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The Supreme Court of Appeal clarifies the in duplum rule.

The in duplum rule protects debtors from exploitation by ensuring that their creditors cannot allow interest to accumulate indefinitely.

The law, of course, protects a person's legal rights. However, the law also recognises that, if a person has a legal right, then he must enforce that right and, if he delays doing so, he will eventually forfeit the right.

Thus, for example, if A lends B a thousand rand, then B must enforce his right to repayment, and if he does not do so within the prescriptive period laid down by law, his claim will be totally extinguished by the effluxion of time - in short, his claim will prescribe.

Another aspect of the broad principle that a person who has a legal right must enforce the right, failing which he will lose it, is the in duplum rule. This is a rule of our common law, that is to say, it is not laid down in an Act of Parliament.

The in duplum rule states that unpaid interest on a money debt owing ceases to accumulate once it reaches the amount of the capital sum. In other words, the aggregate debt (capital plus interest) cannot exceed double the capital amount. The in duplum rule does not apply only to borrowed money, but to all debts (including judgement debts) arising from a capital amount that is owed.

The policy reason behind the in duplum rule is that it serves to prevent the exploitation of debtors by creditors who might otherwise allow interest to accumulate indefinitely. The in duplum rule is an encouragement to lenders and other creditors to issue summons and compel debtors to pay what is owing before the existence of, or the terms of, the debt become clouded by the passage of time.

There are, however, some important qualifications to the in duplum rule.

One qualification is that the in duplum rule is suspended pendente lite, in other words, interest on a debt continues to accumulate during the period between the issuing of summons and judgement by the court, regardless of the in duplum rule. The reason is that litigation is often protracted - it sometimes drags on for years - and it would be unfair to a creditor who is taking steps to enforce payment of his debt to have to suffer the loss of the right to interest while the litigation is in progress.

A second important qualification is that the in duplum rule is not a blanket prohibition on a creditor's recovering in interest more than the capital amount of the debt.

The in duplum rule merely states that at no given point in time can the unpaid arrear interest exceed the amount of the capital.

So, for example, if a debtor faithfully pays the interest on a debt month by month, without repaying any part of the capital, the in duplum rule will never be triggered because, at any given time, the only amount of interest that is unpaid is the interest for the past month. It is irrelevant that, if all the monthly amounts of interest were totted up, they would come to more than the capital amount of the debt.

These principles were clarified in the recent Supreme Court of Appeal judgement in Margo v Gardner 2010 (6) SA 385.

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