The in duplum rule provides that interest on a debt stops running when unpaid interest equals the outstanding capital whether the debt arises as a result of a financial loan or from a contract in terms of which a capital sum is payable together with interest. The Supreme Court of Appeal considered the in duplum rule in this case. The Court confirmed that the rule remains part of our law, is based on public policy, is designed to protect borrowers from exploitation by lenders and as such, cannot be altered by banking practice. It was contended by the appellant bank that due to the practice of banks to capitalise interest, interest once capitalised loses its character and becomes capital and that as a result, the in duplum cannot apply to overdraft accounts. However, neither the description nor the practice itself affects the nature of the debit.
Interest remains interest and no methods of accounting can change that.
The in duplum rule thus remains part of our law. The only exception is a statutory one to be found in Section 68A of the Insurance Act 1943 which provides that interest on a loan or advance made by a registered insurer on the sole security of a policy under which the insurer is liable shall not cease to accrue when interest has accumulated to an amount equal to the principal debt. The insolvent had been the sole proprietor of a butchery business conducted on an immovable property. The plaintiff therefore claimed re-transfer of the immovable property and a return of the butchery business and the assets of that business which had been sold. In the alternative, the plaintiff claimed that the defendant pay the value of the immovable property, the butchery and its assets.