How irrevocable is an irrevocable power of attorney?
MAIN IMAGE: Craig Guthrie, partner at Guthrie Colananni Attorneys.
Can the power of attorney be irrevocable? The general rule is that such power of attorneys can be revoked at any time, even if it is stated to be “irrevocable”. Our courts do however recognise that there are exceptions to this general rule explains attorney Craig Guthrie.
Estate agent Andrew Walters asks this very question following a situation that he encountered recently. A group of nature-loving landowners had applied for the establishment of a nature reserve on their properties and recruited their neighbours to join them. In order to do be proclaimed a nature reserve, the title deed of each property had to be changed to reflect the zoning as that of nature reserve. Every property owner that agreed to join had to sign an irrevocable power of attorney to the conveyancer dealing with the project to enable the latter to proceed with the rezoning once official permission had been granted for the nature reserve to be established.
However, some of the property owners, once they realised the onerous restrictions that would be imposed on their use of their properties, have since decided to withdraw their power of attorney by giving written notice to the organising committee. Their withdrawal notices have thus far been ignored.
“Can a property owner withdraw the power of attorney granted under these circumstances? This somehow doesn’t sound right that they can’t withdraw the power of attorney,” asks Walters.
What is the power of attorney?
Craig Guthrie, partner at Guthrie Colananni Attorneys, explains the power of attorney is a legal document through which one person, known as the principal, enables and gives permission to another person, known as the agent, to act in the name of the principal. It is a concept most people are familiar with.
“The general rule is that such power of attorneys can be revoked at any time, even if it is stated to be ‘irrevocable’. Our courts do however recognise that there are exceptions to this general rule,” Guthrie continues.
He says you can give a special power of attorney or general power of attorney. A special power of attorney is for specific actions such as selling a house. A general power of attorney grants much broader authority. Powers of attorney can be either revocable or irrevocable, i.e. it can be cancelled, or it cannot be cancelled by the principal. A power of attorney can be cancelled by the principal simply notifying the agent in writing to that effect.
First and foremost, a power of attorney is only valid so long as the principal is of sound mind and has the mental capacity to revoke it. Many people think a power of attorney allows to assist their aging parent or family member, but once that parent or family member is incapable of handling their own affairs, that power of attorney is no longer valid and lapses automatically. In South Africa the so-called enduring power of attorney is not legal as it is in many other countries.
The general rule, as confirmed by the court in Consolidated Frame Cotton Corporation Ltd v Sithole and Others is that a principal can revoke a power of attorney even if it is stated in the power of attorney that it may not be revoked or it is said to be irrevocable. There are, as is the case with most general rules in law, exceptions.
It can be revoked but there are exceptions
Guthrie explains the main exceptions to the general rule are when a power of attorney is intended as security or when it is coupled with an interest of the agent. For example, where a bank is irrevocably authorised to register a mortgage bond to secure a loan or where the principal gives the agent authority to sue in the principal’s name, or to conduct business for the agent’s own benefit and not for the benefit of the principal. These powers of attorneys were found to be irrevocable and could not be cancelled.
However, he says recently our courts have gone further in Chevron South Africa (pty) Ltd v Ufudu Transport (Pty) Ltd and Others and stated that a power of attorney to intervene in the business of a licensee could be revoked.
“This area of law is quite complex and a proper analysis of the facts underlying the reason for granting the power of attorney should be done, or the principal might face a claim for damages arising from a breach of the mandate given to the agent. Legal advice should be taken before entering into an irrevocable power of attorney or deciding to cancel one,” ends Guthrie.
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