The lawsuit, understood to be the first of its kind, is a clear signal the Mr Fluffy crisis could spill over into the ACT court system.

The family purchased the Forrest home for $1.87 million in November 2008 and spent a further $590,000 on renovations.

But they were never told the property was potentially filled with deadly asbestos until the ACT Work Safety Commissioner in February posted letters to the owners of 1049 Canberra homes warning of the danger, papers filed in court say.

Two asbestos audits of the home discovered loose amosite asbestos in a built-in bedroom wardrobe, and remnants of the potentially lethal insulation in the wall cavities and subfloor areas.

The family, represented by Canberra law firm Snedden Hall & Gallop, launched action in the ACT Supreme Court last week against six defendants, including the ACT government, the former owner, a real estate agent, a law firm and two building companies.

Court papers said the family sought damages, compensation, interest, costs, and an order for the rescission of the 2008 contract of sale.

They allege the family suffered loss and damage as a result of the defendants' negligence, misrepresentation, misleading and deceptive conduct, and breach of fiduciary duty.

It is understood the case was launched to protect the family's legal rights, as the six year limitation within which the family could have brought the claim was due to expire within months.

In a statement to The Canberra Times the family said the claims had been filed "in order to protect our legal position".

"The claims have not been served on any party. We hope and expect that governments will provide fair compensation on this matter in the near future without legal proceedings. Filing the claims was a precaution undertaken in case that does not occur. No further comment."

The house was built in the 1960s and loose asbestos fluff was sprayed into the ceiling by Mr Fluffy sometime between 1968 and 1979.

In 1993, the ACT carried out work under the program to remove loose asbestos insulation from the home.

But court papers say the work did not remove all lose asbestos fibre from the property, and left the substance in areas that were inaccessible or not visible, such as internal and external wall cavities.

The family alleges there continued to be a risk that asbestos was present in the home and would be disturbed during renovations, the value of the home would be substantially reduced, and occupants could develop deadly diseases as a result of exposure.

In March 1993, the ACT issued a certificate which stated that tests had established safety standards had been met.

In 2005, the ACT sent a notice to the home advising of risks still faced by Mr Fluffy properties.

But a copy of the document was not placed on the building control file of the property, which was maintained by ACTPLA, according to the family.

In 2008, the former owner hired a real estate agent to sell the property, which marketed the home as "suitable for renovation".

Court documents allege the agent, by using those words, implied that the home did not carry any risks and renovating the home would not carry unusual dangers.

The property agent provided copies of documents, including the asbestos removal certificate, removal notice, the lease conveyancing report, and a compliance certificate.

But the 2005 asbestos notice was not included in the bundle, the lawsuit claims.

The family says those documents implied that no hazardous asbestos remained on the property and claiming asbestos had been removed was misleading and deceptive.

The family said the former owner, the ACT, ACTPLA, and thre agent did not provide the certificate and did not seek to correct the asbestos removal representation.

The family hired a law firm to handle the legals of the purchase, but says the firm also did not advise the family of the asbestos risk in the home.

In 2009, the family renovated the home, including replacing the lounge and dining room floors, removal of internal walls, enlargement of existing windows, and work on the kitchen, bathroom and wardrobe.

They claim did not handle and contain asbestos correctly, or advise of asbestos risk.

A company was hired to inspect and certify the renovations, issuing documents that said the home was safe to occupy and a report that said the renovations complied with standards.

ACTPLA then issued a certificate of occupancy.

Court documents said neither the company or ACTPLA advised of asbestos risks.

In 2012, the builders completed further renovations, which included the addition of two pergolas and ensuite to the home, and the work was approved by ACTPLA.

In February this year, the family received a letter from the ACT Work Safety Commissioner advising they owned a Mr Fluffy home.

The lawsuit is yet to be served to the defendants.

They will then be given time to a file a defence.