MASERU — Attempts by MKM boss, Simon Thebe-ea-Khale, to block liquidation proceedings against his troubled company hit a brick wall in the High Court on Monday.
The 20202000 Trust Fund, a shadowy outfit bankrolled by Thebe-ea-Khale, wanted the court to stop the liquidation proceedings so MKM could negotiate repayment terms with depositors whose monies were locked up in the company when it was shut down three years ago.
The central bank shut down MKM in November 2007 accusing it of operating banking and insurance businesses without licences.
It also said the company was in essence a Ponzi scheme designed to fleece people of their monies by promises of unrealistically huge profits on investments.
The bank then instituted liquidation proceedings against MKM arguing that it was the only way depositors could salvage what remained of their investments in the company.
It is this liquidation proceeding that the Thebe-ea-Khale-linked trust was trying to block this week.
The trust fund, curiously made up of mostly MKM directors and their friends, argued that the company needed five years to repay the stranded depositors.
On November 19 the trust fund managed to get an interim court order pending a hearing for their application which was due on Monday.
But when they produced the temporary order before acting High Court judge Justice Musi on November 25 the central bank’s lawyers protested and questioned how it had been issued.
The central bank’s lawyers then managed to have the court set the application’s hearing date to November 26.
But on the morning of November 26 the trust’s lawyer called in sick and the case did not proceed as planned.
Justice Musi, who was hired to deal with the MKM case after local High Court judges pulled out, then postponed the hearing to December 6 thus inadvertently granting Thebe-ea-Khale’s trust its wish.
When the case resumed on Monday the central bank’s lawyers wasted no time in attacking the credibility of both the 20202000 Trust Fund and its application.
Appearing for the central bank, Advocate Chris Edeling argued that there was nothing in the application to justify that it was urgent as the 20202000 Trust Fund had argued when they got the interim court order.
“There is no proof that the requested stay will be to the benefit of creditors,” Advocate Edeling said.
“There is also no evidence of ability to meet the promises to investors,” he said in reference to the trust fund’s argument that once it has compiled the list of depositors it will be able to repay them.
“I respectfully submit that no case has been made for an urgent application and I ask that the application be dismissed with costs for lack of urgency,” he added.
Advocate Ranale Thoahlane, lawyer for the applicants, argued that if the liquidation proceedings are stayed the trust fund will be able to persuade more depositors to agree to MKM’s proposal to repay them later.
He said liquidation would not help depositors.
If the MKM is liquidated, Thoahlane argued, depositors will not get the full value of their deposits. This, he added, would hurt the depositors.
If the depositors agree to be paid later they are most likely to get the full value of what they invested, he argued.
He however did not tell the court where MKM will get the money to repay the depositors.
Neither did he say how that money would be raised.
Justice Musi was however not convinced and he threw out the application with costs.
He postponed the case to February 28.
Yet even when the case resumes next year the court is unlikely to go straight into the liquidation proceedings because MKM has already brought another application.
This time the company, already declared by the Court of Appeal as an illegal business, will be challenging efforts by a depositors’ trust to be joined to the liquidation proceedings.
The investors’ trust was established earlier this year and is led by the central bank’s former legal adviser Thandiwe Metsing who, ironically, actively participated in the bank’s decision to close the company in 2007.
This trust fund argues, in court papers, that it must be enjoined to the case because it represents people who are owed by MKM.
But MKM is challenging the legitimacy of the Metsing-led trust arguing that it does not represent the depositors.
Only after a decision has been made on the MKM’s challenge to the trust’s application will the liquidation proceedings start.
Yet legal observers say they don’t see the liquidation proceedings moving smoothly either because there are likely to be more “applications and counter applications” that might stall its progress.
The legal observers say MKM will put up a strong legal fight to ensure that the court does not quickly move to the liquidation case.
Strengthening the central bank’s case for the liquidation of MKM is the fact that PricewaterhouseCoopers, a South African audit firm, has already found that MKM is M300 million in the red and is therefore unable to repay the 300 000 depositors it owes.
Although the company has properties it is highly unlikely that when they are sold they would cover that hole.
The company has hundreds of vehicles which are however registered in Thebe-ea-Khale’s name.
In any case, even if these vehicles are sold it is highly unlikely that they would make a dent on the company’s financial crisis because they have depreciated in value.