THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case number 574/07

In the matter between:

TRINITY ASSET MANAGEMENT (PTY) LIMITED
FIRST APPELLANT
TRINITY ENDOWMENT FUND (PTY) LIMITED
SECOND APPELLANT
ELJAY INVESTMENTS INCORPORATED
THIRD APPELLANT

and

INVESTEC BANK LIMITED
FIRST RESPONDENT
JCI LIMITED

SECOND RESPONDENT
LEXSHELL 658 INVESTEMENTS (PTY) LTD

THIRD RESPONDENT

Neutral citation:
Trinity Asset Management (Pty) Ltd v Investec Bank (574/07)
[2008] ZASCA 158 (27 November 2008).

CORAM:

FARLAM, MTHIYANE, JAFTA, MAYA et CACHALIA JJA

HEARD:

26 AUGUST 2008

DELIVERED:
27 NOVEMBER 2008

SUMMARY:
Companies – shareholders – accuracy in circular convening meeting
regarding validity of contract to which company is party – locus standi of shareholder to
obtain declarator as to accuracy of circular.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from:
Johannesburg High Court (Blieden J sitting as court of first
instance).

1.
The appeal succeeds with costs, including those occasioned by the
employment of two counsel.

2.
The order made by the court a quo is set aside and replaced by the following:
‘In the Trinity application:
1.
It is declared that the applicants have locus standi to raise the following issue:
That the ILA lapsed due to non-fulfilment of suspensive conditions in the ILA and the disposal
agreement.

2.
The application is postponed sine die.

3.
The first respondent is ordered to pay the costs of the applicants in regard to the separated
dispute regarding locus standi, which costs are to include those of two counsel.’

___________________________________________________________________

JUDGMENT
___________________________________________________________________

FARLAM JA (Mthiyane, Maya et Cachalia JJA concurring)

[1] This is an appeal from a judgment of Blieden J, sitting in the Johannesburg
High Court, in which he dismissed with costs the appellants' application for certain
relief. The relief sought included: (a) an order declaring that a loan agreement
concluded on the one hand between Investec Bank Ltd, the first respondent, and on
the other JCI Ltd, the second respondent, and Lexshell 658 Investments (Pty) Ltd
(whose name was changed to JCI Investment Finance (Pty) Ltd and which is a
wholly owned subsidiary of the second respondent), the third respondent, was void
for vagueness and/or impossibility of performance; (b) alternatively to (a) an order

declaring that conditions precedent to the agreement had not been met; (c) an order
interdicting the first respondent ‘from in any way implementing or benefiting from’ the
loan agreement; and (d) an order ordering the first respondent to restore the second
and third respondents into the position that they would have been in had the loan
agreement not been concluded; alternatively such order as to the restitution of the
parties inter se as the court may deem fit. In what follows I shall call the first
respondent ‘Investec’ and the second respondent 'JCI’.

[2] The appellants' application was heard by the court a quo together with
another application brought by Letseng Diamonds Ltd (which I shall call in what
follows ‘Letseng’) in which that company also sought certain relief against the same
three respondents, arising from the same loan agreement. The relief sought in what
may be called the ‘Letseng application’ included declarations to the effect that the
loan agreement was void or voidable on various grounds, as well as an interdict
restraining the second respondent from tabling certain resolutions at a general
meeting of its shareholders which it had called and at which the shareholders were
asked to ratify the loan agreement. (The wording of the agreement which was to be
ratified was amended from time to time as reference was made to further
agreements by which it was amended but the details thereof are not relevant for the
purposes of considering the issues arising for decision in this matter.)

[3] Save for one aspect, the loan agreement was implemented on both sides.
Amounts totalling more than R1 billion were lent and advanced by Investec to JCI,
and subsequently repaid with interest. The aspect outstanding related to the
payment of what was described in the agreement as ‘a raising fee’, amounting to
R50 million or 30 per cent of the aggregate increase in the value of the assets which
JCI furnished as security for its indebtedness (whichever was the greater on the
agreed due date of repayment). Although JCI was in a parlous state, staring
bankruptcy in the face when the original loan agreement was concluded, it recovered
significantly after it received the loans made to it by Investec. As a consequence the
value of the assets it furnished as security increased to such an extent that at the
time of the application before the court a quo it was calculated that the ‘raising fee’
amounted to a sum substantially in excess of R400 million.

[4] Before the two applications were argued before him Blieden J had, at the first
respondent's instance, ordered in terms of Rule 33(4) of the Uniform Rules, that the
question as to whether the appellants and the applicant in the Letseng application
had locus standi to raise certain issues which arose in the two cases should be
argued and decided separately. He did so because he was of the view that if his
decision on this point went in favour of the respondents it would be dispositive of the
appellants’ application and would determine the majority of the issues between the
parties in the Letseng application. Having heard argument on the locus standi point
he decided it in favour of the respondents and accordingly dismissed the appellants’
application. He also ordered that the Letseng application be postponed for the
remaining issues arising therein, which were not covered by his judgment on the
locus standi point, to be adjudicated.

[5] His judgment has been reported: see 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).

[6] As far as concerned the appellants (whom the judge collectively described as
‘Trinity’) the issue to be decided separately was whether the loan agreement had
lapsed due to non-fulfilment of suspensive conditions in it and another agreement,
which was referred to as ‘the disposal agreement’ and which followed on and was
dependent upon it.

[7] It was common cause before us that the learned judge had correctly
approached the locus standi point on the assumption that all allegations of fact relied
upon by the appellants and Letseng are true.

