Real Estate Investor Magazine South Africa October 2015 | Page 28

LEGAL

The In

Duplum Rule

Progress
Extending further protection
to consumer and debtors
BY NATASHA AYSEN

T

he common law in duplum rule limits the
amount of interest that may be charged on
an outstanding debt and provides that such
interest amount cannot exceed the capital amount.
Section 103(5) of the National Credit Act has
extended and altered this rule by including not only
default and contractual interest but also charges such
as initiation fees, service fees, credit insurance costs,
default administration charges and collection costs,
which accrue during the time of a consumer’s default.
A recent judgement handed down by the
Constitutional Court has altered the position of our law
with regard to the operation of the in duplum rule by
overturning the 1997 Supreme Court of Appeal decision
of Standard Bank Limited v Oneate Investments. That
case decided that if the maximum interest had been
reached prior to litigation commencing, interest would
start accumulating afresh on the capital debt as and
when legal proceedings commenced by the service of
the summons on the debtor.
The majority of the Constitutional Court judges in
the recent matter of Paulsen and another v Slip Knot
Investments, decided that the Oneate decision did
not take adequate account of debtors’ rights of access
to courts, as it would hinder rather than promote this
right of access. The Court explained that suspending
the in duplum rule during legal proceedings could have
an undesirable effect because some debtors, despite
having a valid defence to the creditor’s claim, might
settle the claim rather than face the prospect of interest
commencing to run again. This could significantly
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OCTOBER 2015 SA Real Estate Investor

deter a debtor from approaching the Court as it is
constitutionally entitled to do.
The Paulsens, who had borrowed R12 million from
Slip Knot Investments in this matter, were ordered to
repay the R12 million principal debt together with R12
million interest. Interest would, however, commence
running on the full amount of the judgment debt (R24
million) once the judgment had been handed down.
In a strong dissenting opinion Judge Cameron
argued that the Oneate decision of the Supreme Court
of Appeal was correct and constitutionally compliant.
There are also strong public policy considerations
against the operation of the in duplum rule during
the course of litigation for both debtors and creditors
and rather than focus only on the effect of the rule on
creditors, the interests of both the creditors and debtors
must be weighed equally.

THE IN DUPLUM RULE PROVIDES THAT A
CREDITOR IS ENTITLED TO THE FOLLOWING:
• Repayment of the unpaid capital sum
• Interest on the unpaid capital sum at the contract rate up to
an amount equal to the unpaid capital sum
• Interest on the aggregate of the above amounts (unpaid
capital and accrued interest up to an amount equal to the
unpaid capital sum), at the contract rate from the date of
judgment of the court to date of payment by the debtor.

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