Court nul­li­fies MKM auc­tion

. . . as 11 cred­i­tors file new ap­pli­ca­tion seek­ing to com­pletely block the sale

Lesotho Times - - News - Lekhetho Nt­sukun­yane

THE High Court yes­ter­day can­celled the auc­tion of MKM prop­er­ties, ef­fec­tively nul­li­fy­ing last week’s sale of the company’s five com­mer­cial build­ings sit­u­ated in Maseru.

The auc­tion, which had been sched­uled for Le­sotho Sun on 17 Novem­ber 2014, had to be moved to Lady­brand, South Africa, after an angry mob stormed the ho­tel and beat-up the co­or­di­na­tor of the sale.

The mob later iden­ti­fied it­self as MKM work­ers and con­cerned Ba­sotho cred­i­tors and in­vestors whose funds were frozen when the Cen­tral Bank of Le­sotho (CBL) shut down the company, owned by Si­mon Thebe-ea-khale, in 2007 for op­er­at­ing il­le­gal bank­ing and in­surance busi­nesses, be­fore the courts ruled the business should be liq­ui­dated be­cause it was in­sol­vent.

How­ever, the auc­tion went ahead in Lady­brand later in the day, with five of the six prop­er­ties go­ing un­der the ham­mer while the other one was with­drawn due to “com­pli­ca­tions”.

But in a new twist to the saga, the court yes­ter­day or­dered that the MKM liq­uida­tors should “un­der­take that they will not ac­cept any of­fers made at the 17 Novem­ber 2014 auc­tion, whether within a pe­riod of 14 days or any­time there­after”.

This was after coun­sel for both the liq­uida­tors and cred­i­tors had re­quested the court to post­pone the mat­ter re­gard­ing the auc­tion.

How­ever, the rul­ing is pend­ing the fi­nal­i­sa­tion of a new ap­pli­ca­tion 11 MKM cred­i­tors filed be­fore the court yes­ter­day morn­ing through their lawyers, Makhetha Motšoari, Ranale Thoahlane and Koili Nde­bele, the court also ruled.

The cred­i­tors — Ntoane Le­pota, Malau Mo­folo, Leshoboro Maribe, ’Mapheello Mpa­pea, Pu­leng Li­bate, Ma­hali Ma­sithela, ’Mamotšelisi Mot­latla, ’Ma­malau Mo­folo, Moeketsi Sekhobe, Mpati Lion and Felile Khoarai — want to block the MKM auc­tion, “pend­ing a fi­nal de­ter­mi­na­tion of this ap­pli­ca­tion.”

The ap­pli­cants also want the court to sus­pend an or­der of 20 May 2011 is­sued by Jus­tice Kelello Guni, which di­rected MKM liq­uida­tors “to sell, by pub­lic auc­tion or oth­er­wise, and de­liver or trans­fer the mov­able and im­mov­able prop­erty of the com­pa­nies”.

The plain­tiffs also want the court to di­rect that the or­der “be re­scinded, cor­rected and set aside as hav­ing been granted in er­ror and or con­trary to the law.”

The eleven cred­i­tors fur­ther want the court to sus­pend a fi­nal or­der of 14 Novem­ber 2014, granted by Jus­tice Semapo Peete, re­gard­ing the auc­tion.

Jus­tice Peete had, on the said date, granted an in­terim or­der block­ing the sale of MKM’S six com­mer­cial prop­er­ties, only to can­cel the or­der two hours later after be­ing ap­proached by South Africa-based liq­uida­tors, Chavonnes Cooper and Daan Roberts.

The judge noted in the fi­nal or­der: “Hav­ing heard Mr Edel­ing (who rep­re­sents the liq­uida­tors in the mat­ter) when he sub­mit­ted that the or­der granted by this court at 14:45pm on 14 Novem­ber 2014 be set aside and re­scinded upon the fol­low­ing grounds: No proper 24-hour no­tice was made in ac­cor­dance with Prac­tice Di­rec­tive No 1 of 2011 (by for­mer Chief Jus­tice Ma­hapela Le­hohla dated 4 Novem­ber 2011. This di­rec­tive was cir­cu­lated widely through Le­sotho LII (Le­gal In­for­ma­tion In­sti­tute) web­site to all prac­ti­tion­ers.

‘That his at­tor­neys, Web­ber Newdi­gate, on 13 Novem­ber 2014 brought to the at­ten­tion of the regis­trars this Prac­tice Di­rec­tive. Er­ro­neously, this let­ter was not timeously cir­cu­lated to judges, es­pe­cially the judge on call.

‘The ur­gent ap­pli­ca­tion should have been brought be­fore the Com­mer­cial Court un­less the Chief Jus­tice had des­ig­nated another High Court judge. None of the above was com­plied with and the court or­der was granted er­ro­neously and in the ab­sence of the re­spon­dents (liq­uida­tors).

