The in-duplum rule essentially provides that interest stops running when the unpaid interest equals the amount of the outstanding capital.  Our courts have repeatedly made clear that the in-duplum rule limits arrear interest to the outstanding capital sum.  The agreed accrual of interest on a capital sum, payment of which has been postponed, is not a claim for arrear interest.

The in-duplum rule is based on public policy and cannot be waived.  Its overarching purpose is to protect debtors from being exploited by creditors.  Interest on a capital debt of which payment is postponed can hardly amount to the exploitation of a debtor.

In the Deed of Sale the payment of the purchase price was deferred until a closure and rezoning had taken place but the purchaser was obliged to pay interest in the meantime.  That is not arrear interest and the in-duplum rule was not applicable.  The purchaser therefore had to pay interest at the rate levied by the defendant’s banker on R8 550 000 from 1 February 2005 to date of payment.

City of Tshwane Metropolitan Municipality v Brooklyn Edge (Pty) Ltd and Another [2022] ZASCA 23 (1 March 2022)