Letseng Diamonds Ltd v JCI Ltd and Others; Trinity Asset Management (Pty) Ltd and Others v Investec Bank Ltd and Others

• Jurisdiction: South Africa
• Citation: 2007 (5) SA 564 (W)

Letseng Diamonds Ltd v JCI Ltd and Others;
Trinity Asset Management (Pty) Ltd and Others v Investec Bank Ltd and Others
2007 (5) SA 564 (W)

2007 (5) SA p564

Citation	2007 (5) SA 564 (W)
Case No	21525/06 and 06/25734
Court	Witwatersrand Local Division
Judge	Blieden J
Heard	April 23, 2006; April 24, 2006; April 25, 2006; April 26, 2006
Judgment	June 28, 2006
Counsel	M D Kuper SC and D N Unterhalter SC for the applicant; A I S Redding SC (with A Williamson) for the first and third respondents; S A Cilliers SC (with A P Rubens SC and J Blou) for the second respondent; G I Hoffman SC (with M W Janisch) for the applicants; S A Cilliers SC (with A P Rubens SC, J Blou and A Rowan) for the first respondent; A I S Redding SC (with A Williamson) for the second and third respondents

Flynote : Sleutelwoorde G

Company — Shares and shareholders — Shareholders — Legal proceedings by and against — Application by individual shareholders for declaration of invalidity of agreements concluded H by company — Locus standi of shareholders — Only company, and not individual shareholders, having necessary direct interest to attack validity of agreements to which company was party.

Declaration of rights — Locus standi — Requirements for — Court to be satisfied that: (1) applicant having direct interest in subject-matter I of litigation; and (2) interested parties existing upon whom declaration would be binding — Individual shareholders seeking declarations of invalidity of agreements entered into by company — Individual shareholders having only indirect financial interest in validity of agreements — Lacking locus standi to bring applications. J

2007 (5) SA p565

Headnote : Kopnota

Two applications were launched in the High Court in which shareholders of JCI (the latter being the first respondent in the A first application and the second respondent in the second application) sought declarations of invalidity of a suite of agreements to which neither applicant was a party, including an agreement in terms of which IB (the second respondent in the first application and the first respondent in the second application) had loaned some R540 million to JCI. The applications were launched one and a half years B after implementation of the agreements, and at all times the parties to the agreements, namely JCI and IB, had considered themselves to have been bound by the agreements. The issue whether the applicants had locus standi to raise the alleged invalidity of the agreements was ordered to be separated from the other issues.

Held, that the general rule was that a shareholder was a stranger to the company in its dealings with third parties, so that an C individual shareholder could not bring an action to complain of an irregularity (as distinct from illegality) in the conduct of the company's internal affairs where the irregularity could be cured by a vote of the company in general meeting. (Paragraphs [20] - [21] at 573F/G - H.)

Held, further, that the Court was empowered to grant declaratory relief where: (a) the applicant was a person D interested in an 'existing, future or contingent right or obligation'; and (b) the case was a proper one for the exercise of the discretion conferred on it. (Paragraph [24] at 574G.)

Held, further, as to (a), that in order for a party to be a 'person interested', he or she had to have a direct interest in the subject-matter of the litigation and not merely an indirect, financial interest, such as that of a subtenant in E proceedings in which the tenant's continued right of occupation was in issue. (Paragraph [25] at 574H and 575B/C.)

Held, further, as to (b), that a court could not make a declaratory order unless there were interested parties upon whom the declaration would be binding. (Paragraph [26] at 575C - D.)

Held, further, that it was JCI as a company, not individual shareholders, such as the applicants, who were entitled to attack the F validity of the agreements concluded by the board. Shareholders had no right as shareholders, individually, to attack those transactions. (Paragraphs [35] - [36] at 577I - 578B.)

Held, further, that in the present matters (a) was not satisfied as the applicants had only financial interests in the subject-matter of the proceedings. It was only JCI and IB which had the G requisite direct interest. (Paragraphs [38] - [39] at 578D - F.)

Held, accordingly, that the applicants had no locus standi to raise the issue of the validity of the agreements. The remaining issues in the first application had to be postponed sine die, and the second application dismissed. (Paragraph [66] at 584I.) H

Cases Considered

Annotations

Reported cases

Southern African cases

Absa Bank Bpk v C L von Abo Farms BK en Andere1999 (3) SA 262 (O): referred to I

Breed v Van den Berg and Others1932 AD 283: referred to

Cordiant Trading CC v Daimler Chrysler Financial Services (Pty) Ltd2005 (6) SA 205 (SCA): dictum at 212H applied

Durban City Council v Association of Building Societies1942 AD 27: dictum at 32 applied J

Ex parte Ginsberg 1936 TPD 155: dictum at 158 applied.