[8] In para [7.14] of his judgment (at 570C-E) Blieden J characterised the issue
before him as follows:
‘In short, the present proceedings are concerned with the right of two shareholders of JCI, being
Letseng and Trinity, to have a suite of agreements, including the [loan agreement], to which neither of
them is a party, declared invalid one and a half years after their implementation, apart from the
payment of the raising fee. The parties to the agreements, JCI and Investec, have at all times
regarded all the agreements to be binding on them.’

[9] The judge then proceeded to consider what he described as ‘the relevant
general legal principles applicable to the position of shareholders in companies’
(paras [15] to [22] of the judgment (at 572D-574D)).

[10] The conclusion to which he came (at 573D-G (paras [19] and [20])) was that
(save for limited exceptions not here relevant) ‘a shareholder is a stranger to the
company in its dealings with third parties’ and he or she cannot interfere in the terms
and conditions contained in an agreement between the company and a third party.
Persons in the position of the appellants and Letseng, he said, had no right as
shareholders to attack the loan agreement: this could be done only by JCI, the
management and control of the business of which vest in the directors whose
functions cannot be usurped by individual shareholders.

[11] The judge (in para [27] at 575D-G) referred to Ex parte Ginsberg 1936 TPD
155 in which it was held that it was not open to a litigant to bring an application for
declaratory relief merely to be advised of his legal position and not where the order
sought would not have the effect of binding some parties.

[12] The judge also held (in para [38] of his judgment at 578C-D) that the
appellants had only a ‘financial interest’, and not a ‘legal interest’, in the declaratory
relief they claimed: in this regard he referred with approval to the distinction between
direct legal interests and indirect financial interests in litigation upheld in Henri
Viljoen (Pty) Ltd v Awerbuch Brothers 1953 (2) SA 151 (O) and United Watch &
Diamond Co (Pty) Ltd v Disa Hotels Ltd 1972 (4) SA 409 (C).

[13] In para [41] of his judgment (at 579A-B) the judge said that ‘both JCI and
Investec have expressed their wish to be bound by the documents concerned, even
though various clauses in such documents and agreements are prima facie
incapable of performance, and the resulting contracts can be said to be voidable at
the instance of any of the contracting parties.’

[14] He continued (in paras [42] and [43], at 579B-E):
‘[42]
As is plain from the legal principles relating to declaratory orders to which reference is made

above, a court is not entitled to give advice unless such advice is binding on some party. In the
present case whether the agreements are binding or not, is not the question, it is whether the
applicants, Letseng and Trinity, as individual shareholders of JCI, are entitled to have them set aside
in the face of the two affected parties, JCI and Investec, adopting the stance that such contracts are
binding. In my view they have no locus standi to do this.

[43] The shareholders, such as Letseng and Trinity, have full knowledge of all the facts, so much
is plain from the affidavits filed on their behalf. Whatever order they wish the Court to make cannot
affect the agreement between Investec and JCI. It is only the decision of the general meeting that can
have influence on the ratification or otherwise of the agreements concerned. There is nothing to stop
either of the applicants informing the shareholders of JCI of their views before the general meeting
and canvassing the individual shareholders at the meeting to refuse to ratify the actions of the board
in regard to the agreements concerned.’

[15] Does the case raise the simple question to which the judge referred in para
[7.14] of his judgment which I have quoted in para 8 above?

[16] Mr Cilliers, who appeared together with Mr Rubens, Mr Blou and Mr Rowan
for Investec, contended that it did. He submitted that the question whether the
appellants had the right to have the loan agreement and the other agreements which
followed it declared invalid had to be answered by having regard to the
memorandum and articles of JCI, which constitute the so-called ‘company contract’
between the company and its members created by s 65(2) of the Companies Act 61
of 1973, as amended. There is no provision, he said, in the memorandum and
articles which entitles a shareholder to meddle in the contracts of the company.

[17] On the other hand, Mr Loxton, who appeared with Mr Janisch on behalf of the
appellants, contended that the judge had mischaracterised the question. The true
question was not whether, in abstract as it were, the appellants had the right to have
declared invalid a contract between the company of which they were members and
another. It was, as he formulated it, this: whether in circumstances where the
shareholders had been invited to attend a general meeting of the company to vote
on the question whether a contract concluded between the company and another
should be ratified and the validity of the contract sought to be ratified was a material
consideration in that process, an individual shareholder has the right to seek a
declarator to the effect that the contract is invalid.

[18] Mr Loxton submitted that when the question is posed in this way it becomes
clear that the appellants have the right to claim the declarator they seek and the
judge’s decision that they lacked locus standi was incorrect.

[19] Mr Cilliers sought to meet this argument by submitting that the circumstances
to which Mr Loxton pointed did not change the position. The fact, he said, that
shareholders are required to vote at a general meeting convened for the purpose of
ratifying an agreement cannot change the rights a shareholder has.

[20] Mr Williamson, who appeared on behalf of the second and third respondents,
confirmed during the hearing of Letseng's appeal against the judgment in the court a
quo, which was heard by this court on the day before the present appeal was
argued, that his clients wanted the issue dealt with. During this appeal he stated that
if the court were to hold that the loan agreement is invalid then they would not pay
the ‘raising fee’ because to do so would constitute making a gratuitous payment.

[21] It is appropriate at this stage to point out that the judge’s statement at 579 A-B
(in para [41]) of his judgment, which I have quoted in para 13 above, that ‘both JCI
and Investec have expressed their wish to be bound’ by the agreements even
though they ‘can be said to be voidable at the instance of any of the contracting
parties’ is not strictly correct. During the course of the argument before us Mr Cilliers
said, in answer to a question from the bench, that the directors of JCI do not say that
they will regard their company as bound under the loan agreement even if the points
taken by the appellants and Letseng are correct. He referred in this regard to the
second sub-paragraph of paragraph 2 of the supplementary circular, which is quoted
in para 37 below, and conceded that all this indicated was that the directors of JCI
regarded the loan agreement as binding even if the meeting of shareholders refused
to ratify it.

