Retirees fighting to recoup losses after collapse of Sterling First

Beryl and Ray Taylor sold their house, originally planning to downsize. They poured all their savings into a "lifetime lease" agreement, hoping for a secure home for the next 40 years. However, this ultimately proved to be a complete lie.

In 2017, the Taylors invested all their savings into this "lifetime lease" scheme, which they believed would be their forever home. However, just two years later, they found themselves about to lose everything. Beryl recalls the distress they felt when they saw the news on TV. It took them two weeks to pluck up the courage to tell their daughters that they had lost their life savings.

The leasing company the Taylors signed with, Sterling First, collapsed. The Perth-based company's lease agreements were promoted as "affordable housing solutions for older Australians." Participants were required to pay a large sum upfront, often hundreds of thousands of dollars. The majority of the funds were invested in the Sterling Income Trust, an investment scheme designed to generate enough returns to cover the retirees' rent.

The Taylors paid $160,000 for their 40-year lease and spent thousands more improving the property, but now they are being evicted. They, like many others, thought they were simply tenants, not investors. Beryl stated that the whole situation has caused them immense stress, leaving her sleepless and full of worry.

The federal regulator ASIC investigated the company's collapse, and three men from the Sterling group now face criminal charges of dishonest conduct. A group of investors affected by the collapse has been following the court case closely. Dennis Lyle said many of the victims are in their seventies and eighties, who had hoped to secure their future but are now facing severe housing stress, with some even becoming homeless.

Despite nearly six years having passed, few have received any compensation. Mitchell Coles, a lawyer with the Consumer Credit Legal Service WA, has been fighting for compensation through the Australian Financial Complaints Authority (AFCA). So far, they have only secured one positive outcome from AFCA. He stated that it is an extremely difficult process, and only a small number of those affected are likely to receive the same compensation. Clients lost between $100,000 and $400,000, and they feel shame, guilt, and confusion about where things went wrong.

The collapse of the Sterling group has left more than 100 victims, mainly retirees, facing homelessness. Despite complaints made to state and federal regulators by investors before the company collapsed, Sterling was still allowed to continue selling its "lifetime lease" scheme and other investment products. Sterling collected a total of about $18.5 million, primarily from older clients in Western Australia. Some victims have already passed away, while survivors like Beryl and Ray are still struggling.

Now, the Taylors are living in a caravan in their daughter's backyard, which has become their temporary home. Beryl said they cannot afford rental on their pension and have not been able to get help with community housing. "This is just how it is, it's hard. I never thought I'd have to rely on my children, it’s humiliating,” she said. Another more recent housing issue makes it harder for the Taylors to accept their situation; the Western Australian government recently provided $40 million to help complete about 200 homes after the collapse of WA builder Nicheliving.

Beryl questioned, “If the government can pay $40 million to Nicheliving, why can’t they pay our $18.6 million? We’ve been fighting for five and a half years for this.” Ray added that the government has not given them any acknowledgement, just saying, “we can’t help you.” Western Australia’s Commerce Minister, Sue Ellery, stated in a statement that the investment scheme falls under federal jurisdiction. Documents obtained under Freedom of Information show that the Western Australia Department of Commerce pointed out to ASIC two years before the company’s collapse that the Sterling First scheme had “the hallmarks of a Ponzi scheme.”

The Western Australia Department of Commerce stated, "They were taking money from people upfront, and they were promising that the investment was secure. The problem comes when people want their money back in 20 years' time." ASIC declined to respond to questions about why no action was taken at the time. A spokesperson said in a statement, “Where possible, ASIC will continue to engage with and support Sterling investors affected by the collapse.”

Some are hoping for federal compensation and have filed a class action lawsuit against ASIC for allowing the Sterling group to operate for so long. But people like Beryl consider this to be a pipe dream. “Class actions are great, but you’ve got to have money or have a funder to do it. Even then, you’ll probably only get 3 or 5% of the actual total, the lawyers and everyone else will get their money first, and we don’t have the money to join a class action,” Beryl said.

A 2022 Senate inquiry into the collapse of Sterling First also made recommendations for the federal government to support all those affected so they can “access a final compensation scheme.” But there has been little progress. This leaves people like Beryl and Ray with little hope of improving their situation. Beryl said, “But we will keep fighting, I’ll fight to my last breath, believe me, I won’t give up. We’ve got nothing, so we might as well keep fighting.”

Nearly six years have passed since the collapse of Sterling First, which has resulted in significant financial losses for retirees across the country, particularly in Western Australia. Many retirees face homelessness, and as Carson Ho reports, some are still fighting to recover their losses.