Court nullifies MKM auction
. . . as 11 creditors file new application seeking to completely block the sale
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ahead in Ladybrand later in the day, with five of the six properties going under the hammer while the other one was withdrawn due to “complications”.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The plaintiffs also want the court to direct that the order “be rescinded, corrected and set aside as having been granted in error and or contrary to the law.”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.