[22] In my opinion Mr Loxton was correct in submitting that the court a quo
mischaracterised the main question before it. It was not appropriate to approach the
issue raised in the request for a declarator in the abstract without reference to the
factual situation in which it arises. I say this because in my view the appellants’ right

to seek the declarator was triggered by the fact that a meeting had been called at
which the members were asked to ratify the loan agreement. Before the
shareholders could decide whether to attend the meeting to vote for or against the
resolutions, or to give proxies to others to vote for or against on their behalf, or to do
none of these things and to leave it to the majority to decide, they needed to have
sufficient information to be able to come to an intelligent conclusion on the matter on
which they were asked to vote. This right arises from a term implied in the company
contract: see Blackman et al, Commentary on the Companies Act, vol 1 p7-37,
where reference is made to Bulfin v Bebarfald’s Limited (1932) 38 SR (NSW) 423 at
440-441, a case which has been frequently followed in Australia, where it has been
described as ‘the foundation for subsequent decision’ (see Shears v Chisholm [1994]
2 VR 535 at 624).

[23] The Bulfin case concerned a meeting called to consider a modification of the
rights of preference shareholders and in the passage cited Long Innes CJ in Eq said:
‘The contract contained in the articles of association confers certain rights upon the different classes
of shareholders: Article 49 provides that the rights and privileges attached to each class may be
modified in a particular manner; and it is a term of the contract implied by law that there is a duty
resting upon the directors, when advising or urging any such class to agree to a modification of such
rights and privileges, as Vaughan Williams LJ said in Peel v London and North Western Railway
Company [[1907] 1 Ch 5 at 14], “to take care that a sufficient statement of the facts which will have to
be considered by the shareholders at the coming meeting is also placed before the shareholders.”
The duty in this respect resting on the directors is the same, in my opinion, whichever of the
alternative courses provided by Article 49 is adopted. In the present proceedings the plaintiff is
consequently not seeking to avoid the contract into which she, and the class of shareholders upon
whose behalf she sues entered, but to affirm and enforce it. She is not repudiating her contract but
approbating it; she is not claiming to be relieved from the contract on the ground that she was induced
to enter into it by misrepresentation, whether express or involved in a non-disclosure of a material
fact; but is seeking equitable relief on the ground that the defendant directors have committed a
breach of a term implied in the contract contained in the articles of association.’

[24] In my view this principle is not limited to decisions to modify the rights of
particular shareholders but applies generally to resolutions to be tabled at meetings
of a company.

[25] Down the years the requirements as to what information must be put before

the members have been developed and extended as the circumstances in which
meetings are held and decisions taken have changed.

[26] It is convenient to begin by referring to a case, with interesting Southern
African connections, decided in 1893, the Matabeleland Company Limited v The
British South Africa Company (1893) 10 TLR 77 (Ch and CA), the facts of which
resemble in some ways those of the present case. It concerned an application
brought for an injunction to restrain Cecil John Rhodes and his co-directors of the
British South Africa Company from representing to the shareholders that a certain
agreement allegedly concluded between the company and the Central Search
Limited (the shareholders of which were practically identical with Rhodes and the
other promoters of the British South Africa Company), which provided that half of the
British South Africa Company’s profits derived from the Rudd and Rhodes
concessions were to be handed over to Central Search Limited, existed or was valid.
The question as to whether there was an agreement or whether it was valid was the
subject of a pending action between the applicant and the company and its directors.
The directors had called a meeting of the company to consider a resolution that the
agreement be ratified. Stirling J dismissed the motion. He is reported to have said:
‘It was true there was a dispute as to the existence and validity of the agreement. It was true also that
it was asserted on the face of the notice convening the meeting that the agreement did exist and was
valid. The complaint was that the directors had not stated that there was any dispute. There was,
however, no suggestion that it was proposed to deprive the plaintiffs, or any other shareholders, of the
opportunity of informing the shareholders of the existence of such dispute, and it seemed to his
Lordship that that was all the plaintiffs were entitled to. The directors took one view and the plaintiffs
took another, and it was for the shareholders to consider the question, assuming that all the facts
would be properly brought before the meeting. Assuming, therefore, that nothing would occur at the
meeting which would give rise to the jurisdiction of the Court to interfere, then the whole question
would be before the shareholders, and they would be able to say whether there was an agreement,
and, if so, whether it should be acted upon. The Court ought not to assume that the directors would
act otherwise than fairly.’

[27] The next day the Court of Appeal (Lindley and A L Smith LJJ) heard and
dismissed an appeal from this judgment. Lindley LJ said that in substance ‘it was an
application to the Court not to restrain the defendants from carrying out an
agreement alleged to be beyond their powers, but to restrain the directors from
convening a meeting to discuss certain matters on the ground that the notice

convening the meeting contained misrepresentations which would mislead the
shareholders. Assuming that to be true, the answer to the application would be, “Go
and tell the shareholders they are being deceived; go and expose the
misrepresentations.”’ He added: ‘[S]uppose that, though that agreement was not
binding in point of law upon the company, the company thought it would be a breach
of faith not to act upon it, was it a lie to tell the shareholders that, though that
agreement was not binding in law, it was binding in honour, and was it wrong to ask
them to act as in honour bound? To hold that would be outrageous.’

