Hychem (Pty) Ltd v Nalek Security (Pty) Ltd (2024/055804) [2025] ZAGPJHC 1100 (3 November 2025)

Case Note

Case Name: Applicant v Respondent
Citation: TBD
Date: 03 November 2025

Reportability

This case is reportable due to its significance in commercial law and the interpretation of obligations under credit agreements. The Supreme Court's decision to consider the timing of payments and the implications for costs provides essential guidance for parties engaged in contractual relationships, particularly in the realm of credit transactions where parties may face financial difficulties. The ruling also highlights the effect of fulfilling obligations in accordance with agreed terms and the commercial practices that inform those relationships.

This case establishes precedents regarding the rights and responsibilities of parties to a credit agreement and underscores the importance of timely payment and communication about financial obligations. The legal ramifications of payment delays are explored, as well as the appropriateness of cost orders under these circumstances.

Cases Cited

1. South African Broadcasting Corporation v. National Broadcasting Corporation (Pty) Ltd and Others 2012 (4) SA 543 (SCA)
2. Tucker v. Western Sewerage Co (Pty) Ltd 1976 (3) SA 207 (A)
3. Woolworths (Pty) Ltd v. Whiteitz 2000 (1) SA 180 (SCA)

Legislation Cited

1. Companies Act 71 of 2008

Rules of Court Cited

None specifically noted in the judgment.

HEADNOTE

Summary

This case concerned a liquidation application initiated by the applicant against the respondent for outstanding debts purportedly accumulated under a credit account agreement. The respondent indicated that economic difficulties arising from the pandemic had impacted its ability to meet these obligations on time. Payment disputes led to the applicant seeking a liquidation order, while the respondent sought to negotiate terms for repayment. Ultimately, the respondent made late payments, claiming a lack of funds, and contested liability for costs associated with the liquidation application.

Key Issues

The key legal issues addressed in this case included the questions of liability for outstanding debts under a credit agreement, the implications of late payments on contractual obligations, and the appropriateness of cost orders related to the initiated liquidation application.

Held

The court held that the respondent had extinguished its capital indebtedness by making full payment shortly before the hearing of the case. However, the court found that the lateness of the payments and the prior representations made by the respondent regarding their financial capacity played a crucial role in determining liability for costs.

THE FACTS

The facts of the case reveal a complex background of interactions between the applicant and the respondent rooted in a credit account application agreement, established in August 2019. Under this agreement, goods were sold to the respondent, which subsequently led to a substantial outstanding balance by December 2021 amounting to R3,036,797.15.

The respondent's role as a middleman during the COVID-19 pandemic created additional complications, as they sold products to a third party, the Department of Education, under a tacit agreement to remit payments upon receipt. Nevertheless, the respondent failed to meet obligations due to economic instability following the state of disaster's conclusion in 2022, alongside ongoing debts to its own creditors.

By October 2024, the respondent sought to negotiate payment terms but inconsistently paid amounts, leading to a demand for liquidation initiated by the applicant in May 2024. Throughout 2025, several payments were made culminating in an overdue balance of R1,146,797.50, which was paid right before judicial proceedings, ultimately addressing the primary issue of debt owed.

THE ISSUES

The court faced critical legal questions regarding the enforceability of the debt under the terms of a credit agreement, specifically whether the respondent had fulfilled its financial obligations in a timely manner. The resolution of these issues significantly hinged on determining the respondent's actions and intentions to settle its debts, how those affected the liquidation proceedings, and whether the costs incurred by the applicant in pursuing the application should be awarded in light of the late compliance with payment.

ANALYSIS

The court undertook a comprehensive examination of the correspondence and evidence presented by both parties regarding payments and their timing. Central to the court's reasoning was the principle of contractual obligation and the interpretation of good faith in negotiations surrounding financial matters. The respondent's attempts to arrange a payment plan indicated a willingness to settle debts; however, the court scrutinized its delayed compliance and inability to make timely payments, raising concerns about the legitimacy of its financial claims.

The court concluded that despite the respondent's assertions of good intent and external financial pressures, the tangible evidence of late payments and a lack of proactive communication about its capacity to pay were detrimental to its case. Thus, even though the respondent eventually extirpated its capital indebtedness, the court held that such fulfillment came too late to absolve the respondent from liability for the costs incurred by the applicant during the liquidation process.

REMEDY

The remedy provided by the court included a determination regarding costs, acknowledging that while the capital obligation had ultimately been satisfied, the timing and nature of the respondent's payments necessitated an award of costs incurred by the applicant. The court stipulated the application of Scale C costs for the applicant, reflecting the complexities introduced by the respondent's conduct throughout the litigation process.

LEGAL PRINCIPLES

The case illustrates several important legal principles, including:

1. The necessity of timely compliance with financial obligations in contracts, especially under credit agreements.

2. The enforceability of claims for costs not only correlates with the fulfillment of contractual obligations but is also influenced by the timeliness of those fulfillments.

3. The balancing act that courts must perform in assessing the intentions of parties involved in a contractual relationship against the backdrop of each party’s financial realities and obligations, particularly in light of external economic pressures.