1512041 (Migration) - [2016] AATA 4253

1512041 (Migration) [2016] AATA 4253 (16 August 2016)
DECISION RECORD
DIVISION:Migration & Refugee Division
APPLICANTS:  Mr Peter Alcock
Mrs Gwen Denise Alcock
CASE NUMBER:  1512041
DIBP REFERENCE(S):  CLF2014/119972
MEMBER:Sue Raymond
DATE:16 August 2016
PLACE OF DECISION:  Adelaide
DECISION:The Tribunal affirms the decision not to grant the applicants a Business Skills (Residence) (Class DF) visa

Statement made on 16 August 2016 at 2:07pm

STATEMENT OF DECISION AND REASONS
APPLICATION FOR REVIEW

The issue in this matter is the turnover of a business run by the applicants.
The applicants are citizens of South Africa. The visa applicants applied for Business Skills (Residence) (Class DF) Subclass 892 visas on 8 September 2014. The delegate refused to grant the visas on 14 August 2015. The decision was made on the basis that the delegate was not satisfied that the annual turnover requirement of AUD 200,000 was established during the relevant 12 month period.
The applicants appeared before the Tribunal on 30 March 2016 via videolink from Perth, Western Australia to give evidence and present arguments. Ms Alida Prinsloo, the applicants’ accountant, spoke briefly to the Tribunal at that hearing.
The applicants again appeared before the Tribunal on 14 June 2016 via videolink from Perth, Western Australia to give evidence and present arguments.
The applicants were represented in relation to the review by their registered migration agent who also attended the hearing on each occasion.
Following the first hearing further documentation was received on 21 April 2016 together with a letter from the applicants’ accountant. The Tribunal also received documentation, dated 7 June 2016 and 12 June 2016, respectively, prior to the second hearing, which documentation has been taken into account. Additional documentation was received on 11 July 2016 which has also been taken into account.
For the following reasons, I have concluded that the decision under review should be affirmed. This is based on a conclusion that certain money received for procurement of goods does not amount to “turnover” in the ordinary meaning of that word for the purpose of the Migration Regulations.
In reaching the conclusion I have relied to a significant degree on two authorities of Cheng[1], one of the Federal Circuit Court of Australia and the other of the Federal Court of Australia, which dealt with the issue of “turnover” in the context of this class of visa.
[1] Cheng & Ors v Minister for Immigration & Anor [2012] FMCA 911; and Cheng v Minister for Immigration and Citizenship [2013] FCA 405
CONSIDERATION OF CLAIMS AND EVIDENCE
The issue in the present case is the turnover of the applicants’ nominated business during the 12 months prior to the lodgement of the visa application. The Tribunal is expressly not examining or making a determination about whether the business is a business or satisfies the definition of a “main business”. It has considered whether it should do so but it would involve canvassing in some detail evidence which has not been considered at first instance by the department.
Consequently, for the purpose of this application for review, the Tribunal accepts that the main business is that nominated in the visa application and accompanying forms lodged with the department. There was only one business named in the documentation and that is All Rice Co Pty Ltd (‘All Rice’).
Cl.892.213
The criterion relevant to this application is that in cl.892.213. It provides as follows:
892.213
(1) The applicant meets the requirements of subclause (2) or (3).
(2) An applicant meets the requirements of this subclause if, in the 12 months immediately before the application is made, the applicant’s main business in Australia, or main businesses in Australia together, had an annual turnover of at least AUD200 000.
(3) An applicant meets the requirements of this subclause if:
(a) the applicant meets at least 2 of the requirements set out in paragraphs 892.212(a), (b) and (c); and
(b) the applicant resides in, and operates the applicant’s main business or businesses in Australia in, an area specified in an instrument in writing made by the Minister for this paragraph; and
(c) the appropriate regional authority has determined that there are exceptional circumstances for this subclause.
The relevant subparagraph is (2). The other paragraph is not relevant to this review. In considering the facts of this case I am mindful that the requirement in this subclause sets a particular minimum amount of annual turnover for the business in the context of the applicants’ application for a permanent business visa.
The first named applicant, Mr Peter Alcock, is the main or primary applicant[2] for the visa. Mrs Gwen Denise Alcock is a secondary applicant, who is dependent on Mr Alcock satisfying the primary criteria for the grant of the visa.
[2] Folio 1 of the departmental file
On the basis of the information in the visa application and accompanying forms, I find that:
·The main business nominated is All Rice Co Pty Ltd (‘All Rice’).
·Mr Alcock is the Managing Director of the company.
·His ownership share is 52% for the two years prior to lodgement of the application.
·He began his involvement in the business on 17 August 2010.
·The major activity of the business is stated to be “Importation and distribution of Rice, other Food stuffs and the sourcing and sale of equipment for use in the mining industry sector of Australia.”
Based on the date of lodgment of the visa application, I find that the relevant 12 month period for the purpose of cl.892.213 is 8 September 2013 to 7 September 2014.
Initial issue with the monetary amount of the turnover of the main business
The applicants assert that the relevant turnover requirement is met. This was not evident in the material supplied to the department. The Tribunal noted that inaccurate figures were before the department due to the obliteration of a column of the Business Activity Statements (BAS) statements in the copy initially provided to the department.
I had considered whether I could determine this matter without a hearing as a new complete copy of the BAS statement was available to the Tribunal.
However, I must be satisfied about the amount of the turnover, and in particular that it is at least AUD $200,000 during the relevant 12 month period. Having reviewed the documentation available to the Tribunal prior to the first hearing, there were some discrepancies in the accounting documentation such that I was not satisfied that I could reach a finding about the monetary amount of the turnover. The issues which gave rise to my concerns included:
