Asbestos

Is asbestos going to be the new leaky home syndrome?

by Commerical lawyer, Geoff Hardy

Asbestos is a nasty substance, which is mined from rock-forming minerals, and contains fibres with little hooks in them that once in your lungs, never get out.

 

They can cause serious diseases such as cancer that don’t become evident until 10-40 years later.
It was widely used from the 1940s to the 1990s (and later) because of its fire, heat, chemical and noise-resistant properties, as well as strengthening of substances like cement. It is now illegal to import it, and illegal to work on it unless very strict controls are observed.
The Health and Safety at Work Act 2015 contains the rules for workplace health and safety in general. Under that Act, specific rules have been developed around asbestos. First, the HSW (Asbestos) Regulations 2016 came into force on 4 April of that year.

Secondly there was an “Approved Code of Practice” developed specifically for the management and removal of asbestos, in November 2016. This is 284 pages long so it is a big read, but it is very user-friendly and  is the go-to guide when you need detail. When you just want an introduction rather than detail then the short information  pages on the WorkSafe New Zealand website are the best source. And in April 2018 WorkSafe issued a booklet titled “Working With or Near Asbestos – for Builders” which is helpful.
The first point I want to make is that this needs to be the first item on your checklist before you embark on any renovation project, residential or commercial. In residential construction, asbestos is likely to take over from leaky homes as the biggest compliance cost, the most likely reason for projects to fall over, and the main source of potential liability for builders.
A builder told me a while ago that he was doing a seven-figure renovation on a luxury holiday home. They removed the whole roof and sent it to the landfill. The landfill operators detected asbestos in the roof, refused to accept it, and put it in quarantine at considerable expense. The building site got shut down, indefinitely. Officials were swarming all over it, no-one was interested in when work could resume, and the wealthy homeowner was eying up the builder as the primary culprit.
So what do you need to do to avoid that?

Basically it comes down to this. Just accept that every demolition or refurbishment job has to be asbestos-free before you can do it, and resign yourself to the fact that this is going to be expensive, time-consuming, and not welcomed by the owner.
Don’t agree to do the work unless the owner agrees to follow the rules. The rules don’t apply to minor or routine maintenance work as distinct from demolition or refurbishment work, but there will be times when it will be unclear which is which, so if in doubt assume the rules apply.

 

The steps you need to take

Learn to identify when asbestos is likely to be present. There are courses you can do that last up to four hours. In a structure built prior to 2000, you must assume that asbestos will be present. Get it checked out by a specialist. If asbestos is there, usually samples will need to be tested by an accredited laboratory to determine if the asbestos is dangerous or not.

If the asbestos is going to be disturbed by your work, then it needs to be safely removed or at least isolated before you can start. Removal has to be done by a licenced asbestos removal company unless it is 10sqm or less of non-friable asbestos or dust, in which case it can be removed by a suitably qualified person.
You need to tell anyone who would be potentially affected by the asbestos-related work, including the owner, occupants of the building or structure, your employees and subcontractors, and immediate neighbours. And once the asbestos is removed, you need to get a clearance certificate from an independent expert.

So what should you be doing to manage this risk? First, make sure that you do what the law requires of you, so you can’t be prosecuted by WorkSafe or sued by the owner. Secondly, make sure that you get paid for the extra work. And thirdly, if asbestos threatens to make the project uneconomic or shut it down indefinitely, make sure that either party can pull out of the project or – if instead it is merely suspended – that you are allowed a reasonable time to finish off your other projects before you resume work.

 

What your contract should say

As far as getting paid is concerned, it is important to be absolutely clear whether your contract price or your scope of work includes asbestos-related work or not. It would be risky to include asbestos-related work in a fixed price, because you will generally have no idea how much work is involved.
So you would be better to do the job on a cost and mark-up basis, or if it has to be fixed price, then make it clear that the asbestos-related work must be treated as a variation or a provisional sum and charged for on a cost and mark-up basis. Spell this out in your initial quote or scope of work description, and repeat it in your formal contract.
Even if you are getting adequately compensated for the extra work, there is always the chance that once the asbestos risk is investigated and it is found to be a problem, that will bring the project to a halt while the officials do their thing and the specialists – who will probably be in even shorter supply than skilled tradesmen – put you on the waiting list and then charge you an exorbitant fee.

You may not want to be contractually bound to wait around until you finally get the all-clear and you have to pick up from where you left off. You certainly won’t be able to abandon your existing projects and resume work at a moment’s notice.
So how do you deal with that? One option is to include specific rules in your building contract. For example, both the owner and the builder could have an express right to terminate the contract if asbestos threatens to delay the project or escalate the cost too much. None of the standard-form building contracts currently provide for this, so you would need to insert your own clause for the time being. Another option is to use
a preliminary agreement solely for the asbestos investigation and (if necessary) removal work, and use a standard building contract for the rest of the building work, assuming it turns out to be feasible.

What if you get caught out?

If you have not taken any of those precautions and then you encounter an asbestos problem, what can you do about it?
One possibility is to claim a variation on the basis that a regulatory authority (WorkSafe) has required an alteration to the building work. Whether you succeed in that depends upon whether asbestos management was impliedly part of your original scope of work or not. But you have a greater chance of succeeding with a variation claim than you have with suspending work or terminating the contract because of the asbestos.
The important point is that on a residential project, as a PCBU (a person conducting a business or undertaking), it is the builder who breaks the law if he has not identified the asbestos, not the homeowner. The law requires the builder to investigate it and deal with it before commencing work.
It is different if it is a commercial project, in which case the owner was obliged to have an asbestos management plan in place on or before 4 April 2018. But this does not let the builder off the hook, it simply means that the responsibilities are shared.

 

 

Geoff Hardy has 44 years’ experience as a commercial lawyer and is a partner in the Auckland firm Martelli McKegg.
He guarantees personal attention to new clients at competitive rates. His phone number is (09) 379 0700, fax (09) 309 4112, and e-mail geoff@martellimckegg.co.nz. This article is not intended to be relied upon as legal advice.

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