Lechesa v KPMG/Harley & Morris joint Venture and Others (CIV/APN/425/03)

Case No: 
Media Neutral Citation: 
[2004] LSHC 88
Judgment Date: 
21 July, 2004




In the matter between:





(In Liquidation 2nd Respondent

The REGISTRAR OF DEEDS 3rd Respondent




Delivered by the Hon. Mr. Justice G. N. Mofolo On the 21st day of July, 2004:-

The applicant has approached this court on a Notice of Motion for an order in the following terms:

  1. Directing third Respondent to cancel deed of hypothecation number 20819 dated 16 December, 1987 and deed of hypothecation number 20774 dated 31 March, 1988 both passed by Applicant in favour of Lesotho Bank (In liquidation);

  1. Directing third Respondent to cancel all endorsements of the said deeds of hypothecation on lease number 13293-138, Lower Seoli Maseru.

  1. Directing First Respondent to hand over to Applicant the original lease document of lease number 13293-138, Lower Seoli, Maseru;

  1. Declaring that Applicant is not indebted to Lesotho Bank (In Liquidation), its assigns, liquidation if any, and/or KPMG/Harley & Morris Joint Venture;

  1. Directing first Respondent to pay the costs hereof and the other Respondent to pay same in the event of opposing this application;

  1. Granting Applicant further and/or alternative relief. The application was opposed.

According to applicant, he was granted overdraft facilities in the amount of M75,000.00 and M65,000.00 respectively by hypothecating lease number 13293-138 per hypothecation numbers 20819 and 20774 respectively - see paragraphs 10 and 11 of the Founding Affidavit, the first deed of hypothecation being dated 16 December, 1987 and the second 31 March, 1988.


At paragraph 13 applicant claims that he made other random payments and paid Harley and Morris directly. Annexure "HL3' on page 39 of the record is applicant's bank statements dated about 25/06/97. I say about because it is feint. Page 40 is another of applicant's bank statement showing a debit order in the sum of Ml,000.00; pages 41-42 reflect some of the payments and page 43 is a fixed deposit in the sum M3,600.00. Page 44 is yet another customer statement showing new balance of M369,754.00 on 27/02/01 and balance of M105,165.00 on 02/10/02. On this page is shown amounts of M22,l 84.70 and Ml 19,254.65 written off respectively on 31/07/2001 and 12/09/2001 meaning within a period of two months there were write-offs from the same account. Payments or credit entries on p.44 amount to M25,080.05 but M2,430.05 (27/02/03) has to be deducted because it belongs to a period before 21/03/01 when applicant acknowledged his debt; the balance therefore stands at M22,650.00. Payments or credit entries on p. 46 amount to M26,380.05 but since M2,430.05 belongs to a period before 21/03/01 as shown above, this must also be deducted leaving a sum of M23,950.00. Page 47 reflects payments or credits in the amount of M20,580.05 and deducting M2,430.05 as above the balance is M18,150.00. It will be seen that there are discrepancies and conflicts as to balance of whien Mr. Ntlhoki has complained.


Mr. McAlpine has acknowledged and explained these errors and inconsistencies in his affidavit saying owing to an administrative error by their accountant Ms. Mooki the two accounts were written off when only Ml 19,754.65 should have been written off; the accounts had been regularized in that the sum of M122,184.70 had been debited to the account and interest debited to the account written off leaving customer balance of M250,000.00 as acknowledged by applicant (see para.13 of 1st respondent's Answering Affidavit). Ms. Mooki has acknowledged the oversight on her part saying after the adjustments and crediting the applicant with payments she had made the balance in applicant's account stand at M226,050.00 (see paras 3-6 of Ms. Mooki confirmatory affidavit).

As Mr. McAlpine and Ms. Mooki both agree and have proved to my satisfaction that of the acknowledged sum of M250,000.00 the applicant has paid M23,950.00 leaving a balance of M226,050.00 due and payable by the applicant, I do find that barring other considerations to be decided by this court, the amount of M226,050.00 is due and owing by the applicant.


A lot of dust, smoke and mud was thrown in this application to cloud real issues. Although the applicant freely acknowledged the sum of M250,000.00 owing, Mr. Ntlhoki has gone back to the old account urging the court to recapture the old transactions before the acknowledgement of debt. Some of the arguments advanced by Mr. Ntlhoki are quite valid such as, for example, capitalization of interest in the form of interests on interest or accumulated interest. Indeed if a debtor were made to pay interest on interest he could never discharge his indebtedness. Besides interest charged must always be a matter of agreement between the debtor and creditor. A creditor cannot charge interest unilaterally. Thus according to Lee and llonore" The South African Law of Obligations - 2nd Ed. chapter 5 (174),the court will not enforce an agreement to pay usurious interest - see also Dyason v. Ruthven (1860)3 Searle 282, Renter v. Yates, 1904 TS 855 and SA Secutites Ltd v. Greyling, 1911 TPD 352. Has also been held if the agreed rate of interest exceeds the permitted rate, the interest may be recovered up to the permitted rate- see Spencer v. The Merchant Credit Corp., 1933 WLD 391; Cassimjee v. Naidoo, 1959 (4) SA 139 (N); Hanan v. Turner, 1967(4) SA 368 (R) as, indeed, it was also held a usurious rate of interest that has been paid may be recovered - see Diamond & Acceptance Corp. (Pry) Ltd. V. Law son and Kirk, 1937 CPD, 451.


