Brief Summary

Contract — Specific performance — Transfer of Facebook page — Co-owners of Nuri Sushi (Pty) Ltd entered into a settlement agreement wherein one party agreed to transfer control of the restaurant's Facebook page to the other — Dispute arose regarding the interpretation of the clause requiring the transfer of administrative rights — Court held that the purpose of the clause was to ensure the buyer became the sole administrator of the Facebook page, and directed the seller to take all necessary steps to effectuate this transfer.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings took the form of an application in the High Court of South Africa, Western Cape Division, Cape Town, in which the applicants sought specific performance of a term in a prior settlement agreement. The relief ultimately granted was framed as interdictory and mandatory in nature, compelling positive steps to be taken in relation to control of a Facebook Page associated with a business.

The parties were Bonny Levi (first applicant) and Nuri Sushi (Pty) Ltd (second applicant) as applicants, and Mehdi Pakdoust as respondent. Levi and Pakdoust had previously been co-owners of Nuri Sushi (Pty) Ltd, a sushi restaurant business. The dispute concerned whether, and how, Pakdoust was obliged to place Levi in control of the restaurant’s Facebook Page after Pakdoust exited the business.

The procedural history included an earlier settlement of business disputes between Levi and Pakdoust in 2021, followed by arbitration proceedings instituted by Levi against Pakdoust (on a delictual misrepresentation claim) which culminated in an arbitral award delivered on 6 December 2022. That arbitral award dismissed Levi’s delictual claim but included an award of certain wasted costs in Levi’s favour. Subsequent steps taken by both parties, including engagement with Facebook/Meta through attorneys and subpoenas, revealed a technical mechanism (via Meta Business Manager) through which administrator control could be restored.

The present application was initially brought as an urgent matter and was postponed, with wasted costs tendered by Levi, for later hearing. It came before Bishop AJ on 22 November 2023, with reasons delivered on 24 November 2023. The general subject-matter of the dispute was the interpretation and enforcement of a settlement clause dealing with social media disengagement and administrative control, particularly the transfer of control of a business Facebook Page.

2. Material Facts

It was common cause that Levi and Pakdoust were co-owners of Nuri Sushi (Pty) Ltd, and that the business maintained a Facebook Page used to advertise the restaurant. The court accepted that such a Page is operated through Facebook’s administrator functionality, which enables an administrator to add content, add other administrators, and remove administrators.

It was undisputed that on 26 April 2021 Pakdoust removed Levi’s agent, Eastern Food Bazaar (a business through which Levi had administrative access), as an administrator of the Nuri Sushi Facebook Page. Levi himself was not a personal Facebook user. It was further undisputed that the parties settled their disputes approximately a month later, with Levi agreeing to buy out Pakdoust’s share in Nuri Sushi for R1.5 million, and that the settlement agreement contained a clause (clause 3.2) dealing with Pakdoust’s disengagement from social media relating to the business and handover of passwords and access information.

The clause relied upon stated that Pakdoust undertook to disengage from any social media platform relating to Nuri and/or St Georges Mall, including Facebook pages and Instagram, and to do all things necessary to remove himself as administrator and to hand over passwords and access information required from time to time. The court treated it as material that the clause was directed at removing Pakdoust’s involvement and enabling Levi to take over control of the relevant social media presence.

A key factual theme was the technical difficulty encountered after the settlement in transferring administrative control of the Facebook Page. Pakdoust asserted that shortly after concluding the settlement, he invited Eastern Food Bazaar to become administrator and then removed himself. However, Eastern Food Bazaar did not receive the relevant Facebook notification and did not become administrator. The court treated it as material that the Page nonetheless continued to exist and be visible, which implied that an administrator still existed (because, on the expert evidence summarised in the arbitration, a Page cannot exist without an administrator).

