Lize de la Harpe, Senior Legal Advisor at Sanlam Corporate

Introduction

The recent judgment in the matter of Blue Crane Route Municipality v Municipal Workers Retirement Fund and Another (1827/2024) [2025] ZAECMKHC 28 handed down on 8 March 2025 has prompted the Office of the Pension Funds Adjudicator (OPFA) to revisit its previous stance on the applicability of the common law principle of in duplum to interest arising from the non-payment of arrear contributions under the Pension Funds Act, 1956.

The Pension Funds Act, 1956 (PFA)

First things first, let’s recap on the applicable sections of the Pension Funds Act, 1956 (PFA).

Sections 13(1) and (2) of the PFA, read together with FSCA Conduct Standard 1 of 2022 (RF), imposes a duty on the participating employer under a retirement fund to calculate and pay over to the fund the contributions, payable in terms of the fund’s rules, on a monthly basis and to furnish to the fund certain prescribed information.

Section 13A(7) of the PFA in turn states that interest shall be levied on such late payments or unpaid amounts, calculated for the period 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.

The common law principle of in duplum

The common law principle of in duplum can literally be translated as payment in double. It determines that interest stops running when the unpaid interest equals the amount of the outstanding capital claim.

As confirmed by the Constitutional Court in the matter of Paulsen and Another v Slip Knot Investments 777 (Pty) Limited [2015] ZACC 5 the purpose of the in duplum rule is to protect debtors from being crushed by the never-ending accumulation of interest on an outstanding debt.

Background to OPFA Communication 1 of 2025

In the matter of Municipal Workers Retirement Fund v Umzimkhulu Local Municipality and Others 2023, the court had to decide whether the in duplum rule should be applied to interest arising from non-payment of arrear contributions under the PFA, and, if so, whether the calculation of the interest fell within the ambit of section 1(1) of the Prescribed Rate of Interest Act, 1975 (PRI Act).

The Municipality in question failed to comply with the provisions of section 13A(1) of the PFA in failing to make contributions to the Fund for an extended period. After legal action was taken against the Municipality, it eventually paid the arrear contributions. The Municipality however contended that it is, in terms of the in duplum rule, not liable for interest on the arrear contributions in excess of the capital amount of the arrear contributions.

Having considered the facts of the matter and the applicable law, the court held that the Fund’s claim for interest on outstanding contributions is statutorily regulated by the PFA – it does not arise out of a contractual relationship. The PFA imposes liability for the payment of interest, stipulates the rate of interest applicable, and when it accrues, therefore, it is not mora interest, and thus not interest regulated by the provisions of the PRI Act.

The court accordingly held that the in duplum rule does not apply to interest arising from the non-payment of arrear contributions under the PFA.

Subsequent to the above judgment, the OPFA issued Communication 1 of 2024 confirming that it supported the view of the court in the Umzimkhulu matter, i.e.: that the in duplum rule does not apply to interest arising from the non-payment of arrear contributions in terms of section 13A(7).

In March 2025, the Eastern Cape High Court handed down a judgment which confirmed the in duplum rule does in fact apply to arrear contributions, prompting the OPFA to revisit its previous stance.

Blue Crane Route Municipality v Municipal Workers Retirement Fund and Another (1827/2024) [2025] ZAECMKHC 28

In short, as of December 2023, approximately 12600 employers were reported to have contravened the PFA by neglecting to remit pension contributions to retirement funds. The applicant (the Municipality) failed to deduct the correct pension fund contributions from its employees between 2007 and 2013 and breached section 13A of the PFA. The High Court granted a default judgment in favour of the first respondent (the Fund) on 26 November 2019, ordering the municipality to make payment to the Fund in the amount of R3.8m and payment of interest on all amounts from the first day following the expiration of the period in which the amounts were payable up to the date of payment.

On 15 January 2024, the Fund’s attorneys issued a Warrant of Execution reflecting the capital amount indicated in the judgment, as well as interest in the sum of R30m. The Municipality made payment of the full capital amount and tendered payment of interest in the amount of R8m. Four months later, the Municipality obtained an order, granted on an urgent basis, staying execution pending the finalisation of a High Court application in terms of which it sought an order setting aside the writ and declaring, in essence, that the interest payable is limited by the in duplum rule.

The court took the view that the rate at which interest on a debt is calculated, be it in terms of the PFA or the PRI Act, is immaterial for purposes of determining whether the in duplum rule remains applicable. To put it differently, neither the cause of action nor the identity of the debtor makes a difference in the application of the rule.

Once interest is payable on a “debt”, the in duplum rule potentially comes into play. The effect of the rule is clear: where a debt is owed and bears interest, the amount of such interest may not exceed the capital amount.

The meaning of “debt” has been well ventilated before our courts. It refers to something owed or due; something (as money, goods or service) which one person is under an obligation to pay or render to another.

The court accordingly held that the amount owed by the Municipality to the Fund in terms of the PFA constituted a “debt” imposed by statute and, once interest became payable, the in duplum rule cames into play. This meant that once the sum of the unpaid interest equalled the amount of the outstanding capital, the running of interest stopped.

With regards to Fund’s argument that the PFA must be interpreted to exclude the in duplum rule, the court noted as follows at paragraph 12:

[12] 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. On my reading, this is also not to be implied simply because the PFA provides that interest is payable ‘from the first day following the expiration of the period in respect of which such amounts were payable…’. The focus of that subsection is on the date from which interest accrues, rather than necessarily implying deviation from the rule. Read individually or cumulatively, the provisions of the PFA dealing with matters such as the obligation to pay contributions, the time for payment, date of commencement of interest, the prescribed rate and personal liability for compliance, cannot be read to evince an express or implicit intention to alter the applicability of the rule in the present circumstances.”

The court accordingly set aside the warrant of execution and ordered that the interest payable be limited by the application of the in duplum rule.

Conclusion

In response to the Blue Crane judgment discussed above, the OPFA on 8 May 2025 published its Communication 1 of 2025 confirming it will adopt the Blue Crane judgment (as handed down by a full court) on the basis of stare decisis. It is therefore important for funds and employers alike to be advised that the in duplum rule will apply to interest arising from the non-payment of arrear contributions under the PFA.

ENDS