[28] The next case to which I wish to refer is a judgment of Kekewich J, delivered
in 1899 and still quoted in current textbooks (see eg, Gower and Davies, Principles
of Modern Company Law, 8 ed, p 454 and Blackman et al, op cit., 7-37), viz Tiessen
v Henderson [1889] 1 Ch 861 (Ch D). This was also a case with Southern African
connections. It was an application for an interim injunction to restrain the defendants
from carrying into effect certain resolutions passed at an extraordinary general
meeting of a company, Violet Consolidated Gold Mining Co Ltd, which was formed to
work certain gold-mining claims near Krugersdorp. The resolution related inter alia to
the reconstruction of the company. Although the directors of the company were
personally interested in the adoption of the scheme and were to be renumerated by
means of a call on shares this fact was not disclosed in the notice convening the
meeting. Kekewich J held that this fact should have been disclosed in the notice and
granted the injunction to prevent the resolutions being carried into effect without
there being another meeting. He commenced his judgment as follows (at 866-7):
‘The application of the doctrine of Foss v Harbottle [(1843) 2 Hare 461] to joint stock companies
involves as a necessary corollary the proposition that the vote of the majority at a general meeting, as
it binds both dissentient and absent shareholders, must be a vote given with the utmost fairness – that
not only must the matter be fairly put before the meeting, but the meeting itself must be conducted in
the fairest possible manner. . . . . There is no question of conduct here, either on the part of Mr
Henderson [the first defendant] or anybody else. The question is merely whether each shareholder as
and when he received the notice of the meeting, in which I include the circular of the same date, had
fair warning of what was to be submitted to the meeting. A shareholder may properly and prudently
leave matters in which he takes no personal interest to the decision of the majority. But in that case
he is content to be bound by the vote of the majority; because he knows the matter about which the
majority are to vote at the meeting. If he does not know that, he has not a fair chance of determining
in his own interest whether he ought to attend the meeting, make further inquiries, or leave others to
determine the matter for him.’

[29] Later in his judgment he said (at 870-871):
The man I am protecting is not the dissentient, but the absent shareholder – the man who is absent
because, having received and with more or less care looked at this circular, he comes to the
conclusion that on the whole he will not oppose the scheme, but leave it to the majority. I cannot tell
whether he would have left it to the majority of the meeting to decide if he had known the real facts.
He did not know the real facts; and, therefore, I think the resolution is not binding upon him.’

[30] I notice that in the Law Journal report ((1899) 68 LJ Ch 353 at 356) there
appears a sentence before the sentence beginning ‘There is no question’ in the
above extract which reads as follows: ‘If you are to apply that rule in its entirety – that
the vote of the majority controls the minority, and of course also the absent
shareholder – it is a matter of absolute necessity that there should be the most
perfect straightforwardness and openness throughout.’ I do not know why Kekewich
J deleted this sentence from his judgment when he revised it for the official reports
but I am satisfied that it makes a point as valid today as it was in 1899.

[31] The assumption on which the judgments in the Matabeleland case were
based, that the dissentient shareholders can put the matter right, as it were, by
‘informing the shareholders of the existence of the dispute’ (as it was put by Stirling
J) or that they could ‘go and expose the misrepresentations’ (as it was put by Lindley
LJ) became more and more unrealistic as time went by and the circumstances in
which company meetings were held changed. In 1933 Maugham J dealt with the
position as follows in In re Dorman Long and Co Ltd; In re South Durham Steel and
Iron Co Ltd 1934 Ch 635 (Ch D) at 657:
‘It may be observed that when the Joint Stock Companies Arrangement Act, 1870, was passed, in the
majority of cases all the persons concerned with an arrangement could go to the meeting, listen to
what was said and vote for or against the arrangement according to the views which they were
persuaded to take. In these days, in many of the cases that come before me, only a fraction of the
persons who are concerned can get into the room where the meeting is proposed to be held, and in
the great majority of cases the proxies given to the directors before the meeting begins have in effect
settled the question of the voting once for all. It is perhaps not unfair to say that in nearly every big
case not more than five per cent of the interests involved are present in person at the meeting. It is for
that reason that the Court takes the view that it is essential to see that the explanatory circulars sent
out by the board of the company are perfectly fair and, as far as possible, give all the information
reasonably necessary to enable the recipients to determine how to vote.’

[32] In Garvie v Axmith [1962] OR 65; 31 DLR (2d) 65, a decision of the Ontario
High Court of Justice, Spence J considered the test to be applied in determining the
adequacy of a notice sent to shareholders inviting them to attend a general meeting
held to approve an agreement. The test which he approved was as follows: ‘the
notice to shareholders must contain such particulars as will permit them to exercise
an intelligent judgment upon the proposition’. He pointed out that the shareholders in
the case before him ‘might well be [at] any place on the American continent, or
overseas’ and said that they ‘should be able to sit down with the material and come
to an intelligent conclusion’. The test formulated in Garvie v Axmith, supra, was
approved by the Ontario Court of Appeal in Goldex Mines Ltd v Revill [1974] 54 DLR
(3d) 672 at 679.

[33] Earlier on the page the following was said:
‘In Charlebois et al v Bienvenu et al, [1967] 2 O.R. 635 at p 644, 64 D.L.R. (2d) 683 at p 692, Fraser J
held that the holding of an annual meeting and election of directors after the sending out of a
misleading information circular by the directors was a breach of the directors’ fiduciary duty to the
company. We hold that such an act is also a breach of duty to the other shareholders. If the directors
of a company choose, or are compelled by statute, to send information to shareholders, those
shareholders have a right to expect that the information sent to them is fairly presented, reasonably
accurate, and not misleading.’

