DEFAMATION – proceeding brought by Australian investor against “Stock Swami” Twitter personality – seventeen imputations alleged to have been conveyed by six tweets – where tweets alleged applicant had engaged in insider trading, “pumping and dumping” of securities and other market misconduct – all seventeen imputations carried – where parts of defence abandoned – defence of justification pleaded pursuant to s 25 of Defamation Act 2005 (NSW) – consideration of relevant principles – consideration of so-called defence of “partial” justification – consideration of ss 671B, 769C, 1041E and 1041H of Corporations Act 2001 (Cth) as part of substantial truth defence – defence of honest opinion pleaded to one matter – both defences not made out
DAMAGES – where applicant sought general damages for non-economic loss – where applicant sought aggravated damages – assessment of damages – consideration of so-called “mitigation” of damages – where respondent engaged in relentless Twitter regime against applicant notwithstanding apology and commencement of proceedings – where respondent pursued partly misconceived justification defence – where respondent destroyed documents and failed to comply with discovery obligations – circumstances warrant award of aggravated damages for increased hurt
PRACTICE AND PROCEDURE – where applicant sought permanent injunction enjoining respondent domiciled in New Zealand – consideration of relevant principles pursuant to Trans-Tasman Proceedings Act 2010 (NZ) – importance of form of proposed permanent injunction
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Kumova v Davison (No 2) [2023] FCA 1
Case
[2023] FCA 1
Decision Date
CaseChat Overview and Summary
The case of Kumova v Davison (No 2) involved a defamation proceeding brought by Mr Kumova, an Australian investor, against Mr Davison, a Twitter personality known as "Stock Swami". Mr Kumova alleged that Mr Davison had made seventeen defamatory imputations through six tweets, accusing him of insider trading, "pumping and dumping" of securities, and other market misconduct. The court found all seventeen imputations to be carried. The court examined the defences of justification and honest opinion, finding them to be unsuccessful. The court also considered the issue of damages, awarding general damages for non-economic loss and aggravated damages due to Mr Davison's relentless Twitter campaign against Mr Kumova despite the apology and the initiation of legal proceedings.
The court addressed the issue of a permanent injunction enjoining Mr Davison, who is domiciled in New Zealand, from making further defamatory statements. The court considered the relevant principles under the Trans-Tasman Proceedings Act 2010 (NZ) and the importance of the form of the proposed permanent injunction. The court ordered the parties to provide agreed or competing short minutes of order, including the amount of damages to be awarded and the form of injunction, by a specified date. The court also noted that Mr Davison had given an undertaking to refrain from publishing or republishing the defamatory imputations until a specified time.
In conclusion, the court found in favour of Mr Kumova, awarding him damages and enjoining Mr Davison from making further defamatory statements. The court emphasized the importance of practitioners ensuring that only bona fide contentions are put in issue in defamation cases, in line with the statutory duty to facilitate the just resolution of disputes according to law.
Orders
Orders of the court
1. By 8 February 2023, the parties bring in agreed or competing short minutes of order providing for:
(a) judgment to be awarded in favour of the applicant against the respondent on the amended statement of claim in the sum of $275,000 together with interest (at a rate of 3%) calculated to the date of entry of judgment; and
(b) a proposed form of injunction enjoining the respondent if such relief was to be granted.
2. The proceeding be stood over to 10 February 2023 at 10:15am to deal with the entry of judgment and all remaining issues.
THE COURT NOTES THAT:
3. The respondent, through his solicitor, has given an undertaking to the Court that he and his servants and agents will take no steps to publish or republish the imputations that I have found to be conveyed until 4pm on 10 February 2023.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
In explaining why, the balance of my reasons are divided into the following headings:BFurther Background;CThe Publications, Imputations and Mode of Publication;DThe Disputed Imputations and Meaning;EThe Defences Generally;FJustification;GHonest Opinion; andHRelief.B FURTHER BACKGROUND The backdrop to this dispute is set out in the Statement of Agreed Facts (SAF) jointly filed by the parties pursuant to s 191 of the Evidence Act 1995 (Cth) (Evidence Act) and received into evidence. The following section records my findings, in large part based upon that document.B.1 Mr Kumova’s Business and Trading Activity Mr Kumova boasts an extensive business and trading history. He has pursued investment opportunities in the junior mining sector since 2013, investing in numerous companies including Aston Minerals Limited (formerly known as European Cobalt Limited), Alderan Resources Limited, Bellevue Gold Limited (Bellevue Gold), Meteoric Resources NL, New Century Resources Limited (New Century) and Syrah Resources Limited (Syrah Resources). Mr Kumova