Letseng Diamonds Limited v JCI Limited and Others

Letseng Diamonds Limited, a shareholder in JCI Limited, sought to interdict a general meeting of JCI shareholders convened to ratify a suite of agreements, including a large loan agreement between JCI and Investec Bank Limited. The agreements had been implemented pursuant to an exemption granted by the JSE from prior shareholder approval, subject to later ratification. Letseng alleged that the circular convening the meeting was inaccurate and misleading and that the loan agreement and related agreements were void or voidable due to defects such as lack of authority of the board, non-fulfilment of suspensive conditions, contraventions of competition law, and alleged impropriety by the directors. Investec challenged Letseng’s locus standi to seek declaratory relief on the validity of agreements to which it was not a party. The High Court upheld the challenge and held that Letseng lacked locus standi. Letseng appealed to the Supreme Court of Appeal.

The appeal succeeded with costs, including the costs of two counsel. The High Court’s order was set aside and replaced with an order declaring that Letseng Diamonds Limited had locus standi to raise the separated issues. The main application was postponed sine die for determination of the remaining issues, and Investec was ordered to pay Letseng’s costs in relation to the separation application.

The case is significant for clarifying that shareholders may, in appropriate circumstances, have locus standi to approach the court where they are required to ratify corporate transactions and allege inaccuracies or defects affecting the validity of those transactions. It limits an overly rigid application of the rule in Foss v Harbottle and affirms the role of shareholder oversight where informed consent is required.