Kumova v Davison (No 3)

Case [2023] FCA 171

FEDERAL COURT OF AUSTRALIA

Kumova v Davison (No 3) [2023] FCA 171

File number: NSD 984 of 2020
Judgment of: LEE J
Date of judgment: 10 February 2023
Date of publication of reasons: 6 March 2023
Catchwords:

PRACTICE AND PROCEDURE – application for permanent injunction to restrain publication of anticipated defamatory material – consideration of Court’s jurisdiction to grant permanent injunctions – whether real or appreciable risk of republication of defamation – consideration of public interest in right of free speech – injunction limited to republication of defamatory imputations in relation to events prior to date of order

COSTS – application for costs of interlocutory application and adjectival proceeding on an indemnity basis – indemnity costs awarded

Legislation:

Corporations Act 2001 (Cth) ss 671, 1041E, 1041H

Federal Court of Australia Act 1976 (Cth) Pt VB, s 23

Defamation Act 2005 (NSW) ss 25, 26, 30, 31, 33
Cases cited:

Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR 57

Australian Securities and Investments Commission v Scholz (No 2) [2022] FCA 1542

Carolan v Fairfax Media Publications Pty Ltd (No 7) [2017] NSWSC 351

Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179

Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82

Hanson-Young v Leyonhjelm (No 5) [2020] FCA 34

Jackson v Sterling Industries Limited (1987) 162 CLR 612

Kumova v Davison (No 2) [2023] FCA 1

Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116

Palmer v McGowan (No 5) [2022] FCA 893; (2022) 404 ALR 621

Rush v NationwideNews Pty Limited(No 9) [2019] FCA 1383

Speidel v Plato Films Ltd [1961] AC 1090
Australian Securities and Investments Commission, ASIC warns of social media led ‘pump and dump’ campaigns (Media Release 21-256, 23 September 2021)
Division: General Division
Registry: New South Wales
National Practice Area: Other Federal Jurisdiction
Number of paragraphs: 44
Date of hearing: 10 February 2023
Counsel for the Applicant: Ms S Chrysanthou SC with Mr B Dean
Solicitor for the Applicant: Gilbert + Tobin
Counsel for the Respondent: Mr D R Sibtain SC
Solicitor for the Respondent: Xenophon Davis

ORDERS

NSD 984 of 2020
BETWEEN:

TOLGA KUMOVA

Applicant
AND:

ALAN FRANCIS DAVISON

Respondent

ORDER MADE BY:

LEE J

DATE OF ORDER:

10 FEBRUARY 2023

PENAL NOTICE

TO: ALAN FRANCIS DAVISON

IF YOU (BEING THE PERSON BOUND BY THIS ORDER):

(A)    REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR

(B)     DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU NOT TO DO,

YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT.

ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.

THE COURT ORDERS THAT:

1.Judgment be entered for the applicant against the respondent on the amended statement of…

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Kumova v Davison (No 3) [2023] FCA 171
Case
[2023] FCA 171
Decision Date

CaseChat Overview and Summary

In the case of Kumova v Davison (No 3), Tolga Kumova, the plaintiff, sought a permanent injunction to prevent the defendant, Davison, from publishing defamatory material. The Federal Court of Australia was tasked with deciding the appropriate scope of the injunction and whether it should extend to future publications. The court also considered an application for costs on an indemnity basis. The court found that there was a real risk of future defamation and that a permanent injunction was necessary to protect Kumova's reputation. However, the court limited the injunction to statements about events that occurred before the date of the order, as there was insufficient evidence to justify a broader injunction.

The court examined the nature of the defamation and the specific imputations made by Davison, including allegations of insider trading, unlawful activity, and market manipulation. The court recognised the public interest in freedom of speech but balanced this against the need to protect Kumova's reputation from further harm. The court concluded that an injunction was necessary to prevent further defamation and ordered that Davison be permanently restrained from publishing certain statements about Kumova. The court also awarded costs to Kumova on an indemnity basis, acknowledging the significant legal efforts involved in the proceedings.

The court's decision was influenced by the specific nature of the defamatory statements and the evidence presented regarding the risk of future harm. The court emphasised the need for specificity in the injunction to ensure that it was both effective and fair to the parties involved. The final orders included a permanent injunction tailored to the specific defamatory imputations and an award of costs to the plaintiff, reflecting the court's consideration of the balance between protecting reputation and upholding free speech.

Orders

Orders of the court

1. Judgment be entered for the applicant against the respondent on the amended statement of claim in the sum of $300,000.

2. Pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth), until further order of the Court, the respondent is hereby permanently restrained from publishing himself, or by his servants or agents, a matter in any form in relation to anything that has occurred prior to the date of this Order to the effect that:

(a) Tolga Kumova engaged in insider trading;

(b) Tolga Kumova engaged in unlawful activity on the Australian Securities Exchange (ASX);

(c) Tolga Kumova misled the Australian share market;

(d) Tolga Kumova acted illegally by buying and selling stocks in a number of companies that he is intimately connected with;

(e) Tolga Kumova gave inside information about the New Century Resource’s acquisition of the Goro nickel mine prior to the capital raising involving IGO Limited;

(f) Tolga Kumova has a professional relationship with convicted tax evader Harry Hatch;

(g) Tolga Kumova manipulated the share price of stocks to the benefit of money launderers;

(h) Tolga Kumova manipulated the share price of Syrah Resources to the benefit of money launderers;

(i) Tolga Kumova manipulated the share price of Syrah Resources to enable it to get into an ASX index;

(j) Tolga Kumova engaged in pump and dump schemes in the financial market;

(k) Tolga Kumova engaged in an activity that is as disreputable as engaging in a drug syndicate;

(l) Tolga Kumova has engaged in market manipulation; and

(m) Tolga Kumova gave inside information to Assad Tannous.

3. The respondent pay the applicant’s costs of and incidental to the discovery application conducted on 1 July 2022 and 5 July 2022 on an indemnity basis as agreed or taxed.

4. The respondent pay the applicant’s costs of the proceedings as agreed or taxed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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 I will make orders giving effect to these reasons.

Ratio Decidendi

Legal Principle Established

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): 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). As will be seen, the Seventh Statement was also raised during submissions today.B REMAINING ISSUES FOR RESOLUTION Three issues remain for resolution. 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]). 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. 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. 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.