With great power comes great... security? Lessons from the Johannesburg High Court

The recent judgment of the High Court, Gauteng Division (Johannesburg) in Medicross Healthcare Group (Pty) Ltd v Dr LH Linde & Associates (6 August 2025) provides a valuable illustration of the complexities surrounding the revocability of powers of attorney.

While the case does not establish binding precedent outside its division, it serves as persuasive authority on the interplay between mandates, cessions, and security arrangements in commercial contexts.

The Core Issue: Can an "Irrevocable" Power of Attorney Be Revoked?

At the heart of the dispute was whether the respondent (Dr Linde & Associates) could revoke two powers of attorney it had granted to Medicross. These instruments allowed Medicross to operate and control the respondent’s bank accounts, including sweeping funds into other accounts. When the commercial relationship between the parties broke down, the respondent sought to cancel the powers of attorney.

The banks, however, refused to recognise the cancellation on the basis that the powers were described as “irrevocable.” This led to urgent litigation, with Medicross arguing that the powers of attorney formed part of its security for debts owed (over R4.2 million) under related administration, financing, and cession agreements.

The Court a quo vs. the Appeal Court

The urgent court (per Shepstone AJ) sided with Dr Linde & Associates, holding that the powers of attorney were not security instruments but merely mandates to operate the accounts. As such, they were revocable at common law.

On appeal, however, Noko J (with Wilson J and Botsi-Thulare AJ concurring) overturned this approach. Drawing from the Supreme Court of Appeal’s reasoning in Smit v Origize and Stupel & Berman Inc v Rodel Financial Services, the court emphasised that the general rule is that a power of attorney, even if described as irrevocable, is ordinarily revocable by the principal.

The exception being where the authority is “coupled with an interest” (e.g., granted as security for a debt), revocation is not possible until the underlying obligation is extinguished.

The appeal court held that Medicross’ control over the respondent’s bank accounts was not merely administrative but formed part of the security package, alongside the cession of book debts, intended to ensure repayment. Revocation would have undermined this security, which the parties had contractually bargained for, thereby derogating from the interests of justice by not respecting the concept of "privity of contract" and mutual obligations between the parties.

Technical Principles Affirmed

The Johannesburg High Court clarified several key technical principles regarding powers of attorney:

• Mandate vs. Security: A power of attorney that merely authorises an agent to act may be revoked at will. However, where it is given as security (expressly or impliedly), it becomes irrevocable until the debt is repaid.

• Coupled with Interest: Courts distinguish between a power that secures an agent’s personal interest (e.g., repayment of a loan) and one that does not. Only the former resists revocation.

• Interplay with Cession: Where book debts are ceded in securitatem debiti, complementary powers of attorney over related bank accounts may form part of the same security arrangement.

• Stare Decisis: The court criticised the urgent court for failing to follow binding authority (Smit and Kroon), reiterating the importance of judicial consistency in commercial law.

Practical Implications

This decision carries important implications for businesses and practitioners:

• Drafting clarity matters. Where powers of attorney are intended as security, the drafting should expressly state so. Courts may, however, still infer irrevocability from context.

• Banks and third parties should carefully assess whether an “irrevocable” power of attorney is linked to security interests before refusing a principal’s attempted revocation.

• Principals and agents must understand that once a power is “coupled with an interest,” revocation rights fall away until the secured obligation is discharged.

  
  

Conclusion/s

The Medicross v Linde case highlights that powers of attorney are not always the simple mandates they appear to be. When tied to commercial financing and debt security, their legal effect shifts dramatically. Although the judgment emanates from the Johannesburg High Court and thus holds persuasive authority elsewhere, it provides a compelling roadmap for how South African courts may continue to treat irrevocable powers of attorney in the context of security arrangements and is invaluable to us, as practitioners, who draft and arrange these documents.