More than 400 residents north of Newcastle have launched a class action against the Defence Department over the contamination of their local groundwater.
Residents say their livelihoods and property values have been severely affected since news broke that toxic chemicals once used in firefighting foam at the Williamtown RAAF base had leached into ground and surface water.
"It's had a devastating affect on the community," Lindsay Clout, who lives 5km from the base said on Thursday.
"Businesses have suffered, fishermen have been put out of work for 12 months and house prices have collapsed," he said.
Residents have also been unable to drink bore water or eat home-grown fruits or vegetables or eggs from farmyard chickens.
The toxins, PFOS and PFOA, which have been linked to a number of health problems such as bowel and liver cancer in international studies, have also been detected in a number of residents' blood, Mr Clout said.
"But the main issue right now, is people's mental health," he said.
"We've got people who have been told their homes are worthless because they're in the contamination zone, and they want to leave but they can't because they don't have the money to leave.
"The anxiety and financial stress is really bubbling up for many of them.
"We just really want (Defence) to clean this bloody mess up."
Sydney law firm Gadens said the lawsuit was filed in the Federal Court after the Department of Defence responded to a letter of demand from the local community.
The department failed to provide any time-frame or meaningful way forward to remediate the land and offer reasonable compensation, lawyer Ben Allen said.
"The one-and-a-half page letter from the Department of Defence is a slap in the face for residents and business owners who have been looking for answers for over a year now," he said.
There are 17 other RAAF sites around Australia which have been similarly affected by the contamination.