A real estate agency that underpaid its workers has been told to cover the cost of meeting their wage entitlements itself, after a failed bid to trigger a management liability policy.

Attree was sued in a WA court by eight employees alleging breaches of the Real Estate Industry Award and Fair Work Act. They sought backpay of entitlements such as minimum wages, paid leave and commissions, totalling more than $870,000.

Across 2021 and 2022, it agreed to pay them about $338,000. It also paid $19,000 to four “informal claimants”.

But when Attree approached underwriting agency Dual and its Lloyd’s underwriters for cover – including $140,900 in legal costs – under its ML policy, it was knocked back.

Now, Attree’s lawsuit seeking a payout from the underwriters has been rejected by the Federal Court, which backs the insurers’ assessment that no loss has been shown.

“The policy does not provide any avenue for payment to Attree in respect of the shortfall in the amounts it [was] obliged to pay as the cost of engaging its employees,” Justice Sarah Derrington says in her ruling.

“The payments made in settlement of their claims merely represent the fulfilment of its ... obligations to pay its employees their full entitlements. By making them in response to their claims, it did not suffer any ‘loss’, because it had already agreed to pay those amounts as the consideration for the employees’ services.”

The ruling adds that under the ML policy, Dual and the underwriters agreed to pay “all [loss] on account of any [claim] against the company for a [wrongful act] by the company”, and that “claim” was in part defined as a “civil proceeding, or written demand for compensation or damages”.

The judge says no claims for compensation or damages were made, because the workers merely wanted what they were owed. And the employees’ request for interest on the sums did not “transmogrify them into ones for compensation or damage”.

Finally, Justice Derrington notes that, even if the estate agent’s bid satisfied the definitions of loss and claim, a policy exclusion applied. 

The policy stated the insured was not covered for “any actual or alleged contractual liability of the company whether under any express or implied contract or agreement”, and the judge says the industry award and Fair Work breaches fell into this category.

See the ruling here.

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