NV Sumatra Tobacco Trading Company v Philip Morris Products Inc

The Federal Court of Australia heard an application by NV Sumatra Tobacco Trading Company (Sumatra) seeking to strike out parts of the defence filed by Philip Morris Products Inc (Philip Morris). The dispute concerned allegations of misleading and deceptive conduct and breach of contract relating to the supply of tobacco leaf. Sumatra alleged that Philip Morris had made representations about the quality and suitability of tobacco leaf supplied, which were false and misleading, and that this conduct breached their supply agreement. Philip Morris sought to rely on certain contractual clauses as a defence to these claims.

The primary legal issue before the Court was whether certain paragraphs of Philip Morris's defence, which relied on clauses within the supply agreement, should be struck out. Specifically, the Court had to determine if these defence paragraphs disclosed a valid defence to Sumatra's claims of misleading and deceptive conduct and breach of contract, or if they were otherwise an abuse of process or embarrassing. The Court considered whether the contractual provisions relied upon by Philip Morris could operate to exclude liability for the alleged misrepresentations.

Justice Vija Zars reasoned that the defence paragraphs in question sought to rely on clauses that purported to limit or exclude liability for representations made prior to or at the time of the agreement. However, the Court found that the nature of the claims brought by Sumatra, particularly those concerning misleading and deceptive conduct under the Australian Consumer Law, could not be so easily excluded by general contractual provisions. The Court applied the principle that statutory prohibitions against misleading and deceptive conduct are generally not capable of being contracted out of, especially where the conduct alleged involves misrepresentations about the very subject matter of the contract. Consequently, the Court determined that the defence paragraphs, as pleaded, did not disclose a valid defence to Sumatra's claims and were therefore embarrassing.

The Court ordered that the specified paragraphs of Philip Morris's defence be struck out.