Codelfa Construction Pty Ltd v State Rail Authority of NSW
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales, ("Codelfa") is a widely cited Australian contract law case, which serves as authority for the modern approach to contractual construction. The case greatly influenced the development of the Eastern Suburbs railway line. In terms of contract law, the case addresses questions of frustration, construction and the parol evidence rule. The case diverged from the well established English approach regarding the use of extrinsic evidence in contractual interpretation. Background The State Rail Authority engaged Codelfa Construction under a contract for services to excavate tunnels in the Eastern Suburbs allowing for the development of the Eastern Suburbs railway line. The works were to include "the excavation of two single track tunnels commencing at Edgecliff and running through Woollahra to Bondi Junction, an open cut excavation at the site of the Woollahra station, and an underground excavation at the site of the Bondi Junction station." The State Rail Authority issued Codelfa Construction with a notice to proceed on 7 March 1972. From this date, Codelfa was bound to complete all works within 130 weeks. 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), supposedly providing crown immunity. In 1972 Codelfa Construction commenced the work in three shifts each day for seven days a week. However, the noise generated by their underground drilling led several local residents and Council to apply for an injunction. 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. Codelfa Construction incurred additional costs to complete the required work within the agreed-upon timeframe. Procedural history Pursuant to an arbitration clause, within the contract, the parties started arbitration proceedings in 1976 to establish whether Codelfa Construction could recover the additional costs by reason of an implied term or alternatively if the contract was frustrated to recover the reasonable value of the services provided (quantum meruit). As the arbitration proceedings had no jurisdiction with regard to frustration of the contract, they dealt principally with the issue of an implied term in the contract. The arbitrator found that a term could be implied into the contract to the effect that the deadline could be extended if workable hours varied. Both parties issued summons in the Supreme Court of NSW to reach a determination on a number of questions raised in the proceedings. Codelfa Construction alleged that the contract had been frustrated and further alleged that an implied provision of the contract, to pay a reasonable sum for work performed, had not been met. The State Rail Authority's allegations were to the effect that Codelfa Construction was bound to complete the works. Following the arbitrator's decision, a case was commenced in the Supreme Court of New South Wales. In his judgment Justice Ash