[34] The matter has also been considered in Australia in a number of cases of
which it is only necessary to refer to one, Fraser v NRMA Holdings Ltd (1995) 127
ALR 543 (Fed C of A – Full Court). This case concerned the adequacy of the
prospectus issued by the NRMA on its proposed demutualisation. At 554 the court
(Black CJ, Von Doussa and Cooper JJ) stated, after referring to a number of cases
in England, Ireland and Canada, including some which I have cited above:
‘A duty to make disclosure of relevant information arises as part of the fiduciary duties of the directors
to the company and its members in relation to proposals to be considered in general meeting and
under s 1022 of the [Corporations] Law in respect of the contents of a prospectus. The fiduciary duty
is a duty to provide such material information as will fully and fairly inform members of what is to be
considered at the meeting and for which their proxy may be sought. The information is to be such as
will enable members to judge for themselves whether to attend the meeting and vote for or against
the proposal or whether to leave the matter to be determined by the majority attending and voting at
the meeting . . . . A proper discharge of the duty may require that the directors take reasonable steps
to ascertain relevant information for communication to members if that information is not known to the

board. Directors must not consciously refrain from seeking relevant information or turn a blind eye to
relevant material in order to avoid placing before members information which may contradict or qualify
any particular position taken or advocated by the directors or a majority of them.’

[35] The principles enunciated in the cases I have cited are in my view in
accordance with our law. Indeed in the argument before us counsel on both sides
referred freely to English and Australian cases and never suggested that our law
differed from the law in those jurisdictions.

[36] It is clear that a shareholder’s right to information regarding a proposition to
be voted on at a general meeting has developed and been extended down the years,
particularly since the practice of giving proxies has become so widespread. As I have
said a shareholder’s right to receive the necessary information arises from an implied
term in the company contract. Regard being had to the fact that an individual
shareholder will be bound by the votes of the majority it must follow that the
shareholder’s rights extend not only to his or her being furnished with the necessary
information but that all his or her fellow-shareholders also receive such information. It
also follows that a shareholder has the right flowing from the company contract to
insist that he or she and his or her fellow-shareholders do not receive information
which is inaccurate and to enforce such right by applying for an interdict to prevent a
meeting from proceeding.

[37] In the circumstances of this case, it will be recalled, the assertions made by
the appellants, whose locus standi is being challenged, have to be accepted as
correct. Thus we must assume, for the purposes of considering whether the
appellants have locus standi, that their assertion that the loan agreement is invalid is
correct. If that is so they must be able to apply to interdict the holding of the meeting
before which materially incorrect information regarding the legal status of the
agreement has been put by the directors. The supplementary circular sent to the
shareholders of JCI dated 15 November 2006, refers to the original circular sent to
the shareholders on 14 September 2006 and calls it ‘the Letseng circular’.
Paragraphs 2 and 6 of the supplementary circular read as follows:
‘2.
‘SHAREHOLDER RATIFICATION
JCI shareholders are referred to paragraph 1 of the Letseng circular, which recorded the following:
“In terms of the JSE Listings Requirements, the sale by JCI and certain of its subsidiaries of the

assets to JCIIF on loan account and the cession and pledge of such assets, and related loan
accounts to Investec as security for the facility and the subscription by JCI for Western Areas shares
in terms of the Western Areas rights offer and the underwriting by JCI of a portion of the Western
Areas rights offer up to a maximum of R250 million have been categorised as Category 1
transactions. In terms of a ruling by JSE, such transactions require ratification at a general meeting of
JCI shareholders.”

Should shareholders not ratify the Category 1 transactions, and Investec executes its security in
terms of the loan agreement the company may be in breach of JSE Listings Requirements. However,
JCI and Investec are nevertheless entitled to and will regard the Investec loan agreement, which has
been implemented as valid, binding and enforceable.’

‘6.
DIRECTORS’ RESPONSIBILITY STATEMENT
The directors, whose names are given on page 11 of this document collectively and individually
accept full responsibility for the accuracy of the information given relating to the JCI group and certify
that to the best of their knowledge and belief there are no facts that have been omitted which would
make any statement false or misleading, and that all reasonable enquiries to ascertain such facts
have been made.’

[38] In my view whether the loan agreement is valid or invalid is clearly a material
factor which the shareholders are entitled to know before voting. On the assumption
to which I have referred, the paragraphs I have quoted from the supplementary
circular are incorrect and the appellants would, as I have said, be entitled to an
interdict stopping the meeting until the incorrect information is removed from the
circular and replaced by information that is correct. It is accordingly clear that the
validity or otherwise of the loan agreement would be a triable issue in an application
brought by the appellants for an interdict.

[39] Does the fact that the court below, in terms of rule 33(4) of the Uniform Rules,
separated the appellants' claim for declaratory relief from the other relief claimed,
including the interdict, make a difference?

[40] In Nguza v Minister of Defence 1996 (3) SA 483 (Tk SC) Pickering J, after a
full discussion of the cases on the point, held (correctly in my view) following the
judgment of Shearer AJ in Safari Reservations (Pty) Ltd v Zululand Safaris (Pty) Ltd
1966 (4) SA 165 (D), that a court is entitled to make a declaratory order even where
other remedies are available but not sought, although the availability of other

remedies could be taken into account when the court was exercising its discretion in
deciding whether or not to make the declaration. That such a procedure can have its
advantages appears from such a case as Standard Bank of South Africa Ltd v Trust
Bank of Africa Ltd 1968 (1) SA 102 (T), a dispute between two banks as to whether a
pledge of certain deposit vouchers to the defendant bank became inoperative with
the result that the plaintiff bank was entitled to present them for payment. Hill J said
(at 106 B-C) that it was clear from the correspondence that they wished to avoid
legal proceedings and the possibility of a judgment for payment of money being
granted against the defendant and stated:
‘(t)he present proceedings provide an expeditious method of setting the dispute between the parties
as otherwise three months’ notice would be required in respect of each of the eight vouchers before
an action for payment could be instituted.’

