Untangling Legal Principles: Exploring the In Duplum Rule in Pension Fund Cases

This case involves the Municipal Workers Retirement Fund (the Fund) and UMzimkhulu Municipality (the Municipality). It revolves around Section 13A of the Pension Funds Act (PFA), which outlines the rights of pension funds and the responsibilities of employers, including timely contribution payments and penalty interest for late payments.

The Fund claimed that the Municipality's failure to comply with Section 13A of the PFA resulted in owed arrear contributions, along with late payment interest (LPI) as per Section 13A(7) of the PFA. This led to a legal dispute over the outstanding amounts and associated interest.

Key Argument - In Duplum Rule:

The Municipality argued that the in duplum rule, a legal principle limiting interest accumulation on a debt to the outstanding capital amount, should apply to the LPI owed to the Fund, thus reducing it. However, the court disagreed with this perspective.

Court's Analysis:

The court provided a clear interpretation of the in duplum rule's relevance in this context. It concluded that the interest claimed by the pension fund was not bound by the in duplum rule. Instead, the court ruled that the interest outlined in Section 13A(7) of the PFA had its own distinct statutory provisions.

The court emphasized the difference between statutory interest and contractual agreements. It determined that the in duplum rule did not restrict statutory interest claims. This ruling underscores the significance of meeting statutory obligations.

Implications for Legal Interpretation:

In summary, the court established that LPI must be calculated as per Section 13A(7) of the PFA read with Regulation 33 (now repealed by the Conduct Standard 1 of 2022) and PF Circular 110. This interest operates under its own statutory regulations. Consequently, non-compliant employers failing to pay pension fund contributions will owe both the outstanding contributions and the interest in line with statute.

Full Citation: Municipal Workers Retirement Fund v Umzimkhulu Local Municipality and Others (11458/2015) [2023] ZAKZPHC 80 (10 August 2023)