is not a mere requirement of form. The constitution stipulates that the association shall have a direct say in the important decision namely who the persons should be who will go forward to become the directors of the company when elected by the trustees. [18[ It follows that in my view, the new board was not properly elected as directors of the Company. The registration on 26 July 2013 of the names of the improperly elected new board in the Companies Registry, does not cure the fatal defect in their election as directors of the Company. [19] This finding has the following consequences. First, the challenge to the authority granted by the old board to institute the proceedings in the court a quo fails. The status of the old board now depends on the effect of the 5 September 2013 Court Order in case No. 395. Although it is not known what issues had to be decided in that case, the company was a party in the matter. The matter has not been taken on appeal and the order stands. In the circumstances the resolution of the old board to authorize the institution of these proceedings constitutes sufficient evidence that the company is properly before the court. (Lesotho Revenue Authority and Others v Olympic Off Sales LAC (2005-2006) 535 at 541). Secondly, the basis upon which the respondents claimed to be entitled to control and take part in the company’s affairs and to be on its premises has fallen away. The respondents do not constitute the company’s board of directors. [20] The respondents contend that the company has an alternative remedy for damages if it should be found that its funds had been misappropriated by the respondents. The respondents deny the allegation in the founding affidavit that the company has already lost M290 000 in misappropriated rentals from tenants. They point out that in terms of an interim order granted by consent in the High Court, rentals that are collected from the company’s tenants are held in trust by attorneys Webber Newdigate pending the outcome of the litigation. I do not consider that a claim for damages will be an adequate alterative remedy. The company is entitled to conduct its business under the management of a lawfully appointed board of directors and to have its premises and offices occupied by persons authorised by a lawfully constituted board of directors. The ongoing control exercised by the improperly appointed new board of directors can only be stopped by the interdictory relief and the order of ejectment sought by the company. The company is consequently entitled to the relief sought. [21] The court a quo ordered costs on the attorney and client scale against the respondents. [22] Making a costs order was within the discretion of the court a quo, to be exercised judicially. The court a quo held that by filing documents with the Registrar of Companies on 26 July 2013 reflecting the appointment of the second to tenth respondents as directors of the company, the respondents had acted in “blatant disregard” of the interim order made in case CIV/APN/395/2011 by Molete, AJ, on 15 August 2011. In coming to this conclusion, the judge a quo misdirected himself on the facts. The interim order relied upon is set out in paragraph 2 (g) of the order and does no more than to interdict and restrain the Registrar of Companies “from registering and filing the new Form L and Form I presented for filing by advocate Koili Ndebele on Friday the 5th August 2011, pending final determination of this matter.” The respondents did not act in disregard of this order. This court is consequently at large to reconsider the order for costs. In this case a punitive costs order is not appropriate. The respondents were, it seems, genuinely of the view that the appointment of the new board was procedurally in order. This is not, in my view, a case where the respondents have acted unreasonably in the manner of conducting the proceedings or where their conduct was in some way reprehensible. Although the company incurred costs in overcoming the unsuccessful opposition mounted by the respondents, this is almost invariably the case where a party is successful in opposed motion proceedings. I would consequently set aside the costs order and order costs on the ordinary scale. Although the appeal succeeded in regard to the order for costs, the company enjoyed substantial success in the appeal and should in my view be awarded the costs of the appeal. [23] In the result the following order is made: (1) The appeal against the order for costs is upheld. (2) Save for the order in (1) above, the appeal is dismissed, with costs. (3) The order of the court a quo is set aside and the following order is made in its stead. “The application succeeds with costs to be paid by first to tenth respondents, jointly and severally”. _________________________ W. J. LOUW ACTING JUSTICE OF APPEAL I agree I agree _______________________ C. T. HOWIE JUSTICE OF APPEAL _______________________ W. G. THRING JUSTICE OF APPEAL