For many years the in duplum rule was a trite principle of our law, until the Western High Court decision in Paulsen & Another vs Slip Knot Investments 777 (Pty) Ltd 2014 (4) SA 253 (SCA) (“The Paulsen decision”) created some confusion.
This rule is a common law rule, which provides that interest on a debt will ceases to run where the total amount of arrear interest that has accrued equals the total outstanding principal debt. The rule originates from Roman law, which comprises the majority of our common law. It is important to note that the common law in duplum rule only applies to arrear interest and not any other charges, meaning that a longer period of interest cannot be levied. Section 105 of the National Credit Act No 34 of 2005 however, has taken it one step further. It has done so by applying the principle throughout the entire period of default, and therefore for as long as the client is in default, the creditor may not levy any further charges. The rule therefore applies to both interests and costs – including administrative costs, penalty fees and legal costs.
In the matter of Nedbank v The National Credit Regulator the Supreme Court of Appeal held that S103(5) is not a codification of the in duplum rule and that the rule in S103(5) is only applicable to credit agreements that fall within the ambit of the NCA
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