Class action initiated by the victims of Melissa Caddick against SMSF auditors

Media Release

Mackay Chapman has filed a class action on behalf of 24 victims of Melissa Caddick against the auditors engaged to conduct annual audits of their self-managed superannuation funds (SMSFs).  

The class action, filed in the Federal Court of Australia in Sydney, alleges the auditors engaged to review the annual financial reports for the SMSFs failed to identify fraudulent documents prepared by Ms Caddick and failed to confirm that the assets said to be held by the SMSFs in fact existed.  

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Background  ‍

Melissa Caddick, an unlicensed financial adviser based in Sydney, Australia, defrauded approximately $23 million from her clients. This occurred from 2012, when she established her financial services company, Maliver Pty Ltd (Maliver), up to her disappearance on 12 November
2020, following an ASIC raid on her home the day before.  

Ms Caddick's scheme involved purporting to be a legitimate financial adviser.  

Investors provided funds to Ms Caddick in the belief that the funds were being predominately invested in ASX-listed equities using CommSec accounts. 

The Federal Court later determined that these actions constituted a Ponzi scheme conducted by Ms Caddick and/or Maliver. 

The “investments” in fact never existed, and the money provided by the investors was instead fraudulently diverted to for Ms Caddick and/or Maliver's own use.

It has become apparent that the documents purporting to record the investors; investments and how they were performing were fraudulent creations by Ms Caddick, as found by the Federal Court.  

In some cases, when some investors sought to withdraw money from their investment, Ms Caddick and/or Maliver purported to pay them from their purported investment. It is now understood that the investor was being provided with money from the pool of funds which investors had invested with Ms Caddick and/or Maliver. 

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. 

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The auditors' role  

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Most victims invested with Ms Caddick and Maliver Pty Ltd through their SMSFs.  

SMSFs are required to be audited annually.   

Over the 8 years between 2012 and 2020, at least five auditors were engaged to conduct the mandatory annual audit of the SMSFs.  

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. 

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Claims against the auditors 

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The victims claim that the auditors failed in their duties by failing to identify fraudulent documents prepared by Ms Caddick and failing to confirm that the assets said to be held by the SMSFs in fact existed.  
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This gives rise to actions against the auditors in:  
- Negligence. 
- Breach of contract;  
- Misleading or deceptive conduct and/or misleading or deceptive representations; and  
- Other contraventions, including breaches of the Corporations Act 2001 (Cth) and the ASIC Act 2001 (Cth). 
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Approval of settlement of class action victims of Melissa Caddick against SMSF auditors

Mackay Chapman is pleased to advise that the settlement of the class action brought on behalf of 32 victims of Melissa Caddick and the auditors engaged to conduct annual audits of their self-managed superannuation funds has been approved by the Federal Court.

The respondent auditors have agreed to pay a combined settlement sum of $3.54million by way of settlement on a no admissions as to liability basis.

The class action was a highly complex case with multiple respondents. Most are run against one or two parties.  There were five respondents to this class action.  Despite this, it reached settlement in less than 18months from commencement.

The settlement achieved two important objectives.

First, it achieved a fair and reasonable amount of compensation.  

Secondly, it obtained resolution in a comparatively short timeframe, less than 18 months from commencement. It was important not to just to obtain the maximum amount of money possible in terms of compensation, but also to ensure the outcome was timely and efficient, given many of the group members are retirees, elderly, or otherwise vulnerable, and could not afford to have a drawn-out proceeding.

In-principle settlement was reached by around October 2024 and approved by 1 April 2025.

Justice needs to be not just fair, but efficient. We think the settlement reflects this.

The Court has also approved the legal costs and deductions to be made from the settlement sum, including unpaid legal costs to Mackay Chapman and barristers engaged on our behalf, and recovery of costs outlaid and payment of a funding commission to the litigation funder, Therium Litigation Finance Atlas.

Both Mackay Chapman and Therium have agreed to forego a substantial amount of what they would have otherwise been entitled to be paid, to ensure that group members receive at least 50% of the settlement proceeds.

The lead applicants are very happy with the outcome. It meets their expectations, and no objections were raised by any the group members to either the total proposed settlement or deductions.

We were told before we started this class action that it was too small, too complex, and too difficult to be funded and be successful. We are pleased to have proven those predictions incorrect.

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‍The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such.  It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only.  You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.

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