Correspondence between the parties in mid-2021 did not resolve the problem. Levi then instituted arbitration against Pakdoust, framing the claim in delict as one based on fraudulent or negligent misrepresentation regarding Pakdoust’s ability to remove himself while restoring Levi’s administrative access. The arbitration culminated in findings that it was not possible for an administrator to remove himself without appointing another administrator, and that the continued existence of the Page implied someone remained administrator; however, the arbitrator dismissed Levi’s misrepresentation claim because Levi had not testified to the pleaded representation. The arbitrator did not decide the contractual meaning of clause 3.2, although he commented that a commercially sensible interpretation might entail an obligation to reinstate Levi’s administrative access and that failure to do so might constitute breach of contract.

After the arbitral award, Pakdoust sought to establish what had occurred by engaging American attorneys and by subpoenaing Facebook. Bowmans, acting for Facebook’s attorneys, informed Pakdoust’s attorneys (10 April 2023) that the requested administrator (Pakdoust) should still have administrator rights via a Business Manager connected to the Page, and explained how he could regain administrator status. The court accepted as material that this “back door” existed and that it appeared to have been created through the actions of a marketing manager (“Zane”), who had created the Meta Business Manager environment without the parties’ knowledge, making himself and Pakdoust administrators.

Pakdoust’s attorneys confirmed on 20 April 2023 that Pakdoust had regained administrator access to the Page. The court treated it as significant that, despite this regained ability to administer the Page and thereby to add Levi (or Eastern Food Bazaar) and remove himself, Levi maintained that Pakdoust still did not effect the transfer of control. The court further regarded it as material that Levi obtained (through subpoena) correspondence suggesting it was possible for Pakdoust to add Eastern Food Bazaar as administrator, and that Pakdoust nonetheless did not do so.

The facts surrounding a 28 April 2023 attorney call were acknowledged as disputed and potentially without-prejudice, and the court expressly declined to decide that issue, indicating that it was not relied upon for determining whether relief should be granted. Two interlocutory applications (striking-out and setting aside a subpoena) were also not decided by agreement from the bar.

Finally, a settlement proposal made after the matter was removed from the urgent roll became relevant to costs and to whether the litigation was abusive. The court found, based on later correspondence placed before it, that the tender to restore administrator access was not unconditional but linked to a global settlement including waiver of costs.

3. Legal Issues

The central legal questions were whether the High Court could entertain the application notwithstanding the settlement agreement’s arbitration clause, whether the application was barred by res judicata (or a related doctrine), and what clause 3.2 of the settlement agreement required Pakdoust to do in practical terms regarding the Facebook Page.

A further question concerned the characterisation of the relief sought and whether the requirements for interdictory relief were met, including irreparable harm and the absence of an adequate alternative remedy. The court also had to consider the relevance of a belated settlement tender in assessing the propriety of the application and the appropriate costs order.

These issues primarily involved questions of law (jurisdiction in the face of an arbitration clause; the requirements of res judicata), questions of interpretation (application of interpretive principles to the language, context and purpose of clause 3.2), and the application of legal standards to facts (whether the respondent was in a practical position to perform, whether irreparable harm and lack of alternative remedy were established, and whether the settlement offer affected the relief or costs).

4. Court’s Reasoning

On the arbitration point, the court held that an arbitration agreement does not oust the court’s jurisdiction. It reasoned that a party seeking to enforce an arbitration agreement must properly invoke the mechanism for a stay of court proceedings contemplated by section 6 of the Arbitration Act 42 of 1965, typically by application or special plea. Pakdoust did not apply for a stay under section 6, but instead sought to raise a jurisdictional objection, which the court considered an incompetent way to advance the arbitration point.

The court further interpreted the settlement agreement’s arbitration clause as creating an entitlement to require arbitration by written notice, rather than imposing an automatic obligation to arbitrate all disputes. On the facts, Pakdoust had not issued the written notice required to insist on arbitration. In addition, the court relied on an express contractual carve-out permitting either party to approach a competent court for an interdict notwithstanding the arbitration clause. Since Levi sought interdictory relief, the court concluded that arbitration did not bar the application.