has also held corporate director positions in a suite of mining companies. Two companies are of especial importance to this case: Bellevue Gold and New Century.Bellevue Gold Bellevue Gold is listed on the Australian Securities Exchange (ASX). The company is exploring and developing a high-grade underground gold mine in Western Australia. In the period during which the impugned matters were published (September 2019 to June 2020), Bellevue Gold experienced considerable growth, notwithstanding the COVID-19 pandemic. The share price bottomed at around $0.28 in early 2020, when the COVID-19 pandemic first broke out, but bounced back after BlackRock Asset Management took a $30,000,000 placement. As at the close of business on 27 May 2020, the company’s market capitalisation was $491,100,000 based on a $0.72 share price with an average daily volume of 3,000,000 shares. By 11 November 2020, Bellevue Gold’s market capitalisation was $1,175,900,000, based on a $1.40 share price with an average daily volume of 4,500,000 shares. The largest shareholders in Bellevue Gold across the period included the following large institutional investors: 1832 Asset Management (a leading global gold fund), BlackRock Asset Management and VanEck (the largest gold exchange trade fund in the world): T342.19–21. Mr Kumova first purchased shares in Bellevue Gold in about March 2017, at a time when they were trading for as low as three cents per share. Between July 2019 and March 2020, Mr Kumova disposed of a net 3,000,000 shares in Bellevue Gold. More particularly, on 5 July 2019, Mr Kumova sold 1,500,000 shares on market for $0.665 per share, totalling $997,500. He sold a further 200,000 shares on market on 11 November 2019 for just shy of $0.50 per share, and 200,000 shares on market on 16 December 2019 for just over $0.50 per share. During the earliest stages of the COVID-19 pandemic, in late February 2020, Mr Kumova sold 389,498 shares for $0.60 per share and 810,502 shares for $0.6131 per share on market, culminating in a total sale of $730,617. As the full force of the pandemic was felt in March and April 2020, the Bellevue Gold share price collapsed. Mr Kumova took advantage of the drop, purchasing 100,000 shares on 19 March 2020 for $0.2850 per share. He sold those shares for $0.3150 per share the next day.
Evidence
Evidence Before The Court
The backdrop to this dispute is set out in the Statement of Agreed Facts (SAF) jointly filed by the parties pursuant to s 191 of the Evidence Act 1995 (Cth) (Evidence Act) and received into evidence. The following section records my findings, in large part based upon that document.B.1 Mr Kumova’s Business and Trading Activity Mr Kumova boasts an extensive business and trading history. He has pursued investment opportunities in the junior mining sector since 2013, investing in numerous companies including Aston Minerals Limited (formerly known as European Cobalt Limited), Alderan Resources Limited, Bellevue Gold Limited (Bellevue Gold), Meteoric Resources NL, New Century Resources Limited (New Century) and Syrah Resources Limited (Syrah Resources). Mr Kumova has also held corporate director positions in a suite of mining companies. Two companies are of especial importance to this case: Bellevue Gold and New Century.Bellevue Gold Bellevue Gold is listed on the Australian Securities Exchange (ASX). The company is exploring and developing a high-grade underground gold mine in Western Australia. In the period during which the impugned matters were published (September 2019 to June 2020), Bellevue Gold experienced considerable growth, notwithstanding the COVID-19 pandemic. The share price bottomed at around $0.28 in early 2020, when the COVID-19 pandemic first broke out, but bounced back after BlackRock Asset Management took a $30,000,000 placement. As at the close of business on 27 May 2020, the company’s market capitalisation was $491,100,000 based on a $0.72 share price with an average daily volume of 3,000,000 shares. By 11 November 2020, Bellevue Gold’s market capitalisation was $1,175,900,000, based on a $1.40 share price with an average daily volume of 4,500,000 shares. The largest shareholders in Bellevue Gold across the period included the following large institutional investors: 1832 Asset Management (a leading global gold fund), BlackRock Asset Management and VanEck (the largest gold exchange trade fund in the world): T342.19–21. Mr Kumova first purchased shares in Bellevue Gold in about March 2017, at a time when they were trading for as low as three cents per share. Between July 2019 and March 2020, Mr Kumova disposed of a net 3,000,000 shares in Bellevue Gold. More particularly, on 5 July 2019, Mr Kumova sold 1,500,000 shares on market for $0.665 per share, totalling $997,500. He sold a further 200,000 shares on market on 11 November 2019 for just shy of $0.50 per share, and 200,000 shares on market on 16 December 2019 for just over $0.50 per share. During the earliest stages of the COVID-19 pandemic, in late February 2020, Mr Kumova sold 389,498 shares for $0.60 per share and 810,502 shares for $0.6131 per share on market, culminating in a total sale of $730,617. As the full force of the pandemic was felt in March and April 2020, the Bellevue Gold share price collapsed. Mr Kumova took advantage of the drop, purchasing 100,000 shares on 19 March 2020 for $0.2850 per share. He sold those shares for $0.3150 per share the next day.
