1500367 (Migration)

[2016] AATA 3250

1500367 (Migration) [2016] AATA 3250 (11 February 2016)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANT:  WSP Import and Export Pty Ltd

CASE NUMBER:  1500367

DIBP REFERENCE(S):  BCC2014/2158127

MEMBER:Marten Kennedy

DATE:11 February 2016

PLACE OF DECISION:  Adelaide

DECISION:The Tribunal affirms the decision under review to refuse the nomination.

Statement made on 11 February 2016 at 3:53pm

STATEMENT OF DECISION AND REASONS

1. This is an application for review of a decision made by a delegate of the Minister for Immigration on 19 December 2014 to reject the applicant’s application for approval of the nomination of a position in Australia under r.5.19 of the Migration Regulations 1994 (the Regulations).

2. The applicant applied for approval on 30 August 2014. The requirements for the approval of the nomination of a position in Australia are found in r.5.19 of the Regulations which contains two alternative streams: a Temporary Residence Transition nomination (r.5.19(3)) stream and a Direct Entry nomination (r.5.19(4)) stream. If the application is made in accordance with r.5.19(2) and meets the requirements of either stream, then the application must be approved. If any of the requirements are not met then the application must be refused: r.5.19(5). In this case, the applicant has applied for approval of a nomination, seeking to satisfy the criteria in Direct Entry Nomination stream.

3. The delegate refused the application on the basis the applicant’s nomination did not satisfy r.5.19(4)(d)(i) or r.5.19(4)(h)(ii)(D). Both issues were explored in the course of the hearing, but my decision in this review turns on r.5.19(4)(d)(i).

4. Regulation 5.19(4)(d)(i) requires that the Minister be satisfied that the nominee to be employed in the nominated position will be employed on a full-time basis in the position for at least 2 years.

5. The Department’s policy suggests that the financial viability of the sponsor is relevant to this consideration, and a mere statement that an employer can provide the 2 years of full-time employment is insufficient. I am conscious that the Department’s policy may not impose additional criteria to those set out in the Regulations, but I agree that the requirements of r.5.19(4)(d)(i) inherently require satisfaction as to the financial viability of the nominating employer to provide the requisite term and nature of employment.

6. The delegate was not satisfied as to the financial viability of the nominating employer to provide at least 2 years’ full-time employment.  This is the issue for me also in this review.

   Does the nominating employer have the financial capacity to employ the employee on a full-time basis in the position for at least 2 years?

7. The applicant is a company trading as Workforce Safety Products.  The applicant imports safety and personal protection equipment, and acts as a wholesaler for domestic suppliers.  I have been provided with detailed evidence about the applicant’s activities, structure and the visa nominee’s role.

8. The applicant has provided comprehensive financial reports regarding its operations and performance.  I rely on these documents as evidence of its previous financial performance.  I have taken into account that evidence, but also the evidence of Mr Tian (Director of the Applicant) in considering this issue.  The Tribunal was assisted by the careful preparation and provision of relevant evidence by the applicant’s registered migration agent.  Unfortunately however, on balance and after careful review of the financial information, I am not satisfied that the applicant has the financial viability to provide the requisite term and nature of employment. 

9. I have reached this finding despite Mr Tian’s confidence that the business may turn around.  I have reached this finding conscious that it is by its nature a prediction as to the future that could turn out to be wrong. I have reached the finding however on my best assessment of the objective financial information before me.  I have relied on the updated financial statements provided by the applicants’ accountants, but noted that earlier iterations of the financial accounts show a less favourable picture.

10. The delegate observed that the business’ tax returns showed an operating loss for 2013 of $252 333.  

11. The more detailed financial evidence produced to the Tribunal shows ongoing operating losses of $83 920 for 2014, and of $56 779 for 2015.  The applicant’s accountant states in a letter of 21 December 2015 that the first quarter of 2015/2016 shows a small profit, but the supporting documentation shows the business continues to operate at a loss.

12. Conscious that operating losses are not necessarily everything, I have examined the businesses sales and expenses underlying that performance.  An updated summary provided by the businesses accountant shows that sales rose slightly from 2013 to 2014, but fell in 2015.  I do not place weight on projections and budgets forecasting an increase in sales for 2016 or 2017.  It is significant that sales are stagnant to falling, and the business operates consistently at a loss.

