November 14, 2008

The Workplace Health and Safety (WH&S) Regulation 1997 is often overlooked when contracts for commercial properties are prepared. If a commercial building was built before 1980 then an Asbestos Materials Report must have been completed by the owner by 1 January 2008. It should be safely retained and produced as required under the regulation, including in relation to any proposed sale or lease.

If the building is offered for sale, or is leased, dismantled or demolished then the regulation requires the report must be produced. The regulation does not apply to a domestic residence, common property related to residential premises or to that part of a workplace used for domestic residential purposes.

What if an Asbestos Materials Report has never been obtained or is not produced to a buyer on the sale of the property? In a recent Supreme Court case* V sold a commercial property to P. At settlement P asserted V was in breach as it did not have any Asbestos Materials Report as required by the WH&S Regulation. V denied the breach. P refused to settle. V terminated the contract and applied to the court for a ruling to confirm that V could validly forfeit the deposit and sue P for damages.

V accepted that it was an offence to offer the property for sale without having an Asbestos Materials Report but denied that this had any affect on the contract. The majority of the court found in V’s favour. It decided that neither the Regulations nor the Act made it an offence to enter into a contract to sell the property without complying with the Asbestos Management Code and nor did it expressly state that such a contract would be unlawful or void.

It was not the intention of the legislature, said the court, to declare a contract void if the Asbestos Management Code was not complied with. The Court found in favour of V and the deposit was held to be validly forfeited and judgement was entered for the deposit and interest.

This decision has now made it clear that if the Asbestos Management Code is breached an offence is committed by the seller under the WH&S Regulation but the purchaser will not be able to rely on this to support its refusal to settle or assert any breach on the part of the seller.

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