Court’s concern about ‘probity’ over investor bid for more emails, docs from Melbourne fund manager

A case involving a Melbourne fund manager and Chinese investors has almost run its course, with a request for more documents shut down by the Federal Court.

Wealthy ex-Salter Brothers clients failed in a last-minute attempt to get the fund manager to hand over more emails and documents in their long-running court fight, having accused the company of unconscionable conduct and refusing redemption requests.

Chinese citizens Li Xu, Jinyi Li and Zheng Xu’s request for further discovery was shot down on Monday as Federal Court judge Shaun McElwaine expressed concerns about “probity”, while there are just two days left for evidence in the trial which kicked off in early June.

As well as Ms Li, two other former Salter Brothers clients — Jinyi Li and Zheng Xu — have lodged separate cases against the fund manager. All three cases are being heard together.

In her pleadings, Ms Li has alleged the Melbourne funds house did not make it clear it wasn’t obliged to redeem their investments and it engaged in unconscionable conduct because it failed to ensure information memorandums about their fund products were translated into Mandarin when it knew, or ought to have known, likely investors were non-English speakers.

Salter Brothers argued redemption requests under Li’s fund could not be satisfied unless there is a float or the sale of a significant asset.

Salter Brothers co-founder Robert Salter.

In their defence documents, seen by The Australian, Salter Brothers said the “liquidity risk associated within a property asset” was made clear in the information memorandum, which also informed investors the company may not be able to meet “all redemption requests when they are received”.

The court heard managing director Paul Salter is still under cross examination, and Ms Li’s barrister suggested “we may wish to put some matters to him”.

Justice McElwaine rejected all of Li’s expanded requests for discovery which came 15 days into the trial and included asking for access to “other complaints” which might show if other clients external to the court case also could not understand the information memorandums because they were not in Chinese, and that names of other investors provided to them in a letter be un-redacted.

Giving on-the-spot reasons for denying all of the requests to expand the categories, Justice McElwaine in one case said he was “deeply concerned” about probity and in another he said it appeared the plaintiffs were “fishing”.

Ms Li said she invested $1.5m in the Salter Brothers Significant Investor fund in 2015 — followed by a further $994,572 in 2016 — in order to obtain an Australian visa, according to court documents first lodged in 2022.

An artists impression of the Salter Brothers plan for the Intercontinental Hotel in Collins St, Melbourne

She alleged the fund was marketed by Salter Brothers as a compliant fund for the Significant Investor Visa program run by the then-Department of Immigration.

Ms Li claimed Salter Brothers provided promotional materials, including an information memorandum, to migration agents in China which asserted funds held would be invested in a broad range of real estate asset classes and the particular fund Ms Li invested in was liquid and investors could redeem their investment.

But, the funds were actually invested in a “small group of assets held and operated by” Salter Brothers, Ms Li claimed.

She said she asked multiple times to redeem her investment between July 2019 and December 2021, but Salter Brothers denied her request and said it had “no obligation” to and the fund did not have sufficient liquidity anyway.

The court heard on Monday at least one of the clients gave evidence in court she signed documents pertaining to the investments which were written in a foreign language, being English, when she could not read them. As well, she could have had it translated but she did not.

The three investors are seeking a declaration the Salter Brothers breached the law and damages.