Decision
Reasons for decision
By retweeting a tweet by Mr Assad Tannous, Mr Davison puts an insidious spin on it. The tweet conveys both that Mr Kumova gave inside information to Mr Tannous on this occasion but also on other earlier occasions (“giving info to mates… again?”). Although Mr Davison uses a question mark, it is deployed in a rhetorical sense given the content of Mr Tannous’ tweet and the use of the ellipses. In any event, Mr Tannous is the only “mate” identified in the Sixth Matter, and the tweet accuses Mr Kumova of giving inside information “again”. The ordinary reasonable reader would understand the Sixth Matter to impute that Mr Kumova gave inside information to Mr Tannous, perhaps on more than one occasion.D.7 Conclusions as to Meaning The upshot of the foregoing is that the following imputations are conveyed: Given the belated but inevitable concession that the pleaded meanings were defamatory of Mr Kumova, it then becomes necessary to turn to Mr Davison’s defences.E THE DEFENCES GENERALLY A different form of “pump and dump” took place in the conduct of Mr Davison’s defence. In his further amended defence, Mr Davison had pleaded the following defences to each of the six matters:(1)justification under s 25 of the Defamation Act 2005 (NSW) (Defamation Act); (2)statutory qualified privilege under s 30 of the Defamation Act and qualified privileged at common law;(3)honest opinion under s 31 of the Defamation Act and fair comment at common law; (4)qualified privilege at common law based on reply to attack; and (5)(remarkably) triviality under s 33 of the Defamation Act. Mr Davison also asserted contextual truth under s 26 of the Defamation Act with respect to the Fifth Matter. The bulk of Mr Davison’s defences fell away. It should have been obvious from the start that a number of these defences were untenable on the facts. Mr Davison is not an outlier in not pursuing pleaded defences following mature reflection. It seems that in defamation, in stark contrast to most commercial litigation, there is an entrenched persistence in joining issue and raising positive defences when there is an infirm basis for doing so. Defamation cases are now commonly run in the Federal Court. Part VB of the FCA Act does not contain empty rhetoric. There is a statutory duty on practitioners to assist their clients in facilitating the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: s 37N(2) of the FCA Act. This means that in preparing pleadings, it is necessary for both the solicitor on the record and the barrister settling the pleading to ensure contentions not bona fide in dispute are not put in issue, and to make sure untenable defences are not pleaded. The apparently persistent notion that defamation practitioners can just roll the arm over and plead defences like they are in a time warp that has transported them back to the 1970s needs to be exploded. In any event, to obtain clarity as to what remained, at the conclusion of the hearing, I ordered Mr Davison to prepare two tables: the first being the Imputations and Defences Table referred to above; and the second outlining several representations alleged to have been made by Mr Kumova and primarily relevant to the justification defence.
Ratio Decidendi
Legal Principle Established
The defence to the First and Second Matters is primarily focussed on nine statements made by Mr Kumova in a series of tweets and interviews, all with respect to either Bellevue Gold or New Century. With respect to those entities, Mr Kumova is said to have: (a) engaged in misleading and deceptive conduct in contravention of s 1041H of the Corporations Act 2001 (Cth) (Corporations Act); and (b) made materially misleading statements and/or disseminated materially misleading information, in contravention of s 1041E of the Corporations Act. It is also said that Mr Kumova contravened s 671B of the Corporations Act by failing to disclose to the market changes in his shareholding in Bellevue Gold. Mr Davison’s defence to the Fifth Matter asserts that Mr Kumova engaged in a pump and dump scheme in respect of Bellevue Gold. There was some confusion as to the evidence relied upon in respect of the Fifth Matter. As I understand the final position, however, Mr Davison relies on a series of bullish statements made by Mr Kumova (including the nine statements relied upon with respect to the First and Second Matters), as well as changes in Mr Kumova’s shareholding in Bellevue Gold. In the end, the parties agree that evidence of specific conduct adduced in relation to the First and Second Matters (as opposed to my findings as to whether that conduct constituted contravention of a statutory norm) may be relevant to my assessment of damages. Notwithstanding this, Mr Davison submits that it is necessary for the Court to determine whether Mr Kumova contravened the statutory norms he invokes in pursuit of his defence. In his further submissions, he insists this is because an “essential element of the imputations sought to be justified is that the activity of [Mr Kumova] was unlawful”, and “there is a difference between conduct that is unethical or contrary to accepted standards and conduct that contravenes a statutory prescription regulating conduct”. Although this last statement is undoubtedly correct, there is, with respect, an oversimplification in the submissions of Mr Davison on this topic. For almost fifty years, the commercial life of this country has been regulated by a basic norm, now reflected in a bewildering array of statutory provisions, being that persons must not engage in conduct which is misleading or deceptive, or likely to mislead or deceive. The pervading influence of the provisions enacting this norm might be seen generally as a reflection of social attitudes that have heralded a retreat from legal formalism on several fronts and, in many ways, the existence of the norm reflects community expectations of acceptable commercial behaviour. But it is not as simple as that. There is a continuum of conduct that can contravene the norm: at one end, wicked, predatory, and highly immoral conduct; and at the other, guileless conduct, engaged in by someone trying to do their best, but which involved an innocent but factually mistaken representation.