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

45 Reportability
Insolvency Law
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Brief Summary

Costs — Liquidation application — Respondent's admission of indebtedness and subsequent payment — Respondent sought to limit liability for costs of liquidation application, arguing payment was tendered prior to hearing — Court held that despite late payment, the respondent's failure to settle the debt until shortly before the hearing did not absolve it from liability for costs incurred prior to payment; costs awarded on Scale C.

Comprehensive Summary

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.



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[2] The respondent filed its answering affidavit on or about 8 October 2024, requiring
it to seek condonation which was, considering the papers, opposed and which
condonation application was not pursued, because of the withdrawal of the
liquidation application.
[3] The replying affidavit dated 5 March 2025 was subsequently filed followed by the
Respondent’s first supplementary affidavit filed on Thursday, 16 October 2025
reflecting the payment of the outstanding indebtedness of that day, with the filing
of an affidavit in response thereto by the Applicant on 21 October 2025, and the
filing of a further supplementary affidavit by the Respondent on 22 October 2025.
[4] The Registrar of this Court was informed by way of courtesy email on Friday, 17
October 2025 at 10:43 a.m. , received from counsel acting on behalf of the
applicant, Mr B Pye SC that the Respondent had made payment and that the
matter would proceed on the issue of costs only.
[5] The parties argued the issue of costs at the hearing of the application, the
applicant seeking costs of the application on Scale C and the respondent seeking
an order that it is to pay the costs associated with the application on Scale A,
only until 1 October 2025 , a date when the respondent offered make payment,
referred to later in the judgment.
Factual Matrix
[6] During August 2019 , the applicant and the respondent entered into a written
credit account application agreement (“the agreement”), whereafter the applicant
sold and delivered goods to the respondent with a remaining account balance
during December 2021 in the amount of R 3,036,797.15.
[7] Due to the high demand for sanitiser during the COVID -19 pandemic the
respondent, on its version of events , acted as a middleman for the applicant to
sell its products to a specifically identified third party, the Department of
Education, increasing the respondent’s credit limit with the tacit understanding

Education, increasing the respondent’s credit limit with the tacit understanding
that once the products were sold to the end -customer and the respondent
received payment, it would make payment to the applicant, with this in apparent
conflict with the Conditions of Sale.

Page 3 of 6

[8] The respondent further alleged that due to the unforeseen upliftment of the state
of disaster in South Africa during 2022 the demand for sanitiser came to an end,
also admitting the amount outstanding to the applicant with apparent
unsuccessful attempts to enter a payment plan with the applicant whilst waiting
for payment from its debtors.
[9] By way of the answering affidavit during October 2024, some two years after the
upliftment of the state of disaster and its admitted obligations to the applicant,
the respondent tendered payment of the outstanding amount on monthly
instalments to be agreed to between the parties, also requesting the applicant to
negotiate in good faith in circumstances where the respondent was owed a large
amount of money by its debtors . However, that did not materialise and did not
absolve the respondent from its obligations to the applicant.
[10] Over time, and sporadically, the respondent made payment against its
obligations in the amounts of R 50,000.00 during February 2023 with the
unacceptable payment proposals, resulting in the issue of a letter of demand
during July 2023 on the subsequent issue of a section 345 letter of demand in
terms of the provisions of the Companies Act 1 during February 2024.
Subsequent thereto the liquidation application was launched during May 2024.
[11] The respondent made further payments on 6 August 2024 in the amount of
R100,000.00, on 1 April 2025 in the amount of R 800,000.00 and on 5 June 2025
in the amount of R 1,000,000.00 with a capital indebtedness at the time of the
hearing of the matter in the amount of R 1,146,797.50 , excluding interest and
costs.
[12] During the week prior to the hearing of the matter the respondent filed
supplementary affidavits confirming that it owed the amount of R 1,146,797.50 ,
that on 1, 2 and 10 October 2025 a tender was made to pay the full amount
claimed in the liquidation application without addressing the issue of costs and

claimed in the liquidation application without addressing the issue of costs and
without making payment of the admitted indebtedness, which was only paid on
Thursday, 16 October 2025 , prior to the hearing of the opposed liquidation

1 Act 71 of 2008.

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application, which was received by the Applicant on Friday, 17 October 2025
thereby extinguishing the capital indebtedness.
[13] The Respondent further alleged that the late payment of the indebtedness that
arose in December 2021, with the three aforementioned payments was not
deliberate, but arose from the timing of payments received from its undisclosed
creditors which then enabled the respondent “to marshal the necessary funds” in
circumstances where “ the respondent was at all times intent on setting its
indebtedness as soon as practically possible, and it is only now that full payment
could be affected.”
[14] The respondent consequently formed the view that because of its offer on 1
October 2025 to settle the capital indebtedness it was not liable for the costs of
the liquidation application from then , notwithstanding the admitted inability to
effect payment until 16 October 2025, and that costs should only be ordered on
Scale A.
[15] The applicant ’s legal representatives by way of responding affidavit dated 21
October 2025 confirmed that the capital amount was received into their trust
account on Friday, 17 October 2025 whereafter the respondent’s legal
representatives were informed that the liquidation application would not be
proceeded with and that the issue of costs would require argument in
circumstances where the issues regarding outstanding interest on the capital
amount was discussed, without resolve. In confirmation thereof, Adv B Pye SC
informed the Registrar of this Court that payment had been made with the only
issue outstanding being costs, requesting a hearing of the matter on Monday, 20
October 2025.

Considerations
[16] Notwithstanding various expressions of either undertakings, offers or intention to
make payment of the capital amount over time, including on 1, 2 and 10 October
2025, the respondent could not do so in circumstances, where on its own version,
the respondent only marshalled the necessary funds on 16 October 2025

the respondent only marshalled the necessary funds on 16 October 2025
enabling it to effect payment.

Page 6 of 6

Heard: 22 October 2025
Judgment: 03 November 2025


Appearances

For Applicant: WB Pye SC
Instructed by: Harris Billings Attorneys

For Respondent: R Blumenthal
Instructed by: Schultz Wiskin Incorporated

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