On res judicata, the court applied the orthodox requirements that the same parties, the same cause of action, and the same relief must be present in both matters. It found that, at most, only one element could arguably overlap, and that the core requirements were not met. The arbitration concerned a delictual claim premised on misrepresentation, whereas the application was founded in contract and alleged breach of clause 3.2. The relief sought differed materially, with damages claimed in arbitration (R500 000) and specific performance (transfer of administrative control) sought in the application. The court also noted that the second applicant (Nuri Sushi) was not a party to the arbitration, though it considered it unnecessary to determine whether that alone would defeat the defence given the failure on the cause-of-action and relief elements. The court mentioned the related doctrine of issue estoppel, but found it inapplicable on the reasoning that the issues decided in arbitration (whether a representation was made) were different from the issues in the application (whether clause 3.2 had been breached).

On the interpretation of clause 3.2, the court applied the established unitary approach to contractual interpretation, focusing on the language, read in its context, and having regard to the purpose of the provision. It also accepted that parties’ conduct in implementing an agreement can shed light on how reasonable businesspeople understood a contested clause. Applying these principles, the court rejected Pakdoust’s narrow reading that the clause required only the handover of “passwords and access information.” The court reasoned that such a reading ignored the commercial purpose of the clause and would be unbusinesslike given the clause’s object of disengaging Pakdoust from the business’s social media and transferring control to Levi.

The court treated the provision’s emphasis on passwords as reflecting the parties’ mistaken understanding of Facebook’s technical processes, rather than as limiting the substantive obligation. It reasoned that the transparent objective was to place Levi in control of the Page as an incident of Levi buying out Pakdoust’s share. The court also relied on Pakdoust’s own post-settlement conduct and stance, noting that he had initially acted on the premise that he was required to add Eastern Food Bazaar as administrator and that he did not, in practice, tender passwords as the operative means of transfer. This conduct was considered inconsistent with his later interpretation advanced only once Levi threatened arbitration.

The court then addressed Pakdoust’s secondary argument that he was not currently an administrator and could not make Levi administrator without first making himself administrator, which he suggested would breach clause 3.2. The court rejected this argument as inconsistent with correspondence confirming that Pakdoust had regained administrator access. The court further reasoned that, for purposes of performance, it was immaterial whether Pakdoust was a direct Page administrator or had effective control through the Meta Business Manager mechanism; in either event, he was practically able to take the necessary steps to make Levi administrator and remove himself. The court characterised the reliance on a technical distinction as self-serving and found that it did not justify non-performance.

On the requirements for interdictory relief, the court reasoned that irreparable harm was established by the continuing position that Levi, despite owning the business, could not control or use the business’s Facebook Page. The court likened the position to withholding keys after the sale of a business. The court accepted that fear of sabotage had not materialised, but held that the harm lay in the ongoing denial of control contrary to the settlement arrangement. Regarding alternative remedies, the court reasoned that damages were not a realistic alternative given the difficulty of quantifying loss arising from inability to manage the Page, and that specific performance (or mandatory interdictory relief) was the reasonable form of relief.

Finally, on the belated settlement offer, the court analysed the offer and the subsequent correspondence placed before it and concluded that the tender to restore administrator access was not unconditional but linked to a settlement requiring abandonment of costs awards. The court found that Levi was entitled to pursue enforcement of clause 3.2 without compromising other rights such as costs awarded in arbitration. The settlement offer therefore did not provide a defence to the application and did not justify depriving Levi of costs.

In exercising its costs discretion, the court held that costs should follow the result. Although it considered making a punitive order due to dissatisfaction with how the settlement correspondence was presented, it ultimately made an ordinary costs order.

5. Outcome and Relief

The court granted relief compelling performance. It directed the respondent to take all necessary steps to place the first applicant in the position of being the sole and exclusive administrator of the Nuri Sushi Facebook Page.

