Kumova v Davison

(Delivered ex tempore, revised from the transcript)

A INTRODUCTION 1 Early in the new year, I delivered judgment in Kumova v Davison (No 2) [2023] FCA 1 (J). The parties have returned before me today to deal with the entry of judgment and all remaining issues. 2 Mr Tolga Kumova, an Australian mining investor, sued on six matters published on Twitter by Mr Alan Davison (better known by his Twitter handle "Stock Swami"), a religious ascetic turned self-professed Twitter vigilante. At the heart of the dispute (and the core of Mr Davison's defence) was Mr Davison's belief that Mr Kumova deliberately used Twitter as a vehicle to mislead and deceive the investing public in furtherance of his own financial interests. 3 I found that Mr Davison defamed Mr Kumova and had no substantial truth or honest opinion defence. Judgment was entered in favour of Mr Kumova in the sum of $275,000 (with interest to be added to this amount). 4 My reasons also outlined why Mr Davison was not tilting at windmills in being generally concerned about the real or potential use of social media to "pump and dump" or "ramp" securities: see J (at [5]-[10]); Australian Securities and Investments Commission v Scholz (No 2) [2022] FCA 1542 (at [1]-[13]) per Downes J); Australian Securities and Investments Commission, ASIC warns of social media led 'pump and dump' campaigns (Media Release 21-256, 23 September 2021). I found that, on two occasions, Mr Kumova contravened the Corporations Act 2001 (Cth) (Corporations Act) as pleaded by Mr Davison in pursuit of his justification defence. The first contravention was a failure to disclose changes in his substantial shareholding in two companies as required by s 671B of the Corporations Act. The second arose from the publication of the following tweet (defined in the judgment as the Seventh Statement): 5 I found that the Seventh Statement conveyed a representation which was misleading or deceptive or likely to mislead of deceive within the meaning of s 1041H of the Corporations Act, and that it was a false or misleading statement for the purposes of s 1041E of the Corporations Act. The Seventh Statement figured in my assessment of damages, as evidence of directly relevant and particularised misconduct in the relevant "sector" of Mr Kumova's reputation: Speidel v Plato Films Ltd [1961] AC 1090 (at 1140-1144 per Lord Denning). 6 As will be seen, the Seventh Statement was also raised during submissions today.

B REMAINING ISSUES FOR RESOLUTION 7 Three issues remain for resolution. 8 The first is the amount of interest to be paid on the judgment amount. In my reasons (at J [347]), I indicated that I would award interest at a rate of 3 per cent, consistently with the principles collected by White J in Hanson-Young v Leyonhjelm (No 5) [2020] FCA 34 (at [7]-[16]). 9 The parties initially disagreed on how this amount should be calculated. There was disagreement as to the period of time in respect of which interest should be charged. Mr Kumova calculated interest as running from the date of initial publication of the first defamatory matter, while Mr Davison proposed a lower sum, presumably based on the later initial date of publication for some of the subsequent matters. 10 Pragmatically, the parties were able to agree today that it is appropriate that judgment be entered in the amount of $300,000, reflecting less than half the difference between the competing calculations. 11 The second issue requiring resolution was foreshadowed in Section H.3 of my reasons (J at [348]-[358]), where I concluded that a permanent injunction is utile to protect Mr Kumova from further harm by Mr Davison. The controversy now surrounds the form of that injunction. I indicated (at J [358]) that the form of injunction sought by Mr Kumova in his originating application lacked necessary specificity, and that it would be contrary to principle to decide upon whether an injunction should be granted without identifying the precise form of the injunction that would run if ordered. Accordingly, the parties sent up proposed short minutes and put on submissions on this issue today. 12 The third and final matter relates to costs.