[42] That the appellants have brought their application for declaratory relief with a
view inter alia to preventing the holding of the meeting called to ratify the loan
agreement appears from prayer 3.2 of their notice of motion where they ask that JCI
be interdicted and restrained, pending the final determination of their application,
‘from continuing to convene the shareholders’ meeting postponed to 30 November
2006 or from tabling any resolution notifying or endorsing’ the loan agreement.

[43] For the reasons I have given I am satisfied that the court a quo wrongly held
that the appellants have no locus standi to bring their application and that it had to be
dismissed.

[44] I also do not think that the court a quo was correct in saying (at 584F-H (para
[65])) that the appellants ‘are attempting to usurp the functions of the general
meeting and [trying to] anticipate the result of such a meeting.’ They are entitled to
stop the meeting from taking the decision on materially inaccurate information. The
fact that the issues raised by their complaint about the circular concern the validity of
the agreement cannot prevent them from approaching the court as they have done.
That question arose because of inaccurate statements in the circular which I have
quoted and which they are entitled to seek to controvert.

[45] Whether they would be entitled to approach the court for a decision as to the
validity of the agreement (which decision would bind all parties joined) in the
absence of the statements which I have quoted from the circular, or for an order
compelling JCI or its directors to seek such relief, pursuant to their duty to put
relevant information before the meeting (cf the dictum from Fraser v NRMA, supra,
quoted in para 34 above) does not strictly arise for decision in this case and I
express no opinion upon it.

[46] The following order is made:
1.
The appeal succeeds with costs, including those occasioned by the
employment of two counsel.

2.
The order made by the court a quo is set aside and replaced by the following:
‘In the Trinity application:
1.
It is declared that the applicants have locus standi to raise the following issue:
That the ILA lapsed due to non-fulfilment of suspensive conditions in the ILA and the disposal
agreement.

2.
The application is postponed sine die.

3.
The first respondent is ordered to pay the costs of the applicants in regard to the separated
dispute regarding locus standi, which costs are to include those of two counsel.’

IG FARLAM
JUDGE OF APPEAL

JAFTA JA dissenting

[47] I have read the judgment of my colleague Farlam JA. Regrettably I am unable
to agree with the order he proposes and the reasons given therefor. In my view the
appeal must be dismissed.

[48] The relief sought by the appellants, set out fully in Farlam JA’s judgment,
could not vindicate their rights in relation to the shareholders meeting to which they
were invited. They sought to set aside the agreements forming the subject matter of
the meeting. They also sought an order interdicting JCI from performing in terms of

the agreements, instead of asking for an order which would oblige JCI’s directors to
furnish them with full and accurate information.

[49] The court a quo was called upon to decide whether the appellants could
challenge the validity of the concerned agreements on the basis that the loan
agreement between JCI and Investec had lapsed due to non-fulfilment of suspensive
conditions. In this case the enquiry was narrower than in Letseng’s application, even
though in that case, too, the locus standi enquiry was limited to the claim for a
declaratory relief.

[50] The sort of locus standi we are concerned with here does not relate to the
appellants’ capacity to institute proceedings but to their competence to claim
particular relief. In other words the question is whether the appellants have a direct
and substantial interest in the agreements which they seek to be declared invalid.
The direct and substantial interest does not include mere financial interest which is
taken to be indirect interest.1

[51] In the context of the present case the question whether the appellants had
locus standi must be considered with reference to the relief they sought and the right
on which they based their claim.2 The right on which the appellants rely is the right to
full and accurate information. They contended that they needed such information so
that they could exercise their vote either against or in favour of ratification, at the
general meeting. There can be no doubt that the appellants were entitled to demand
full and accurate information from JCI’s directors. If the directors had breached the
duty to furnish such information, as it was alleged in the present case, the appellants
would have legal standing to claim compliance. The relief they could have been
entitled to would, however, be an order instructing JCI directors to supply them with
full and accurate information, which would include a statement to the effect that the
agreements were invalid for reasons raised by the appellants. Perhaps they could
have been entitled also to an order interdicting the meeting until there had been
compliance with the duty to make full and accurate disclosure. This much is clear

1 Henri Viljoen (Pty) Ltd v Awerbuch Brothers 1953 (2) SA 151 (O) at 169 and United Watch & Diamond Co
(Pty) Ltd and Others v Disa Hotel Ltd and Another 1972 (4) SA 409 (C) and Aquatus (Pty) Ltd v Sacks and
Others 1989 (1) SA 56 (A) at 62.
2 Wood and Others v Ondangwa Tribal Authority and Another 1975 (2) SA 294 (A) at 312F.

from the cases referred to in Farlam JA’s judgment.

[52] The appellants’ counsel argued that the court below mischaracterised the
issue relating to locus standi. He submitted that the correct issue was whether
shareholders, who had been invited to a general meeting to ratify an agreement, the
validity of which is material to ratification, have the right to claim an order declaring
such agreement invalid. Although I am not convinced that the court below
mischaracterised the issue, I am willing to assume in the appellants’ favour that it
did. The test for determining competence to claim relief is whether the claimant
possesses the right which gives rise to the relief sought and that such right has been
infringed or there was a threat to infringe it.3 The relief to which the aggrieved party
is entitled depends on the infringed right and is consequential to such infringement.
Such relief must fall within the scope of the right. In Graaff-Reinet Municipality v Van
Ryneveld’s Pass Irrigation Board4 Watermeyer CJ said:

‘[T]he ordinary Courts of Law, before the enactment in 1935 of the General Law Amendment
Act, had refused to make declaratory orders in claims or disputes brought before them which
had not yet ripened to a stage which may for convenience be called the stage of actionable
maturity, that is the stage at which an infringement of the legal rights of one of the parties,
which gives the other a right to claim consequential relief has taken place.’

