Federal Court approves $3.54m Caddick auditor class action settlement

On Tuesday, the Federal Court of Australia approved the class action settlement, which was initially announced in December 2024, between a group of 32 victims of Melissa Caddick and auditors who had given their SMSFs a “clean bill of health”.

Speaking with ifa, Michael Chapman, director of law firm Mackay Chapman, who acted on behalf of the victims, said the finalisation of the class action was a “huge relief” for his clients.

The final settlement amounted to $3.54 million, and Chapman noted the result in the context of the total estimated claim amount against the SMSF auditors, which is still confidential, was “a pretty good result”.

“What was important to us was not just the amount, though, it was also time,” he told ifa.

“A lot of these investors, some of them are quite elderly. They've been involved in this since 2020 when Caddick went missing. It was important to get a quick, or at least an efficient result.

“After we first commenced in September 2023, we had an in-principle settlement by October 2024 and it's been approved today. It was important to be efficient, so we're very happy with that.”

In conjunction with the work of the receivers of Caddick’s estate, which Chapman said amounted to around 39 cents on the dollar being distributed to victims, some of the SMSF clients will be repaid up to half their losses.

“Most of that they've already distributed to out-of-pocket investments, but the class action sits on top of that,” he explained.

“The class action is only incorporating the SMSFs plus around nine others, and that's a recovery of $3.54 million. That equals about an additional 10 to 11 cents on top of that 39, so for the SMSF investors, they're going to get back, inclusive of the receiver, about 50 per cent of what they lost.”

Compared with other Ponzi schemes, which he said are often lucky to get back “one cent on the dollar”, the class action return is a great result.

Mackay Chapman initially filed the suit in the Federal Court in October 2023 on behalf of victims, with the filing alleging that the auditors engaged to review the annual financial reports for the SMSFs failed to identify fraudulent documents prepared by Caddick and failed to confirm that the assets said to be held by the SMSFs, in fact, existed.

It further alleges that auditors were negligent, engaged in misleading or deceptive conduct and/or representations, and breached the Corporations Act and the ASIC Act.

Caddick, while posing as an adviser, allegedly defrauded 74 investors out of some $23 million through her company, Maliver.

Caddick’s scheme involved purporting to be a legitimate financial adviser, telling investors their funds were being predominantly invested in ASX-listed equities using CommSec accounts. However, the Federal Court has since determined it was a Ponzi scheme, with the funds instead fraudulently diverted for Caddick’s own use.

“Bruce Gleeson, one of the receivers appointed to the property of Ms Caddick, has stated following his investigations that he could not identify a single genuine document that Ms Caddick provided to her investors, and he could not identify any circumstances in which any of the CommSec account statements provided by Ms Caddick to her clients were found to have been true,” Mackay Chapman said in a media release when it filed the class action.

“The auditors all provided audit reports that, in effect, gave the SMSFs a clean bill of health.”

“Specifically, all of the audit reports found that the financial reports for the SMSFs were ‘free from material misstatement’ and ‘presented fairly in all material respects the financial position of the SMSF’. In other words, they did not identify any concerns.

“We now know that the financial reports reviewed by the auditors were supported by fraudulent documentation prepared by Ms Caddick and the assets said to be held by the SMSFs did not exist.”

The settlement comes more than a year after investors wrapped up in the scheme received their first payouts.

Following the liquidation of Caddick’s assets, including the $9.8 million sale of her Dover Heights property, 55 investors were paid a total of $3 million.

Jones Partners, the firm that was appointed as the liquidators for Maliver and receivers of her property in December 2020, made the initial distribution to the victims.

Further proceeds are expected from the sale of an Edgecliff penthouse apartment, which Caddick also owned.

Caddick was last seen at her Dover Heights home on the evening of Wednesday, 11 November 2020, and was reported missing two days later.

ASIC had raised concerns that Maliver may have been providing financial services without an AFSL, or with the AFSL of another company without authorisation, to unlawfully deal with investor funds.

The Federal Court made interim orders against Caddick and Maliver in November 2020, including a prohibition against her leaving Australia and removing assets held in Australia.

But Caddick had not shown at the first case management hearing of the matter, having vanished.

Three months later, the 49-year-old’s decomposing foot was found on Bournda Beach on the NSW South Coast.

In November 2021, the Federal Court confirmed that Caddick and Maliver carried on a financial services business without holding an Australian Financial Services Licence, contrary to section 911A of the Corporations Act.

In May 2023, Deputy State Coroner Elizabeth Ryan ruled that Caddick was dead, yet the precise circumstances surrounding her death remain unresolved.

“I have concluded that Melissa Caddick is deceased. However, a more problematical issue is whether the evidence is sufficient to enable a positive finding as to how she died and when or where this happened,” Ryan said.