On the basis of legal advice the contracting parties were led to believe that the work would be exempt from injunction as it was authorised by s 11 of the City and Suburban Electric Railways (Amendment) Act 1967 (NSW),[6] supposedly providing crown immunity.
On 28 June 1972, the Supreme Court of New South Wales granted an injunction, significantly restricting the work that could be performed after 10 pm and on Sunday.
[1] The State Rail Authority cross-appealed on a number of grounds centrally challenging the court's assertion that a term could be implied into the contract.
[9] In implementing this principle, British and Australian courts have diverged in their allowance of extrinsic evidence which is said to form part of the "surrounding circumstances" of a contract when determining the meaning and effect of contractual terms.
The "matrix of fact" extends to the words and conduct of the contractual parties, common industry knowledge and any other factor which may have affected the reasonable person's understanding of the language of the contract.
Justice Mason held that:The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning.
[3] The court considered whether a term could be implied into the contract allowing for a reasonable extension of time to complete the works given the delays caused by the injunction.
In coming to this determination, the court followed the definition of frustration laid out in Davis Contractors Ltd v Fareham Urban District Council.
On this point, Justice Aickin said:“It is a different situation from that in which one party has been prevented from completing the contract work within a specific time because of a shortage of materials or labour…the injunction made it impossible to complete the work being done in a manner of time, which, from the outset, both parties knew were essential…’[1]: 381 A number of decisions made by the High Court following Codelfa contradicted the 'true rule' including Maggbury Pty Ltd v Hafele Australia Pty Ltd,[11] Pacific Carriers Ltd v BNP Paribas,[12] and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd.[13] Following this apparent shift in judicial opinion, numerous intermediate appellate courts and lower courts followed the principles established by Investors Compensation Scheme Ltd v West Bromwich Building Society.
In Royal Botanic Gardens and Domain Trust v South Sydney City Council,[14] the court indicated that the decision remained good law in Australia.
[5] Furthermore, an application for special leave for a case to be heard in the High Court in Western Export Services Inc v Jireh International Pty Ltd,[15] the bench stated that Codelfa remained good law in Australia.
However, this application for special leave is notable for being published in the Australian Law Reports and representing the unambiguous judicial opinion of three justices of the High Court.
[3][4] As the authority of the Codelfa decision remains an unsettled point in Australian law many issues have arisen in contractual construction at lower level courts.
The Supreme Court of NSW in Mainteck Services Pty Ltd v Stein Heurtey SA,[19] supported the conclusion that Investors Compensation Scheme Ltd v West Bromwich Building Society,[4] had been accepted in Australian law, therefore, ambiguity did not have to be pointed to before referring to 'surrounding circumstances'.