C INJUNCTION 13 The Defamation Act 2005 (NSW) (Defamation Act) and its cognate legislation do not expressly provide for the making of permanent injunctions as a remedy against the publisher of defamatory material. 14 The power to make a permanent injunction in this Court is found in s 23 of the Federal Court of Australia Act 1976 (Cth) (FCA Act). This section confers upon the Court a similarly broad discretion to the equitable power to grant an injunction. In Jackson v Sterling Industries Limited (1987) 162 CLR 612 (at 632), Toohey J reasoned that s 23 "speaks for itself"; it is not concerned with divisions between law and equity, but rather: equip[s] the Federal Court with powers arising expressly or by implication … and with powers that are incidental and necessary to the exercise of the jurisdiction conferred by that Act and the powers so conferred. 15 Exceptional caution must be exercised before restraining the publication of an anticipated defamatory publication: Rush v Nationwide News Pty Limited (No 9) [2019] FCA 1383 (at [8] per Wigney J); Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 (at 66-67 [16] per Gleeson CJ and Crennan J). The right of free speech is essential to the proper functioning of a representative democracy, and subject to certain statutory and other exceptions, should generally not be interfered with or restricted: Palmer v McGowan (No 5) [2022] FCA 893; (2022) 404 ALR 621 (at 730 [520]); Carolan v Fairfax Media Publications Pty Ltd (No 7) [2017] NSWSC 351 (at [13] per McCallum J). 16 Restraining an unsuccessful respondent in a defamation case from republishing defamatory statements or imputations which have not been shown to be substantially true is, however, considered to be an instance where a restriction or limitation on the right of free speech may be warranted: Rush (No 9) (at [11] per Wigney J). 17 The primary consideration is whether there is a risk or apprehension that the respondent will republish the defamation: Rush (No 9) (at [12] per Wigney J). Ultimately, the task before the Court is informed by the bespoke circumstances of the case, and has as its touchstone the question of whether the Court-imposed restraint is reasonably necessary to address the risk or threat of the defamation being repeated: Carolan v Fairfax (at [56] per McCallum J). 18 The contest about the form of the injunction has two components. 19 The first is whether the injunction should be framed to reflect the imputations found to be conveyed by the impugned matters, or whether it should be more finely calibrated, referring only to various companies. The second concerns whether the injunction should extend to anticipated future publications, which are unconnected with the allegations the subject of this case.

C.1 Breadth 20 As to the first issue, each of the imputations upon which Mr Kumova sued was agreed to be defamatory and found to have been conveyed: J (at [95]). For the following reasons, there is a risk or apprehension that Mr Davison will republish the substance of these imputations. 21 First, Mr Davison has been obstinate as to the truth and public utility of the imputations found to have been conveyed. Over the course of the trial, he was intent on asserting this even against the tide of principle and the duties on litigants in Pt VB of the FCA Act. Prior to the involvement of his current counsel, Mr Davison took a scattergun approach to his defence, advancing various untenable contentions and then retreating. 22 Secondly, more generally, Mr Davison views his conduct as a "vital service to investors": J (at [357]). In the context of assessing Mr Kumova's entitlement to aggravated damages, I canvassed countless Twitter posts by Mr Davison, many of which went to the matters the subject of the carried imputations: J (at [324]-[339]). 23 I see no reason why, in principle, the injunction should not extend as broadly as the meanings found to have been conveyed. To take Mr Davison's proposed course and attune the restraint to various companies the subject of evidence runs the risk that he will again seek to find an alternative basis upon which to continue to defame Mr Kumova. 24 Accordingly, the form of the injunction sought by Mr Kumova is to be preferred in this respect.