And, according to the judgement in United Buildings Society v. Labuschagne, 1950 (4) SA 651 (W), the agreement may even provide that the arrear interest be capitalized monthly. Note there was no such agreement in the instant case.

Also, according to Voet 22.1.19, Van Leeuwen RHR 4.7.6 Van der Keessel Th 549; Van der Linden L15.3.3; Niekerk v. Niekerk (1830) Meng 452; Union Government v. Jordaan's Executor, 1916 TPD 411; Solomon Jearsay 1921 CPD 108; van Coppenhagen v. Coppenhagen, 1947 (1) SA 578 (T); Stroebel v. Stroebel, 1973 (2) SA 137(T), interest ceases to run when it reaches the amount of loan, and consequently the lender cannot, in respect of arrear interest, claim a greater sum than the capital amount of the loan.

Unfortunately for Mr. Ntlhoki, the above is not what the court is dealing with for if it was the intention of the applicant to challenge the usurious rate of interest, my view is that the applicant should have refused to sign the revised acknowledgement of debt preferring to take on 2nd respondent on the initial amounts of the overdraft and interest there on. As


will be shown intra, applicant has freely acknowledged the revised debt thus reviving the old loan account.

And while I am on acknowledgement of debt, I am of the view that by acknowledging the revised amount applicant novated his indebtedness to 2nd respondent. Mr. Ntlhoki has also argued the debt is prescribed. I could not disagree more. I am of the view that the running or prescription is interrupted by express or tacit acknowledgement of debt. I am also of the view where prescription is interrupted it begins to run de novo from the date of acknowledgement of liability - see Cohen and Sons v. Dormehl, 1945 (!) PH Fl (TPD): Campbell v. Gilchrist v. Burgess, 1948 (3) SA 223 (T). Petzen v. Radford (Pty) Ltd, 1953 (4) SA 314 (N); Markham v. SA Finance & Industrial Co. Ltd, 1962 (3) SA 669 (A).

While I am on this aspect of the case, Mr. Ntlhoki's arguments do, sometimes, leave much to be desired. He has argued but for the usurious rate of interest applicant would have and in fact he has discharged his indebtedness to the 2nd respondent. And yet, in the same breath, Mr. Ntlhoki has argued the debt has prescribed. If it has prescribed, this is acknowledgement of the fact that the applicant owes the 2nd respondent save


that as the debt has prescribed the 2nd respondent's claim cannot succeed. Mr. Ntlhoki cannot be allowed to ride on two horses or as Judge Ngoepe said recently (The Citizen 27/05/04 p.2), he cannot be allowed 'to butter his bread on both sides.' Either the applicant is owing or is not owing.

I must now consider whether:

  1. applicant having acknowledged his indebtedness to 2nd respondent in the sum of M250,000.00 applicant has paid off this amount;

  1. 1st respondent is properly constituted to have been appointed liquidator of the 2nd respondent and even if he is whether the appointment could have been made retroactively;

  1. 2nd respondent by reason of its liquidation has power and authority to defend these proceedings and in particular whether 2nd respondent has locus standi in judicio;

  1. annexure "F" of the Answering Affidavit is hearsay.

I intend dealing with the above in the order in which they come.

Concerning (1) above, I have already said that I am satisfied with Mr. McAlpine's and Ms. Mooki's explanation regarding the acknowledged


revised debt standing at M250,000.00 due and payable by the applicant. I have already dealt with implications of in duplum rule above and have said Mr. Ntlhoki arguments do not advance his case. He has, however, gone further to submit to avoid the duplum rule the liquidator has sought refuge in an acknowledgement of debt purportedly signed by applicant, (the emphasis is mine).

It is to be recalled that one of the duties of the Liquidator is to collect debts of the Bank and along with this is the duty imposed by the Companies Act, 1967 to agree to any offer of composition made to the company by a debtor (vide sec. 188(b). The fact of the matter is that the applicant signed and did not purportedly sign an acknowledgement of debt. I have already said if applicant was so minded he should have challenged his debt instead of acknowledging a revised debt and that by acknowledging the revised debt applicant revived his indebtedness to the 2nd respondent. I am not aware that applicant was under pressure to sign the acknowledgment of debt or that promises were made to him should he acknowledge debt certain benefits would flow.


Mr. Ntlhoki on (2) above has challenged the appointment of 1st applicant saying it was irregularly appointed and in any event as the appointment was defective from the beginning it could not be ratified retroactively. Mr. McAlpine has deposed (para 14.2 of the Answering Affidavit) that the appointment of the 1st respondent before the Act came into operation was an error which was rectified. I take into account the fact that the error was a Justus error subject to rectification and ratification as the Minister did. Besides what the Minister did was a public duty for public knowledge and in public interest arising from a statute. Seems to me retrospective alterations are relevant in so far as they validate a statute. It would also seem while events that have occurred in the past cannot be changed for to change them would undermine the principle of legality, on the other hand situations can arise in which departure from the principle might be desirable in order to rectify a previously unjust situation; see Baxter Administrative Law p. 355. This is exactly what the Minister did and I have found no fault with the step he took even if it was retroactive for it was a necessary and justifiable action to rectify an unjust situation.

