Case: Tropical Traders Ltd v Goonan [1964] HCA 20 ; (1964) 111 CLR 41
Outcome: applied
Tropical Traders Ltd v Goonan [1964] HCA 20 ; (1964) 111 CLR 41 at 55 Kitto J said that the person with the choice might keep the question open '... so long as it did nothing to affirm the contract and so long as the [other party's] position was not prejudiced in consequence of the delay'. He said that when the vendor in that case told the purchaser that it would not rescind a contract for the sale of land before a particular date if the purchaser paid an additional sum for interest, costs and expenses, the vendor was doing no more than promising that it would not elect to rescind the contract before that date if the conditions were complied with. Kitto J said that in that case a grant of an extension of time was not an election to affirm but, rather, amounted to an announcement of an intention to refrain from electing either way until the money had been paid or the extended time for performance had elapsed: see too Champtaloup v Thomas [1976] 2 NSWLR 264 at 268C-269B per Glass JA; 273D-274D per Mahoney JA; Street CJ agreeing with both at 266: Hunter BNZ Finance v GC Maloney Pty Ltd (1988) 18 NSWLR 420 at 435C-436B per Giles J: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 ; (2003) 128 FCR 1 at 89-92 [356] - [364] per Finn J. And, as the judgment of the Exchequer Chamber written by Blackburn J (see Scarf 7 App Cas at 360) established, this principle applies to a party to a contract who discovers his entry into it was induced by the fraud of the other: Clough v London &amp; North Western Railway Co (1871) LR 7 Ex 26 at 34-35. 22.2 Consideration Through neither party's fault, a meeting was unable to be arranged between 7 July and 22 August. During that period, Hoy Mobile wished the contract to remain on foot while Allphones had indicated that it was keeping its options open until Hoy Mobile had had an opportunity to explain its, prima facie, fraudulent conduct. A reasonable person in Hoy Mobile's position could not have understood Allphones' conduct at this point to amount to an affirmation of the franchise agreement. Both parties were still pursuing the course of holding a meeting for the purposes set out in Mr Donnellan's letter of 7 July. That course was being pursued with Hoy Mobile's full knowledge, and indeed at its request, through Mr Birch's email of 10 July to that effect. And, neither Mr nor Mrs Hoy gave evidence that they understood that Allphones had chosen to affirm during this period. Allphones was not making a choice of affirming the franchise agreement, while holding matters in abeyance pending the meeting at which Hoy Mobile could explain its position. Rather (as Kitto J observed was permissible in Goonan 111 CLR at 55) Allphones had said that it intended to refrain from electing until the meeting occurred. Nor, in fairness to Hoy Mobile, was Allphones required to make a choice before that meeting had occurred: Immer 182 CLR at 41. Of course, there are limits to the ability of a party to a contract to act 'without prejudice' to the legal consequences of those acts in the particular relationship. Unlike a landlord accepting a payment of rent and thus electing to waive reliance upon any pre-existing breach, Allphones did not communicate an unequivocal intention that the franchise agreement remain on foot. Rather, at Hoy Mobile's request Allphones had agreed to postpone making an election until the meeting occurred: cp: Goonan 111 CLR at 55. In that context, a reasonable person in the position of the parties would have understood that Allphones was acting on the basis that it was acceding to Hoy Mobile's request to postpone making an election. It was not electing once for all by its conduct in offering and requiring performance pending the meeting to make a choice. Allphones, in the context in which the parties then found themselves, was not evincing by its actions an unequivocal choice to keep the franchise agreement on foot and not to terminate it. I find that both parties proceeded on the agreed footing that Allphones would refrain from terminating for fraud until the meeting, ultimately arranged for 22 August 2006, had occurred. Both parties knew that, in the interim, they had to carry out the normal incidents of their relationship under the franchise agreement.