C.2 Temporal Application 25 The second issue was the subject of extensive submissions today. 26 Mr Kumova submits that an injunction which extends to "publishing a matter in any form to the effect of [the carried imputations]" is necessary to militate against the "real danger" that Mr Davison will use his online platforms to undermine the Court's findings and resume his defamatory campaign. Counsel pointed to the serious findings I made against Mr Davison, including as to his dishonesty in relation to the conduct of the proceedings and as to the content, tone and frequency of the vast number of tweets he posted about Mr Kumova. It is said, consistently with my reasons (at [327] and [356]), that the matters which I found to be defamatory were indicative of an intention to discredit Mr Kumova, and that this finding was consistent with an array of evidence that included representations by Mr Davison that he did not intend to "shut up about Tolga" and would not be "muzzled". 27 The position of counsel for Mr Davison was to remind me of the caution that should attend the Court's restraint of ordinary freedoms: Palmer v McGowan (at 730 [520]); Carolan v Fairfax (at [14] per McCallum J). In Mr Davison's submission, an injunction in the form sought by Mr Kumova would inhibit Mr Davison from commentating on misconduct which may be engaged in by Mr Kumova in the future. It is said that, should Mr Davison publish defamatory material concerning Mr Kumova in the future, Mr Kumova could preserve his legal right to reputation by bringing an action in defamation. 28 There are, of course, considerations pointing both ways. 29 As explained above, it is evident that Mr Davison is not lacking in self-regard for the importance of his role as the "Stock Swami". So much is clear in what appears to have been a press release published by his solicitors two days prior to the hearing, entitled "Who is Stockswami? Meet the Man Behind the Twitter Account". It is difficult to fathom why Mr Davison's solicitors thought it was appropriate for such a press release to be published. The present relevance of this document is that it demonstrates what even Mr Davison's solicitors describe as "a path that has come to dominate his life": "From 2017 I started calling them out and naming them. Exposing them really. They were sophisticated investors so they'd get the stock low at a capital raise then they would pump it at the same time. I exposed brokers, directors, sophisticated investors, all pumping incognito on social media and stock forums. They would stop posting once I identified them. It's amazing. Once people know who you are they see the conflict of interest but when you're anonymous and don't disclose who you are, it just sucks people in like it sucked me in. Had I known how controversial it was all going to become I should have remained anonymous myself." His public interest journalism made him one of the most vocal figures pressing ASIC and the ASX to crack down on the artificial pumping of stocks on social media. A campaign that has paid off in recent years. "My biggest complaint was how they let companies make ramping announcements that were just designed to push up the share price. Now the ASX have a ramping rule. What annoys me is sometimes I feel the horse racing industry is better regulated than the stock market. They ban people from the racetrack, but ASIC have trouble banning anyone. When you're a mum and dad investor and you've earned your money honestly, you expect companies, especially ones that are regulated to be doing the same and giving it their best." Despite his public agitation and his impact Davison has maintained a low personal profile. "I'm not comfortable talking about my life. I'm still a Swami, we sort of renounce our activities or any benefit from them. I gain nothing from this and I see it genuinely as a public service." His research has earnt him some powerful enemies but Davison remains unfazed. "It is just my philosophy about a greater good. I hope we can get the message that I want across. Hopefully it will advance the conversation. If I have to pay through the nose for it, well that's my karma. I don't mind". 30 Mr Davison's attitude is also reflected in a tweet he posted on 19 December 2022, while judgment was reserved, which noted that he had "won the war against Tolga & others [sic] shameless promoting of his stocks to a retail audience". He went on to assert that he "didn't destroy Tolga's reputation" and referred to the fact that his "conscience is clear". The following day, he compared the tactics of Mr Kumova to the tactics of Mr Tyson Scholz, a person who this Court has found to have engaged in "a clever way of pumping": see ASIC v Scholz (at [1]-[13]) per Downes J); J (at [6]). 31 Mr Davison is perfectly entitled to these opinions. But his conduct bespeaks of a risk of republication. In view of all of the above, there is no doubt in my mind that Mr Kumova deserves some protection. The only question is how far that protection should extend. 32 I queried with counsel whether it was appropriate to have regard to Mr Kumova's contraventions of the Corporations Act in determining whether or not the injunction should extend to matters after the date of the order. Counsel for Mr Kumova's response was not to suggest it was an irrelevant consideration, but rather, that it was one of no weight. In part, and initially, it was said that (leaving to one side Mr Kumova's essentially procedural breach of s 671 of the Corporations Act) my findings as to the Seventh Statement related to what was no more than an arithmetic error on the part of Mr Kumova. 33 This is not a correct characterisation of my reasons at [209]-[220]. As explained, far more concerning than the arithmetic mistake was that Mr Kumova wrongly deployed in situ valuation data (as I indicated (J at [215])). Mr Kumova, in the light of his experience in the mining industry, ought, at the very least, to have known the limitations of this type of data. 34 Counsel for Mr Kumova then submitted that the Seventh Statement was also irrelevant because it was posted at a time when Mr Kumova did not have a substantial Twitter following. This argument was mounted in support of a further submission that the Seventh Statement was unlikely to induce persons to acquire financial products and, in other respects, did not engage the prohibition in s 1041E of the Corporations Act, because it could not be said there was a "real and not remote" chance that the figure would lead Mr Kumova's audience into error: Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 (at 87 per Bowen CJ, Lockhart and Fitzgerald JJ). 35 I do not propose to indulge in debate as to whether that is a correct account of my reasons. I will satisfy myself by repeating a point I have already emphasised (at J [109]-[112] and [310]): to the extent any conduct of Mr Kumova was relevant to the question of damages, the primary focus was on the relevant conduct, rather than the objective characterisation of that conduct as being in breach of a particular statutory norm. 36 Accordingly, whether there was a failure to engage with an argument as to the elements of s 1041E (as Mr Kumova sought to suggest) is of little moment. All of this seems to me to be somewhat of a tempest in a teacup. I did indicate that some of Mr Kumova's conduct on Twitter was of concern, and if he was to continue to make public statements of this type, there could be said to be a non-fanciful risk that such representations might give rise to legitimate public comment. 37 Counsel for Mr Kumova contended that if Mr Davison wished to comment on any matter involving Mr Kumova which might occur at some stage in the future, it would always be open to him to make an application for a variation of the injunction. This is hardly a satisfactory basis to enjoin someone in terms broader than is necessary in the first instance. 38 I regard it as reasonably necessary to make an order in the terms proposed by Mr Kumova, with one significant qualification. I will limit the restraint on Mr Davison such that he is enjoined from publishing matters to the effect of the defamatory imputations in relation to occurrences prior to the date of the order. This course balances Mr Davison's right to free speech against the need to protect Mr Kumova from further harm.