Account has to be taken that Mr. McAlpine has denied in his Founding Affidavit (para. 15.2) above that a firm KPMG and a legal firm


Harlcy and Morris have entered into a joint venture or partnership for gain. He says the entities KPMG and Harley and Morris are neither auditors nor attorneys nor have they concluded a joint venture registered in the Deeds Registry. This apart, it is doubtful the Registrar of Companies would have registered the 1st respondent if the composition was flawed.

In any event, since 1st respondent has denied charges against it, 1st respondents contention cannot but prevail. I am of the view that 1st respondent has the necessary status and locus standi in these proceedings.

Mr. Ntlhoki has also contended (3) above that applicant cannot bind himself to an entity that is not fully active for according to him an entity in liquidation is not fully active and cannot enter into juristic acts such as acknowledgement of debt. It is true that the applicant acknowledged himself indebted to Lesotho Bank (In liquidation) on 21 March, 2001. This was a case where applicant was binding himself to Lesotho Bank and there was no reciprocal duty by Lesotho Bank necessitating it to signal anything. When the applicant acknowledged the debt Lesotho Bank (1999) Limited (Vesting) Act 2000 had been passed almost a year before.


What Mr. Ntlhoki is challenging is the locus standi of the 2nd respondent to defend these proceedings. Account has of course to be taken of Govenment stand in these proceedings and the fact that this was voluntary sequestration and according to Gibson (South African Mercantile I ,aw - 6th Ed.) the effect of voluntary winding up is that the state of powers of a company continue though it must cease to carry on business save for the purpose of beneficial winding up (sec. 212, companies Act, 1967). It is understood that pending the appointment of a liquidator civil proceedings by and against the Bank/Company are stayed though of importance is the proviso to sec. 212 that 'the corporate state and corporate power of the company shall, notwithstanding anything in its articles, continue until it is dissolved.'

Account though has to be taken note of the fact that the 2nd respondent is a statutory body and that on its voluntary dissolution Parliament passed an Act termed Lesotho Bank (1999) Limited (Vesting) Act, 2000.

Salmond in his Jurisprudence - 12th Ed. p. 262 says vested ownership embodies a perfect title which is absolute and the investitive fact from which it derives the right is complete in all its parts. Since these vested rights are


statutory, there can be no doubt that they prevail against all comers; what's more, what is dissolved, put out of existence and circulation is resuscitated and enabled to wield former powers and privileges. In this case old Lesotho Bank was put out of office and new Lesotho Bank (1999) Limited put in office much like the King is dead, long live the King. Mozley & Whiteley's Law Dictionary - 10th Ed. I have always found vague. But it does say 'vest' is to deliver to a person the full possession of land, and so to clothe him with the legal estate in it. Concise Oxford English Dictionary - 10 Rev. Ed. speaks of 'vest' as confer or bestow power, property etc.; to be vested with being to 'give' (someone) the legal right to power. From this it will be seen that vesting is to clothe with power and as said above power that is 'perfect' and 'absolute' and not subject to conditions. This is the power that was vested in Lesotho Bank (1999) Limited by the Vesting Act of 2000 and there can be no question of 2nd respondent being 'an entity that cannot bind itself, enforce its contracts or acknowledge debts' since, by the Vesting Act aforesaid 2nd respondent has assumed its assets and liabilities, can litigate pending actions and arbitrations and can act as contracting party from the beginning in terms of liabilities referred to in sec. 10 of the Vesting Act 2000 and can transact its banking business and act for all intends and purposes in terms and spirit of the said Lesotho Bank (1999) (Vesting) Act,


2000. The contention that 2nd respondent has no locus standi must be rejected and I reject the contention.

Concerning (4) above, Mr. Ntlhoki has also argued that annexure "F" to the Answering Affidavit is hearsay as the author has not filed any supporting affidavit. I disagree for this was not necessary annexure "F" being an official document. In terms of Proclamation No.2 of 1964 (p.48 Laws of Basutoland Vol. IX, 1964, Part II Sec.7):

'In any criminal or civil proceedings a document:

  1. purporting to bear the signature of any person holding office under the Crown, and

  1. bearing a seal or stamp which purports to be a seal or stamp of the department, office or institution to which such person is attached, shall on its mere production, without proof of such signature, seal or stamp, be presumed to have been signed by such person, unless it is proved not to have been signed by him.'

Annexure "F" emanates from the Ministry of Finance and is signed by the Minister of Finance. It has not been proved to me that the signature is not his and I reject the contention that it is hearsay.

I am not persuaded that this application merits orders prayed for; on the contrary, I have found it to be totally without merit and I have dismissed it with costs to the 1st and 2nd respondent.




For (he Applicant: Mr. Ntlhoki

For the Respondents: Mr. Pu Fischer, S.C.