MASERU — MKM’s four-year battle to avoid liquidation ended with tears of grief at the Court of Appeal on Friday.
The Court of Appeal found that the High Court was correct when it ruled that companies under the MKM group should be liquidated.
That means the liquidation of arguably the most infamous group of companies in Lesotho can now begin in earnest.
It’s a devastating judgment for Simon Thebe-ea-Khale, the MKM managing director and founder, who had fought a bitter fight against the Central Bank of Lesotho (CBL)’s attempts to liquidate his companies.
The judgment brings to an end what is probably the most keenly followed court case in Lesotho’s history.
So much was at stake.
MKM owed 400 000 people, nearly a fifth of the country’s population.
The victims of its demise varied from senior politicians, prominent civil servants to judges, pensioners as well as orphans.
It’s a case that touched almost everyone’s life: if you had not lost money in MKM you were probably related or had friends with someone who had lost out.
MKM collapsed with nearly half a billion maloti of investors’ funds on its books and three quarters of that amount could not be accounted for.
Opposition parties were accusing the government of ignoring the plight of MKM’s investors by failing to bail out the company.
There were demonstrations and petitions to pressure the government to intervene.
Public opinion on the MKM saga was divided with some saying the company was a victim of political machinations and jealous rivals while others believed it had to be closed because it was a pyramid scheme designed to fleece people.
The Court of Appeal judgment does not end this debate but at least it ends the misery of 400 000 people who have been anxiously waiting for a verdict on the case.
The MKM case had become a permanent fixture in the High Court as Thebe-ea-Khale battled to save his companies from liquidation.
There have been applications, counter applications and appeals.
Along the way at least three High Court judges had to recuse themselves for various reasons.
One said he was afraid of the backlash if he ruled against the company while another pulled out because he was friends with the MKM directors and had at one time borrowed a car from the company.
Another claimed she had received “a visit” from Thebe-ea-Khale’s emissary a day before she was scheduled to hear one of MKM’s cases.
It was a case that was “too-hot-to-handle”.
Then in March this year the High Court hired Justice John Musi, a South African judge, to hear the case.
And for the first time it seemed there was an end in sight to the saga.
On May 18 Justice Musi ruled that MKM companies should be liquidated.
The central bank quickly moved to appoint two provisional liquidators.
But just as the liquidators were about to start work MKM filed an application for “stay of execution”.
Justice Musi dismissed that appeal on June 18 and six days later MKM filed an appeal with the Court of Appeal.
So MKM was in the Court of Appeal for the second time in four years: the first case was when the company appealed against its closure and lost.
This time the Court of Appeal had to decide if Justice Musi was correct to order MKM’s liquidation.
When the case was heard on October 12 MKM’s team of three lawyers was headed by Dr Kananelo Mosito (KC), who is regarded as one of the best legal minds in Lesotho.
Mosito argued that under section 47 of the Insurance Act the central bank governor did not have a legal right to petition the High Court to liquidate MKM.
The basis of this argument was that the governor was not the Commissioner of Insurance as he had made out to be in the petitions.
But Justice Ian Farlam said although he agreed that the “CBL governor has erroneously thought that he was the Commissioner of Insurance that all he had to do was to proceed as governor and not on behalf of the bank” it was clear that “he was authorised to institute these proceedings on behalf” of the central bank.
The judge said the government had received the authorisation from the central bank’s board of directors.
He said after being authorised by the board the governor “was capable of seeing to it that the commissioner’s power to do so was exercised”.
“In my view to hold that the Commissioner’s power was not exercised would allow formalism to triumph over substance,” Justice Farlam noted.
“The governor intended to fire a shot with a pistol he thought was his own: it was not his own but the true owners had authorised him to use it and the shot was as effective as if the governor’s belief had not been mistaken”.
Mosito’s second argument was that the intervening creditor in the MKM case “should not have been given leave to intervene because the petitioner in the winding up petition under section 47 of the Insurance Act lacked locus standi (legal right)”.
Justice Farlam however said he disagreed because the argument that the CBL governor did not have the legal right to bring the petition under section 47 of the Insurance Act is incorrect.
He said even then the CBL was not asking for the winding up of MKM’s business under section 47, something the Commissioner of Insurance can do, but under the Companies Act.
“The third submission made by the appellant’s counsel that the court a quo erred in making a final winding up order as opposed to a provisional one must also be rejected,” the judge said.
The judge dismissed the appeal with costs.
Justice Noel Hurt and Justice Lionel Melunsky concurred.
Thebe-ea-Khale could not be reached for comment on the judgment.