2007 (5) SA p566

Ex parte Nell1963 (1) SA 754 (A): dictum at 760B applied A

Ex parte Prokureur-Generaal, Transvaal1978 (4) SA 15 (T): applied

Gotze v Estate Van der Westhuizen1935 AD 300: referred to

Henri Viljoen (Pty) Ltd v Awerbuch Brothers1953 (2) SA 151 (O): dictum at 169H applied

Hillock and Another v Hilsage Investments (Pty) Ltd1975 (1) SA 508 (A): referred to B

Kalinko v Nisbett and Others2002 (5) SA 766 (W) ([2002] 3 All SA 294): discussed

Kuter v South African Pharmacy Board and Others1953 (2) SA 307 (T): dictum at 313 applied

Louw v WP Koöperatief Bpk en Andere1994 (3) SA 434 (A) ([1998] 1 All SA 355): referred to C

McLelland v Hulett and Others1992 (1) SA 456 (D): discussed

National Sorghum Breweries Ltd v Corp Capital Bank Ltd2006 (6) SA 208 (SCA) ([2006] 2 All SA 376): referred to

Schroeder v Vakansieburo (Edms) Bpk 1970 (3) SA 240 (A): referred to

Standard Bank of South Africa Ltd and Another v Ocean Commodities Inc and Others1983 (1) SA 276 (A): referred to D

Traub v Barclays National Bank Ltd; Kalk v Barclays National Bank Ltd1983 (3) SA 619 (A): referred to

United Watch & Diamond Co (Pty) Ltd and Others v Disa Hotels Ltd and Another1972 (4) SA 409 (C): dictum at 417A - C applied.

Foreign cases E

Foss v Harbottle(1843) 2 Hare 461 (67 ER 189): applied

John Shaw and Sons (Salford) Ltd v Shaw[1935] 2 KB 113 (CA): dictum at 134 applied

Parke v The Daily News Ltd[1962] Ch 927 ([1962] 2 All ER 929): distinguished

Prudential Assurance Co Ltd v Newman Industries Ltd and Others (No 2)[1982] 1 All ER 354 (CA): F dictum at 357j - 358b applied

Re Halt Garage (1964) Ltd[1982] 3 All ER 1016 (Ch): dictum at 1030d - g applied

Re Lee, Behrens & Co Ltd[1932] 2 Ch 46: discussed.

Unreported cases G

LSA UK Ltd (formerly Curtainz Ltd) and Others v Impala Platinum Holdings Ltd and Others (SCA case No 222/98, 28 March 2000): referred to.

Case Information

Applications by individual shareholders for declarations of invalidity of agreements to which the company was a party. The facts appear from the reasons for judgment. H

Case No 21525/06:

M D Kuper SC and D N Unterhalter SC for the applicant.

A I S Redding SC (with A Williamson) for the first and third respondents.

S A Cilliers SC (with A P Rubens SC and J Blou) for the second respondent. I

Case No 06/25734:

G I Hoffman SC (with M W Janisch) for the applicants.

S A Cilliers SC (with A P Rubens SC, J Blouw and A Rowan) for the first respondent. J

2007 (5) SA p567

A I S Redding SC (with A Williamson) for the second and third respondents. A

Cur adv vult.

Postea (June 28).

Judgment

Blieden J: B

[1] The two applications before Court are brought by two separate and unconnected companies for similar relief principally against the same respondents. The applications arise out of the same set of circumstances and it was agreed by all the parties that it was convenient for the two applications to be heard together. C

The parties

[2] The applicant in the first application is Letseng Diamonds Ltd (Letseng). It is a shareholder in the company JCI Ltd (JCI). This company is the first respondent in the Letseng application. D

[3] The applicants in the second application are Trinity Asset Management (Pty) Ltd, Trinity Endowment Fund (Pty) Ltd and Eljay Investments Incorporated. These three companies are all part of the same group. For the purposes of this judgment they will be collectively E described as 'Trinity'. They together are shareholders in JCI. The latter company is the second respondent in the Trinity application.

[4] Investec Bank Ltd (Investec) is the second respondent in the Letseng application and the first respondent in the Trinity application.

[5] JCI Investment Finance (Pty) Ltd, formerly Lexshell 658 Investments (Pty) Ltd, is the third respondent in both F applications. It is a special purpose vehicle formed by JCI to house certain of the securities that were furnished to Investec. In the papers before this Court it is referred to as the special purpose vehicle (SPV), and will be referred to as such in this judgment. G

[6] In addition to these three respondents Letseng has joined the Johannesburg Stock Exchange (JSE) as a fourth respondent, and Gem Diamond Company of Africa Ltd as a fifth respondent. Neither of these respondents plays any material part in the two applications and neither of them was represented at the hearing. No relief was claimed by or against either of them. H

The background facts

[7]

[7.1]

JCI had been listed as a public company on the JSE. On 19 August 2005 the JSE suspended trade in its shares because of I its failure to produce audited financial statements for the year ending 31 March...