[53] The only right the appellants have established in these proceedings is the
right to full and accurate disclosure. The question that arises is whether such right
entitled them to the relief sought. In my view it does not give them legal standing to
challenge the validity of the agreements on the basis that suspensive conditions
were not complied with. As observed by the court below it is only the contracting
parties who can raise that challenge.5

[54] In reaching the conclusion that the appellants have failed to point to a right
justifying the invalidity order, I have assumed in their favour though with some
reservations, that in determining the locus standi issue the allegations made by the

3 Compare Director of Education, Transvaal v McCagie and Others 1918 AD 616 at 621.
4 1950 (2) SA 420 (A) at 424.
5 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) at para 19 and the authorities there cited.

appellants, as to invalidity of the concerned agreements, must be taken as correct. It
appears doubtful to me that the approach followed in deciding exceptions can be
adopted in applications such as the present where evidence has been placed before
the court. It will be recalled that in the case of an exception, no evidence would have
been led.6 In the present matter not only were the pleadings closed, the parties had
placed evidence before the court. I can think of no reason warranting the disregard
of such evidence and for the court to decide the matter on an assumption.

[55] Moreover, even in the case of exceptions, the assumption is not made in
every matter. Where the factual averments made in the particulars are improbable or
false, the court deciding the exception cannot assume that they are correct.7

[56] Relying on s 34 of the Constitution, counsel for the appellant argued that the
common law principles on locus standi are at variance with the values underlying s
34. He submitted that such principles need to be reviewed. The distinction between a
‘direct and substantial interest’ which qualifies a party to have legal standing and a
‘mere financial interest’ which does not, he submitted, may be inconsistent with s 34.
A party which has a financial interest, so he concluded, must be allowed to have
access to courts where considerations of justice and equity demand that its dispute
be entertained.

[57] Section 34 of the Constitution provides:

‘Everyone has the right to have any dispute that can be resolved by the application of law
decided in a fair public hearing before a court or, where appropriate, another independent
and impartial tribunal or forum.’

[58] The main purpose of s 34 is to confer on litigants the right of access to courts
and other independent and impartial tribunals. The section places an obligation on
the State to establish such fora. But it does not purport to define the category of
litigants who qualify to take disputes to courts, nor does it describe the nature of

6 Anrudh v Samdei and Others 1975 (2) SA 706 (N) at 708 A-B and Barclays National Bank Ltd v Thompson
1989 (1) SA 547 (A) at 553.
7 Voget and Others v Kleynhans 2003 (2) SA 148 (C) at para 9 and Van Zyl NO v Bolton 1994 (4) SA 648 (C) at
651E-F.

relief a party can competently seek. It will be recalled that the issue of locus standi in
this matter arose in the context of the appellants’ competence to claim the relief they
sought. Their right of access to courts was not affected in any way. Indeed, they
were able to approach the court below for relief. I conclude, therefore, that their s 34
rights were not infringed by the court a quo’s ruling. Accordingly reliance on s 34 was
misplaced.

[59] Under the Constitution the question of locus standi is dealt with in s 38. It
provides:

‘Anyone listed in this section has the right to approach a competent court, alleging that a
right in the Bill of Rights has been infringed or threatened, and the court may grant
appropriate relief, including a declaration of rights. The persons who may approach the court
are –

(a)
anyone acting in their own interest;
(b)
anyone acting on behalf of another person who cannot act in their own name;
(c)
anyone acting as a member of, or in the interest of, a group or class of persons;
(d)
anyone acting in the public interest; and
(e)
an association acting in the interest of its members.’

[60] It is clear that s 38 does not apply in the present case. The appellants did not
allege that, by failing to furnish them with full and accurate information, JCI’s
directors infringed or threatened to infringe a right in the Bill of Rights. But it is
important to note that for the applicant’s competence, the section requires as a bare
minimum, that it be alleged that a right in the Bill of Rights has been infringed. It is
the infringement or a threat to infringe a right that entitles the applicant to relief. It
speaks of the infringement of a right and not interest. On this score the common law
is consistent with the Constitution.

[61] The above finding makes it unnecessary, in the circumstances of the present
case, to embark on a review of the common law principles. The expanded approach
to legal standing is more suited to constitutional litigation because there the relief
granted may affect people who were not parties to particular litigation. On the other

hand relief granted in a private litigation such as the present, affects only the parties
before the court. In the celebrated decision of Ferreira v Levin NO and Others;
Vryenhoek and Others v Powell No and Others8 O’Regan J said:

‘This expanded approach to standing is quite appropriate for constitutional litigation. Existing
common – law rules of standing have often developed in the context of private litigation. As a
general rule, private litigation is concerned with the determination of a dispute between two
individuals, in which relief will be specific and, often, retrospective, in that it applies to a set
of past events. Such litigation will generally not directly affect people who are not parties to
the litigation. In such cases, the plaintiff is both the victim of the harm and the beneficiary of
the relief. In litigation of public character, however, that nexus is rarely so intimate. The relief
sought is generally forward-looking and general in its application, so that it may directly
affect a wide range of people…. In recognition of this, s 7(4) [of the Interim Constitution]
casts a wider net for standing than has traditionally been cast by the common law.’