“In terms of Rule 45 (1) (a) of the High Court Rules of 1980, the or­der granted by this court at 14:45pm on 14 Novem­ber 2014 is set aside and re­scinded. The court agrees with Mr Edel­ing’s sub­mis­sions. Mr Edel­ing un­der­takes that the auc­tion will pro­ceed as ar­ranged and ad­ver­tised and the re­spon­dents un­der­take not to con­firm any of­fer re­ceived at the auc­tion for a pe­riod of 14 days from 17 Novem­ber 2014 in or­der to af­ford the ap­pli­cants an op­por­tu­nity to seek re­lief of in­ter­dict in the Com­mer­cial Court after hav­ing given the 24-hour no­tice to the re­spon­dents.”

But the cred­i­tors ar­gue, in the ap­pli­ca­tion they filed yes­ter­day, “that the sale of the im­mov­able prop­er­ties of the com­pa­nies in liq­ui­da­tion within 14 days hereof and or at any­time there­after, be stayed pend­ing the fi­nal­i­sa­tion of this ap­pli­ca­tion and the ap­pli­ca­tion filed on 14 Novem­ber 2014.”

The ap­pli­cants also want the court to “di­rect and or or­der that the liq­ui­da­tion process shall con­tinue only in ac­cor­dance with the res­o­lu­tions of the cred­i­tors made at a cred­i­tors’ meet­ing.”

The meet­ing, the ap­pel­lants noted, should be called “to as­cer­tain the wishes of the majority of cred­i­tors.”

The cred­i­tors fur­ther want the court to de­clare that the re­spon­dents, namely Roberts, Cooper, Pa­trick Tšenoli and Qhale­hang Let­sika, do not have the right “and or power to sell the prop­er­ties of the com­pa­nies be­cause they are provisional liq­uida­tors.”

The four lawyers, as well as the Master of the High Court and At­tor­ney Gen­eral, ap­pear in the ap­pli­ca­tion as first to sixth re­spon­dent, re­spec­tively.

The cred­i­tors also want the court to fur­ther “di­rect and or or­der the sixth re­spon­dent (At­tor­ney Gen­eral) to con­vene

a cred­i­tors’ meet­ing within a pe­riod of six weeks in ac­cor­dance with the law prior to any sale be­ing made of prop­er­ties of the com­pa­nies in liq­ui­da­tion.”

Al­ter­na­tively, the cred­i­tors seek an or­der “that the pow­ers granted and ex­tended un­der an­nex­ure ‘WU’ (Or­der of Jus­tice Guni) specif­i­cally prayer 3.3 (which reads: To sell, by pub­lic auc­tion or oth­er­wise, and de­liver or trans­fer the mov­able and im­mov­able prop­erty of the com­pa­nies) are only ex­er­cis­able after the hold­ing of the cred­i­tors’ meet­ings.”

The cred­i­tors fur­ther state that on 20 May 2011, “the provisional liq­uida­tors of MKM Mar­ket­ing Ltd, Star Lion Group Ltd, Star Lion In­surance Ltd, ap­proached this hon- ourable court on ex-parte ba­sis for the sev­eral prayers which are as­tound­ing in their mag­ni­tude, ex­tent and ef­fect.

“For now, the said or­der is here­unto at­tached and marked ‘WU’. It is self-ex­plana­tory. It is pri­mar­ily this or­der that trig­gered us to make this ap­pli­ca­tion. The rea­sons will be­come clearer later on.

“It should be borne in mind that the ap­pli­ca­tion was brought ex-parte de­spite the fact that it was clear that it was go­ing to have a far-reach­ing con­se­quences to peo­ple like us who have an in­ter­est as cred­i­tors of the above-men­tioned com­pa­nies.

“Now it should also be stressed at this stage that our gripe with the said an­nex­ure, ‘WU’, is only re­lated to prayer 4.2 to the said or­der only.

“It is only this or­der that we seek to have re­scinded. This is be­cause they prej­u­dice us as cred­i­tors di­rectly in ex­er­cise of our rights.

“This ap­pli­ca­tion is be­ing made again to pro­tect our rights and in­ter­est in the as­sets of the com­pa­nies in liq­ui­da­tion which, in our view, are be­ing prej­u­diced by the im­pend­ing sale of the as­sets with­out our hav­ing ex­er­cised our rights as pro­vided for in terms of sec­tion 186 of the Com­pa­nies Act 1967.

“Our view is sim­ple: no sale of im­mov­able prop­er­ties be­fore the hold­ing of cred­i­tors’ meet­ings which among oth­ers, is to give di­rec­tion to the liq­uida­tors on the ad­min­is­tra­tion of the com­pa­nies in liq­ui­da­tion.

“Lastly, we have been ad­vised and ver­ily be­lieve the same to be true and cor­rect that the said specif­i­cally sin­gled out prayer should not have been granted by this hon­ourable court be­cause in law, the first to fourth re­spon­dents are pro­vi­sion liq­uida­tors and not fi­nal liq­uida­tors and con­se­quently do not have a right or pow­ers to sell the im­mov­able prop­er­ties since those pow­ers re­sides with the fi­nal liq­uida­tors who will be nom­i­nated and ap­pointed at the meet­ing of cred­i­tors.”

Mean­while, the High Court act­ing judge, Jus­tice Sakoane Sakoane, yes­ter­day post­poned the mat­ter to 10 Fe­bru­ary 2015 “to set the date of hear­ing.”

One of the MKM l build­ings in Maseru.

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