The Office of the Pension Funds Adjudicator (OPFA) will align its rulings with a judgment which found that the in duplum rule applies to penalty interest charged to employers for overdue retirement fund contributions.
The in duplum rule is a common law principle stipulating that the total amount of interest charged on an overdue debt cannot exceed the original capital sum of that debt. The rule limits the accumulation of interest charges.
On 8 May, Muvhango Lukhaimane, the Pension Funds Adjudicator, issued OPFA Communication 1 of 2025, stating that her Office considers itself bound by the judgment in Blue Crane Route Municipality v Municipal Workers Retirement Fund and Another.
The judgment, which was handed down by the Full Bench of the High Court in Makhanda in March, confirmed that the in duplum rule does apply to late-payment interest (LPI) accrued in terms of section 13A(7) of the Pension Funds Act (PFA).
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Sections 13(1) and (2) of the PFA, read together with FSCA Conduct Standard 1 of 2022 (RF), impose a duty on a participating employer to calculate and pay over to the retirement fund the contributions, payable in terms of the fund’s rules, each month and to provide the fund with prescribed information.
Section 13A(7) states that interest shall be levied on late payments or unpaid amounts, calculated from the first day of the month following the expiration of the period in respect of which the relevant amounts are payable until the date of receipt by the fund.
Historically, there has been some ambiguity about whether the in duplum rule applied to LPI calculated under section 13A(7).
The OPFA, in Communication 1 of 2024, advised that the in duplum rule did not apply to such interest. This advice was based on an August 2023 judgment by the High Court in Pietermaritzburg in Municipal Workers Retirement Fund v Umzimkhulu Local Municipality and Others.
Lukhaimane said in Communication 1 of 2025 that because the judgment in Blue Crane was issued by the Full Bench, it takes precedence over the judgment in Umzimkhulu, which was issued by a single judge. Consequently, the OPFA, in adherence to the principle of stare decisis (following judicial precedent) now considers itself bound by the judgment in Blue Crane has aligned its position accordingly.
This means that legislated penalty interest charged to employers for overdue retirement fund contributions will now be capped at the amount of the original outstanding contribution.
Summary of the judgment in Blue Crane
The Blue Crane Route Municipality failed to deduct and remit the correct retirement fund contributions from its employees between 2007 and 2013.
In 2019, the High Court granted a default judgment in favour of the Municipal Workers Retirement Fund (MWRF), ordering the municipality to pay R3.8 million plus interest. The interest was to accrue from the first day following the expiration of the period in which the contributions were due until the date of payment.
In 2024, the fund’s attorneys issued a warrant of execution, claiming the original capital amount of R3.8m and interest totalling R30m. The municipality responded by paying the full capital amount but balked at the interest figure, tendering only R8.4m.
Four months later, the municipality obtained an urgent court order staying execution pending a High Court application. In this application, the municipality sought to set aside the writ and requested a declaration that the interest payable be limited by the in duplum rule.
The Full Bench held that the rate at which interest is calculated – whether under the PFA or the Prescribed Rate of Interest Act – does not affect the applicability of the in duplum rule. The court further stated that neither the cause of action nor the identity of the debtor alters the rule’s relevance. Once interest is payable on a “debt”, the in duplum rule potentially comes into play.
The court said “debt” is something, such as money, goods, or a service that one person is under an obligation to pay or render to another, aligning with established legal precedent. It concluded that the amount owed by the municipality to the MWRF under the PFA constituted a statutory debt. This meant that once the sum of the unpaid interest equalled the amount of the outstanding capital, the running of interest stopped.
The fund contended that the PFA should be interpreted to exclude the in duplum rule, arguing that the statutory framework overrides common law principles in this context. The court rejected this argument, holding that statutory law is presumed not to alter existing law beyond what is necessary.
“It is always presumed that statute law does not alter the existing law more than is necessary. There is no reference to the rule in the PFA and no express wording to support the contention that the legislature intended to exclude the rule when interest is payable on late contributions to a pension fund organisation,” Judge Avinash Govindjee, who wrote the judgment, stated.
The court further observed that although the PFA specifies the date from which interest accrues – “from the first day following the expiration of the period in respect of which such amounts were payable” – this provision focuses on the starting point of interest rather than its limitation. The court found no indication, either individually or collectively, in the PFA’s provisions – such as those addressing the obligation to pay contributions, the timing of payments, or the prescribed interest rate – that the legislature intended to deviate from the in duplum rule.
Based on this analysis, the High Court set aside the warrant of execution and ordered that the interest payable by the municipality be limited by the in duplum rule.
