AFCA has published on our website AFCA Approaches a series of documents that outline how we approach certain types of financial complaints we receive. Two Approaches are particularly relevant to the Sterling group complaints:

In relation to loss, these documents include the following relevant guidance:

  • If a financial firm has provided misleading information, we will compensate the consumer for any loss which they have suffered by relying on the misrepresentation. That often starts with the question of what the consumer would have done differently if the misrepresentation had not been made.
  • The purpose of compensation is to place the consumer in the financial position they would have been in had the financial firm not misled them.
  • We work out the amount of a consumer’s loss by comparing the consumer’s actual financial position as a result of the misleading conduct, with the financial position they would have been in had they not been misled by the financial firm. The difference between the two positions is the amount of the loss the consumer has suffered.
  • In many complaints, it is clear what a consumer’s position would have been had the misleading conduct not occurred. In some complaints it may not be as clear. In those types of complaints where it is not as clear, we will look at matters including:
  • how the consumer’s money was invested immediately before it was invested in the disputed investments
  • whether the consumer was satisfied with their investments immediately before they made the disputed investments.

However, it is important to understand that each complaint is unique in nature, so the information in the Approaches is a guide only.

How AFCA approached loss in complaint 667682 against Theta

On 31 March 2020, AFCA made the first determination against Theta Asset Management Ltd (In Liquidation) (Theta) awarding compensation to a complainant who had invested in the Sterling Income Trust.

All published determinations made against Theta can be searched for on AFCA’s website, using the Keyword search for “Theta”, here: Search published decisions | Australian Financial Complaints Authority (AFCA)   Click here to access case 667682

We do not treat previous decisions as precedents. There may be circumstances when a previous decision is not applicable because the facts are somewhat different, or we have changed our approach to a particular class of complaint.

However, generally we do try to be consistent in our decision-making. The determination in complaint 667682 can therefore be used as a guide to how AFCA would likely approach calculation of loss if it determines, in favour of the complainant, other complaints having similar facts about the Sterling Income Trust.

In relation to Theta’s responsibility for the complaint, the misleading conduct and AFCA’s calculation of the complainant’s loss, the determination in complaint 667682 included the following findings:

  • Both Mr M and Mr J were representatives of Theta at the relevant time and Theta was responsible for their conduct.
  • Mr M and Mr J failed to disclose the risks associated with the underlying investment, which was misleading and deceptive. In particular, they failed to disclose the risk that distributions would be insufficient to cover rent, that the capital investment could be depleted and did not disclose the risk to their security of tenure if the SIT could not fund the rental payments.
  • It is reasonable to expect that the complainants would not have entered into the Lease-Investment Arrangement, had they known about the risks associated with the underlying investment.
  • As the complainants say they are unsure what they would have done with the balance of the sale proceeds if they had not entered into the Lease-Investment Arrangement, the fairest way to assess loss is on a “no transaction‟ basis. Had they not entered into the Lease-Investment Arrangement, the complainants would:
  • still have sold their home
  • have rented privately
  • AFCA calculated the complainant’s loss as set out below:

Actual Scenario


Aggregate contributions to Sterling New Life Lease

$ 156,761.31*

Indexation of transactions by RBA Cash rate to end date

$ 1,749.98


$ 158,511.29


Investment returned

$ 723.37

Rent savings

$ 38,830.32


$ 39,553.69

Benefits Less Contribution (loss)

$ (118,957.60)


* this includes $4,471.65 on home improvements, the application fee and first month’s rent

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