Smit and Others v Origize 166 Strand Real Estate (Pty) Ltd and Others

Origize 166 Strand Real Estate (Pty) Ltd, controlled by Mr O’Neil Jacobs, purchased real rights of extension over 33 sectional title units. When Origize could not provide guarantees for the purchase price, Mr Jacobs approached Mr Sybrand Smit for assistance. Mr Smit advanced R1 million and arranged further finance to prevent cancellation of the purchase, on the understanding that profits would be shared. As security for the funds advanced and to be advanced, Origize passed a board resolution on 21 July 2016 granting Mr Smit wide powers of attorney, expressly stated to be irrevocable, including the power to sell and transfer the property. After the property was acquired and relations deteriorated, Mr Jacobs purported to revoke the power of attorney in 2018 and refused to accept offers secured by Mr Smit. The appellants sought declaratory relief authorising Mr Smit to sell and transfer the property pursuant to the power of attorney. The High Court dismissed the application, holding that a power of attorney is always revocable. The appellants appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The High Court order was set aside and replaced with an order declaring that Mr Smit was authorised, in terms of the 21 July 2016 resolution, to accept and sign any written offer and to sign all documents necessary to transfer the real rights to a purchaser. The respondents were ordered to pay the costs jointly and severally.

The judgment authoritatively confirms that, in South African law, a power of attorney granted as security for a debt is irrevocable while the debt remains unpaid. It resolves uncertainty created by conflicting academic commentary and affirms long-standing commercial and banking practice, providing legal certainty for transactions relying on security powers of attorney.