13. Operating expenses have fallen consistently from 2013 to 2015, but in that context it is of concern that despite that the business has not yet turned a profit on the evidence before me.

14. I am mindful that a business may operate at a loss and meet its obligations for ongoing employment from its reserves.  I accept this as legitimate, as businesses may take considerable time to become profitable.  I have therefore paid careful attention to the evidence before me as to the applicant’s cash reserves (being reserves relevant for the employment of staff when operating at sustained loss).

15. It is stated by the accountants that the cash position of the business has improved.  It appears that this improvement has come in part from a reduction in trade debt.  Mr Tian also said in his evidence that he business had reduced its level of bad stock.

16. The business held or holds any significant cash reserves in five accounts. The financial information (balance sheet) reports on a US dollar account, Challenge bank cash, Challenge bank saver, interest bearing deposits and a purchasing account.  I do not take into account for these purposes Trade debtors (which I note in any event is relatively consistent, and appears to have reduced in favour of cash holdings recently) or stock on hand.  A business cannot meet its obligations to staff through trade debt as an asset, or through stock holdings.

17. Examining those cash reserves over time reveals that the US dollar account has reduced considerably, the interest bearing deposits of June 2014 of $100 000 is now nil and the challenge bank cash account is significantly lower. The challenge bank saver account is substantially higher, consistent with the reduction in trade debt.  The cash reserves however (excluding trade debt as an asset) are less than the annual wages bill for the company.  Having considered these matters carefully, I do not consider that the financial capacity of the company to provide the necessary term and nature of employment, in light of its sustained operating losses, is demonstrated by its cash reserves.

18. I have taken into account carefully the opinions of the company’s accountants.  As I do not consider that the opinions as to the business being a going concern and having the capacity to provide to provide the requisite term and nature of employment is demonstrated by the financial reports, I do not accept the opinion of the accountants on this occasion.

19. In summary, I see on the financial records of the company that it has operated at a sustained loss over many years, and continues to operate at a loss despite significant cuts to expenditure.  I see the company’s sales are static to declining.  I see its cash reserves have reduced over time and are lower than its ongoing annual wages bill.  In the face of these observations, I have difficulty forming the state of satisfaction that it has financial capacity to provide the required term and nature of employment.

20. In the course of the hearing I raised my concerns as to the finances of the company with Mr Tian. I have also had regard to the history of company’s trading activities, attempts at restructuring and repositioning, as set out in the applicant’s comprehensive written submissions.

21. Mr Tian expressed his confidence that the company will be financially viable. Mr Tian told me he has released himself from his other commitments to turn the business around.  He described for me changes to the market for his company’s goods and its attempts to adapt, and changes to its management.

22. I take note of Mr Tian’s plans and aspirations, but place greater weight on the information I have summarise above in relation to the company’s financial statements in forming my assessment as to the applicant’s capacity to to provide the requisite term and nature of employment.

23. I have taken into account Mr Tian drawing attention to stabilisation of sales and an improvement in cash reserves which he attributes to reducing bad stock levels.  I do not accept that a stabilisation of sales to a period a number of years previously, in the context of ongoing operating losses, is sufficient.  The improvement of the cash reserve position of the business does not materially change the picture in my view, particularly if it has come about in part through reduction of ‘bad’ stock.

24. While I acknowledge Mr Tian’s attempts to turn the business around and change its strategies, as I explained to him at the hearing, I will form my view primarily on the financial information before me.  For the reasons I have given, that information does not lend itself to me forming a state of satisfaction that the nominee to be employed in the nominated position will be employed on a full-time basis in the position for at least 2 years, when regard is had to the financial capacity of the applicant.

25. I am not satisfied that the requirements of r.5.19(4)(d)(i) are satisfied. The applicant has not sought to satisfy the criteria in Temporary Residence Transition Nomination stream, and as such has not met the requirements in r.5.19(3). The nomination must be refused.

26. I reach this decision with regret having also heard evidence about the visa nominee’s skills and experience, and his value to Mr Tian in his attempts to turn the business around.

    DECISION

27. The Tribunal affirms the decision under review to refuse the nomination.

    Marten Kennedy

    
    

    Member