D COSTS 39 This leaves the final issue of costs, which has two aspects: first, the costs of the proceedings; and secondly, the costs of the interlocutory application to cross-examine Mr Davison in relation to the insufficient and dishonest discovery given by him. 40 Mr Davison concedes he will pay Mr Kumova's costs of the proceedings. 41 As to the second issue, there is no need to traverse the well-known principles attending the power to award costs on an indemnity basis because of some unreasonable conduct in the course of litigation: see, for example, Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116 (at [4]-[5] per Jagot, Yates and Murphy JJ). In brief, some "special or unusual feature" is required: Melbourne City Investments v Treasury Wines (at [5] per Jagot, Yates and Murphy JJ), citing Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 (at [3] per Finn J). 42 My findings make clear that the conduct of Mr Davison ought to attract an award of indemnity costs: J (at [333]-[339]). I stress, of course, that such an order is not punitive, but has the purpose of compensating Mr Kumova for losses required to be incurred by him through no fault of his own. 43 The only point made by Mr Davison that should be ventilated in this regard is that an award of indemnity costs might cause problems upon a taxation. I do not consider that this is likely to be the case. I am sure whoever conducts any taxation will be able to ascertain what costs are properly referable to the interlocutory application. For completeness, and in response to a submission made by Mr Davison, it does not matter for these purposes that the evidence adduced in the adjectival proceeding was ultimately tendered in the trial.

E CONCLUSION AND ORDERS 44 I will make orders giving effect to these reasons. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.