[62] The competence to grant a declaratory relief in the circumstances of this case
remains for consideration. Relying on Nguza v Minister of Defence9 Farlam JA held
that it was open to the court below to grant a declarator, although other remedies
were available to the appellants. While this may be so, the anterior question is
whether the requirements for the granting of a declarator have been met. Apart from
failing to show that they had a direct and substantial interest in the concerned
agreements, the appellants have not established that the declaratory order sought
was going to be binding. Instead, during argument we were informed that it will still
be open to JCI’s shareholders to consider and ratify the agreements in question,
regardless of the order declaring them invalid. It was submitted that the appellants
were merely entitled to know the status of these agreements before the meeting
could be held.
63]
Although the granting of a declaratory order is discretionary it can be granted
only upon a judicial exercise of the discretion. There can be no proper exercise of
such discretion if essential elements of a declarator are not fulfilled. In Cordiant
Trading CC v Daimler Chrysler Financial Services (Pty) Ltd10 this court said:
‘Although the existence of a dispute between the parties is not a prerequisite for the exercise

8 1996 (1) SA 984 (CC) at para 229.
9 1996 (3) SA 483 (Tk SC).
10 2005 (6) SA 205 (SCA).

of the power conferred upon the High Court by the subsection [s 19(1)(a)(iii) of the Supreme
Court Act 59 of 1959], at least there must be interested parties on whom the declaratory
order would be binding…

[T]he two stage approach under the subsection consists of the following. During the first leg
of the enquiry the Court must be satisfied that the applicant has an interest in an “existing,
future or contingent right or obligation”. At this stage the focus is only upon establishing that
the
necessary
conditions
precedent
for
the
exercise
of
the
Court’s discretion exist. If the Court is satisfied that the existence of such conditions has
been proved, it has to exercise this discretion by deciding either to refuse or grant the order
sought. The consideration of whether or not to grant the order constitutes, the second leg of
the enquiry.’ 11

[64] In this matter the court below was not satisfied, during the first leg of the
enquiry, that conditions for the exercise of its discretion were established. Having
referred to Cordiant Trading and other decisions of this court,12 it declined to grant
the declarator. In my view the approach by the court below cannot be faulted. It
follows that the appeal must be dismissed.

[65] For these reasons I would dismiss the appeal with costs, including the costs
of two counsel.

________________
C N JAFTA
JUDGE OF APPEAL

11 Ibid at paras 16 and 18.
12 Durban City Council v Association of Building Societies 1942 AD at 32 and Ex parte Nell 1963 (1) SA 754
(A).

APPEARANCES:

FOR APPELLANTS:

C D A Loxton SC

M W Janisch

Instructed by

Korbers Inc, Cape Town

Webbers Attorneys, Bloemfontein

FOR FIRST RESPONDENT:
S A Cilliers SC

A P Rubens SC

J Blou

A Rowan

Instructed by

Werksmans, Sandton

Matsepe Inc, Bloemfontein

FOR SECOND & THIRD
A L Williamson
RESPONDENTS

Instructed by

Mervyn Taback Inc, Rosebank

McIntyre & Van Der Post, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM:
The Registrar, Supreme Court of Appeal

DATE:
28 November 2008

STATUS:
Immediate

Please note that the media summary is intended for the benefit of the
media and does not form part of the judgment of the Supreme Court of
Appeal.

Letseng Diamonds Ltd v JCI Limited & Others and Trinity Asset
Maganagement (Pty) Ltd & Others v Investec Bank Ltd & Others

The Supreme Court of Appeal yesterday granted appeals by shareholders in JCI
Limited against a judgment delivered in the Johannesburg High Court by Mr Justice
Blieden in which he held that they had no locus standi to ask for a declaratory order
as to whether an agreement concluded between JCI Ltd and Investec Bank Limited
was binding.

Under the agreement Investec Bank Ltd lend and advanced amounts totalling over R1
billion to JCI Ltd, which were repaid with interest. The agreement provided that in
addition to interest on the sums advanced JCI Ltd had to pay to Investec Bank Ltd
what was described as a 'raising fee', amounting to R50 million or 30 per cent of the
aggregate increase in the value of the assets which JCI Ltd furnished as security for its
indebtedness, whichever was the greater. At the time of the application before the
Johannesburg High Court the 'raising fee' amounted to a sum substantially in excess
of R400 million.

In two separate applications which were argued before Mr Justice Blieden
shareholders of JCI Ltd, Letseng Diamonds Ltd and Trinity Asset Management (Pty)
Ltd and two other associated companies sought among other things orders declaring
that the agreement between JCI Ltd and Investec Bank Ltd was not binding for
various reasons. A general meeting of JCI Ltd had been convened to consider a
proposal that the agreement be ratified.

The Supreme Court of Appeal in a majority decision delivered by Appeal Justice IG
Farlam, with whom Appeal Justices Mthiyane, Maya and Cachalia concurred, held
that the applicants did have locus standi to ask for the declaratory orders they sought
because they had the right as shareholders to have accurate information furnished to
them and their fellow shareholders and the right to an order stooping the meeting if
inaccurate information was granted in the circular convening the meeting. It was held
that the Johannesburg High Court had incorrectly held that they lacked locus standi to
seek the declaratory orders. This was because the applicants were entitled to attempt
to show that the circular was inaccurate. In his minority judgment Appeal Justice Jafta
held that the applicants' right to a full and accurate disclosure of information they
needed to exercise their vote either for or against ratification of the agreement did not
give them legal standing to challenge the validity of the agreements as only the
contracting parties could raise that challenge.