‘Good result’ as $3.5m Caddick auditor class action approved

A $3.5 million settlement for victims of Melissa Caddick has been approved by the Federal Court following an initial agreement last December. 

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

Caddick, while posing as an adviser, allegedly defrauded 74 investors out of some $23 million through her company, Maliver. Her scheme involved purporting to be a legitimate financial adviser and telling investors their funds were being predominately 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 for designer clothes, jewellery and holidays. 

Combined with the efforts of receivers of Caddick’s estate which amounts to around 39¢ on the dollar being distributed to victims, the settlement approval means some victims can recover up to half of their losses.

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This is significantly higher than typical repayments to victims of Ponzi schemes who can expect to receive as little as 1¢ on the dollar. 

Law firm 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.

Speaking to Money Management’s sister title ifa, Mackay Chapman director, Michael Chapman, said: “What was important to us was not just the amount though, it was also time. 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 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.

“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 10–11¢ 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.”

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.

Last year, the Financial Advice Association Australia (FAAA) said enforcement actions against Caddick had cost the financial advice industry $687,852 in the 2022–23 financial year. 

“Actions against fraudsters and unlicensed operators are currently funded by financial advisers. The Melissa Caddick matter alone cost the advice profession $687,852 in the 2022–23 financial year, and yet her activities would more accurately be described as running a Ponzi scheme rather than providing advice.

“The costs of action against fraudsters and unlicensed operators ought to be borne across the entirety of the financial sector rather than the single financial advice subsector, as the entirety of the sector benefits from consumers having confidence that fraudsters will be actively pursued.”