The court ordered the respondent to pay the costs of the application.

Cases Cited

Dipenta Africa Construction (Pty) Ltd v Cape Provincial Administration 1973 (1) SA 666 (C).

Molaudzi v S [2015] ZACC 20; 2015 (8) BCLR 904 (CC); 2015 (2) SACR 341 (CC).

Esorfranki Pipelines (Pty) Ltd v Mopani District Municipality [2021] ZASCA 89; [2021] 3 All SA 686 (SCA); 2022 (2) SA 355 (SCA).

Royal Sechaba Holdings (Pty) Limited v Coote and Another 2014 (5) SA 562 (SCA).

Capitec Bank Holdings Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others [2021] ZASCA 99; [2021] 3 All SA 647 (SCA); 2022 (1) SA 100 (SCA).

Comwezi Security Services (Pty) Ltd v Cape Empowerment Trust Limited [2012] ZASCA 126.

University of Johannesburg v Auckland Park Theological Seminary and Another [2021] ZACC 13; 2021 (8) BCLR 807 (CC); 2021 (6) SA 1 (CC).

Legislation Cited

Arbitration Act 42 of 1965 (section 6).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The High Court held that the arbitration clause in the settlement agreement did not deprive the court of jurisdiction, particularly where the respondent had not sought a stay under section 6 of the Arbitration Act 42 of 1965, where the arbitration clause created a right rather than an obligation to arbitrate absent written notice, and where the agreement expressly preserved the right to seek interdictory relief from a court.

The court held that the application was not barred by res judicata (nor, on the court’s analysis, would issue estoppel have applied), because the earlier arbitration concerned a different cause of action (delictual misrepresentation rather than contractual breach) and different relief (damages rather than specific performance/mandatory interdict).

On interpretation, the court held that clause 3.2, properly understood in context and purpose, required the respondent to take steps that would effectively transfer control of the business Facebook Page to Levi, notwithstanding that the clause referred to passwords and access information. The court held that the respondent was in a practical position to perform, including through access via Meta Business Manager, and was obliged to do so.

The court held that interdictory relief was appropriate because the ongoing denial of administrative control constituted irreparable harm in the relevant sense and there was no realistic alternative remedy, particularly given difficulties in quantifying damages. The belated settlement tender did not provide a defence because it was linked to conditions concerning costs and the compromise of other rights.

LEGAL PRINCIPLES

The judgment applied the principle that an arbitration agreement does not, by itself, oust the jurisdiction of the courts. A party wishing to enforce an arbitration agreement in response to court proceedings must properly invoke the statutory mechanism for a stay, as contemplated by section 6 of the Arbitration Act 42 of 1965, and cannot rely on an arbitration clause as a bare jurisdictional objection.

The judgment applied the requirements for the defence of res judicata, namely identity of parties, cause of action, and relief, and emphasised that the doctrine does not bar later litigation where the subsequent proceedings are founded on a different cause of action and seek materially different relief. It also recognised issue estoppel as a related, narrower doctrine but treated it as inapplicable on the facts and pleadings before it.

In interpreting the settlement agreement, the judgment applied the unitary approach to contractual interpretation, requiring consideration of the language used, the context in which it was used, and the purpose of the provision. The judgment further treated post-contract conduct as potentially informative of how reasonable businesspeople understood the contract, particularly where a technical process was imperfectly described but the commercial objective was clear.

In relation to interdictory relief, the judgment applied the approach that where an applicant seeks to enforce a contractual right to control an asset (here, administrative control of a business Facebook Page), the ongoing deprivation of that control may constitute irreparable harm for purposes of mandatory relief, and specific performance may be preferred where damages are impractical to quantify and do not provide an adequate alternative remedy.

Levi and Another v Pakdoust (8271/2023) [2023] ZAWCHC 298 (24 November 2023)