Settlement reached in Caddick auditor class action

Victims that lost money to Melissa Caddick are set to receive some level of compensation after a settlement was reached in the class action against auditors that gave their SMSFs a “clean bill of health” in their audit reports.

Law firm Mackay Chapman 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.

The in-principle settlement was recognised in the Federal Court on Friday, with Justice Brigitte Markovic subsequently setting a hearing date to finalise the settlement for 1 April 2025, in which all group members put forward their case for why the settlement should be approved.

According to Michael Chapman from Mackay Chapman, as final negotiations in relation to a deed of settlement are still underway, details on the amount are still confidential.

“In the meantime, we can say that the in-principle settlement with all five respondents is a very good development and the outcome is fair and reasonable to group members,” he told Money Management's sister brand ifa.

“The lead applicants are relieved that their ordeal following the disappearance of Melissa Caddick and subsequent discovery of her fraud against them and loss of their life savings and superannuation is reaching a conclusion.”

He added that there are five respondents to the class action and four settlement figures, which have to be determined. The group member size in the class action was originally 21 but has since grown to 31.

Chapman continued that the final figures may be required to be disclosed as part of the deed of settlement, “which we expect to file later this week”.

“Everybody gets an opportunity to respond to the proposal,” Chapman said

There are four auditors who were named as respondents and one director was also personally named in the class action.

“It is the end of a long saga for these victims. They have been through a hell of a lot. Firstly, the disappearance of Melissa Caddick, then the discovery of the fraud, and many of the victims were family members,” Chapman said.

“They then had to go through the whole process of receivers taking assets and selling them and then our process of the class action. Now we are finally reaching the beginning of the end.”

He added that for all group members in the class action the scale of the fraud was around $23 million but not all of that is being claimed against the auditors, rather the class action is for those members who had SMSFs.

“It is a high-profile case, and hopefully it will remind auditors of the responsibilities they have,” he said.

Caddick’s scheme involved purporting to be a legitimate financial adviser, 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.

“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,” Mackay Chapman added.

“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.

The Australian Securities and Investments Commission 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 is 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.