FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v Caddick [2021] FCA 1443
SUMMARY
In accordance with the practice of this Court in cases of public interest, importance or complexity, the following summary has been prepared to accompany the orders made today. This summary is intended to assist in understanding the outcome of this proceeding and is not a complete statement of the conclusions reached by the Court. The only authoritative statement of the Court’s reasons is that contained in the published reasons for judgment which will be available on the internet on 24 November 2021 at www.fedcourt.gov.au.
By way of background, this proceeding was commenced on 10 November 2020 by the plaintiff, the Australian Securities and Investments Commission (ASIC). On 15 December 2020, on ASIC’s application, the Court appointed Bruce Gleeson and Daniel Robert Soire as receivers over Melissa Caddick’s property (Interim Receivers) and provisional liquidators of Maliver Pty Ltd (Provisional Liquidators). Pursuant to that appointment, the Interim Receivers and Provisional Liquidators reported to the Court on a number of issues including the amounts paid by investors or clients of Maliver to Ms Caddick and Maliver, the outstanding amount owing to investors and the asset positions of Ms Caddick and Maliver.
Most recently, ASIC sought declarations that Ms Caddick and Maliver contravened s 911A of the Corporations Act 2001 (Cth), which requires a person carrying on a financial services business in this jurisdiction to hold an Australian Financial Services Licence (AFSL) covering the provision of the financial services, as well as orders, among other things, for the appointment of receivers over Ms Caddick’s property pursuant to s 1101B of the Corporations Act and for Maliver to be wound up pursuant to s 461(1)(k) of the Corporations Act. Section 1101B of the Corporations Act confers a discretion on the Court to make such order as it thinks fit if, on the application of ASIC, it appears to the Court that, among other things, a person has contravened a provision of Ch 7 of the Corporations Act or any other law relating to dealing in financial products or providing financial services. In summary, the relief sought by ASIC was principally aimed at enabling the receivers, if appointed, to take possession of and liquidate all of Ms Caddick’s assets and to seek directions from the Court in relation to the disbursement of the proceeds.
The Interim Receivers also sought orders in relation to their remuneration, costs and expenses for work undertaken in that capacity from 15 December 2020 to 22 February 2021.
There was no appearance by or on behalf of Ms Caddick or Maliver. Ms Caddick’s brother had previously instructed lawyers to appear on behalf of Ms Caddick pursuant to a power of attorney in his favour but ceased doing so prior to the hearing. However, a Contradictor was appointed to make submissions against ASIC’s application for relief against Ms Caddick. Ms Caddick’s parents sought, and were granted, leave to be heard in the proceeding without becoming parties to it. They contend that they have an interest in a property registered in Ms Caddick’s name.
ASIC relied on a significant volume of evidence. This included the evidence of its investigators regarding documents obtained and findings from their investigations of suspected breaches of the Corporations Act by Ms Caddick, the sole director and shareholder of Maliver, and Maliver, the entity which apparently held the AFSL pursuant to which financial advice was given to its clients, four investors regarding their dealings with Ms Caddick and Maliver, officers of Commonwealth Securities Limited (CommSec) regarding the existence of CommSec accounts referred to in documents provided by Ms Caddick to investors and the Interim Receivers and Provisional Liquidators regarding the work they have undertaken.
Maliver was incorporated on 18 June 2013. From about October 2012 until Maliver’s incorporation Ms Caddick, on her own account, and thereafter from 18 June 2013 to about November 2020 Maliver, acting through Ms Caddick, procured funds from investors purportedly for the purpose of investing them in shares on behalf of those investors. In doing so, Ms Caddick on behalf of Maliver would typically provide investors with various documents including a financial services guide from Maliver containing an AFSL claimed to be held by Maliver, letters authorising Ms Caddick to establish a CommSec account in the name of the investor, “fact finder” and “investor risk profile” documents which sought information from investors about their personal circumstances and risk appetite respectively and, after investments had been apparently been made, periodic portfolio valuations which summarised the investors’ purported shareholdings and returns.
The evidence relied on by ASIC establishes that moneys provided by investors to Maliver (or Ms Caddick prior to Maliver’s incorporation) were not invested in the manner discussed with or as recommended by Ms Caddick but, instead, were used to meet Ms Caddick’s personal expenses and to purchase assets in her name. The AFSL contained in the financial services guides from Maliver was in fact held by another entity. At no time had Ms Caddick or Maliver been given permission to operate under that AFSL and neither Ms Caddick nor Maliver held an AFSL. Based on the Interim Receivers’ and Provisional Liquidators’ investigations, and subject to any potential unjust enrichment or uncommercial transaction claims regarding fictitious and possible inflated returns paid to investors, which will need to be further investigated in a liquidation, $23,554,921 remains owing to investors.
A number of complexities arose in relation to the relief sought by ASIC which are addressed in the Court’s reasons. The Court has concluded that Ms Caddick and Maliver have each contravened s 911A of the Corporations Act by carrying on a financial services business without holding an AFSL and that declarations to that effect should be made, that Maliver ought to be wound up pursuant to s 461(1)(k) of the Corporations Act and that receivers should be appointed over Ms Caddick’s property pursuant to s 1101B of the Corporations Act. However, owing to the unusual circumstances of the case, including Ms Caddick’s unknown status, complexities arising from potential claims by persons other than investors over Ms Caddick’s property (and the intersection of those claims with the investors’ claims), the potential for different classes of investors to have different claims and the fact that investments were made with and through Maliver, the receivers must first approach the Court for directions before exercising any power to take possession of and/or realise Ms Caddick’s property and/or making any distribution from any funds held following realisation of property or otherwise.
As to the Interim Receivers’ application for their remuneration, costs and expenses, the Court has found that the rates charged and costs incurred by the Interim Receivers were reasonable and proportionate to the work undertaken and that their remuneration, costs and expenses should be fixed in the sum of $188,017.84.
Today, the Court’s reasons will only be published to the parties and Ms Caddick’s parents. They will have 48 hours to review the reasons for redactions to be made as a result of previous Orders of the Court made pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) following which the reasons with redactions made in accordance with those Orders will be available on the Court’s website.
Markovic J
Sydney