·The total sales figures of $233,173 in the BAS statement for July 2014 to September 2014[3] did not dovetail with the figures for the same period in the list of sales, invoices and credit notes for the company[4];
·The sale of goods income of $101,681 identified in the income statement for the year ended 30 June 2014[5] did not dovetail with the profit and loss statement for the 12 months ended on 31 July 2014[6] and the July sales invoice figures taken from the list of sales invoices for the company[7].
[3] Folio 148 of the departmental file
[4] Folio 114 of the departmental file
[5] Folio 142a of the departmental file
[6] Folio 61 of the departmental file
[7] Folio 114 of the departmental file
I permitted time following the first hearing to provide further evidence and submissions as to the turnover figure and I requested the source material to be provided.
I received submissions and supporting documentation from the applicants on 21 April 2016. The documents included a letter from the applicants’ accountant, Ms Alida Prinsloo[8], which set out her accounting qualifications and that she is a member of the Institute of Chartered Accountants, Australia and New Zealand. She expressed the view that she knew the applicants as clients of the firm of accountants for which she works. She indicated that she is very familiar with the financial performance of the company as she prepared the annual financial statements of the company for the past three financial years.
[8] Folio 34 of the Tribunal file
Ms Prinsloo expressed the following professional opinion, that based on her examination and consideration of all relevant invoices and documents, All Rice achieved a turnover of $313,132 within the period 8 September 2013 to 7 September 2014.
She noted that previously she reported that the company achieved a turnover for that period of $261,390 (excluding GST) plus GST free sales for rice in the amount of $29,226. She described that this was based on invoices prepared by Mrs Alcock which she had personally examined and confirmed in BAS statements submitted to the Australian Taxation Office. In the letter, she indicated that she was asked to further examine and report on turnover and the differences between schedules provided and the BAS returns. The details of the discrepancies are explained in pages two and three of the accountant’s letter. The accountant concluded in her letter that, in summary, her revision of the BAS reports for All Rice does not change the fact that company turnover for the period 8 September 2013 to 7 September 2014 exceeded $200,000.
Procurement- All Rice and Integrated Industrial Mining Supply (IIMS)
At the hearing I raised the fact that the cost of the sales in the 12 months ended 31 July 2014, either equalled or exceeded the sales income from those items[9]. Of itself, this does not result in the revenue not amounting to “turnover.” However, it is part of the matrix of facts in this matter to which I must have regard. I observed that there were large monetary sales to an entity called Integrated Industrial Mining Supply (IIMS) which sales appeared to have been effected in June 2014 and again in July and August 2014.
[9] Folio 61 of the departmental file
At the hearing, in response to a question from the Tribunal, evidence was given that one of the directors of All Rice was also a director of IIMS.
The accountant’s letter dated 14 April 2016[10] indicated that she was requested to provide detail on the procurement invoices which related to procurement sales to IIMS. The invoices were listed on schedule B with supporting documents comprising invoices, bills and bank statements comprised in appendices I, BS and P. She advised that the invoices were included on the particular dates in the BAS returns and financial statements.
[10] Folio 34 of the Tribunal file
After further consideration of the information, I raised some further issues with the applicants in writing in the hearing invitation, and scheduled a second hearing. In advance of the second hearing the Tribunal drew to the representative’s attention two cases of Cheng[11], one being on appeal from the other.
[11] Cheng & Ors v Minister for Immigration & Anor [2012] FMCA 911; and Cheng v Minister for Immigration and Citizenship [2013] FCA 405
At the second hearing the focus was on the procurement part of the business and its dealings with IIMS. There was another part of the business which involved the importation of rice. The amount of the turnover in the relevant period referable to the rice sales was far less than the procurement income. The rice sales were in the order of approximately $25,600[12] of the claimed turnover of $313,132.
[12] The difference between the claimed turnover amount of $313,132 and the procurement transactions totalling $287,531
On the basis of the oral evidence given at the hearings and the documentary evidence provided to the Tribunal (including the adoption by Mr Alcock at hearing of the contents of submissions dated 7 June and 12 June 2016), I make the following findings:
·During the relevant period All Rice and IIMS shared a common director, Mr Davis.
·Mr Davis was a director of All Rice and also IIMS. He made the introduction of the applicants to IIMS. The applicants indicated that they needed him to get the introduction and it was a way of getting involved in the company. The applicants dealt with the Financial Director-Mr Bianco and the Managing Director, Mr Cox of IIMS. Mrs Alcock also dealt with an Accounts Clerk of IIMS. The applicants did not deal with Mr Davis in its dealing with IIMS.
·There were nine suppliers[13] of highly technical mining equipment to IIMS during the relevant period.
[13] Appendix P at folio 51 of the Tribunal file
·A verbal agreement was entered into between All Rice and IIMS in relation to the supply of certain mining equipment to IIMS.
·The goods were ordered from the various suppliers by IIMS[14]. IIMS had the direct dealing with the suppliers in relation to ordering the highly technical goods. The applicants understood that order forms were placed with the suppliers for the goods directly by the company, IIMS. [The applicants were of the view that that the goods were ordered in the name of All Rice. The order forms were not before the Tribunal].
[14] The accountant’s description of the process as described in her letter dated 14 April 2016 varies slightly from that of the applicants, in relation to which of the two companies was ordering the goods. I accept the applicants’ evidence in this regard as the best first hand evidence of the transactions.
·The applicants did not source the goods for IIMS from any alternative suppliers.
·Invoices were rendered to All Rice by each of the suppliers. Payments were then made to each supplier by All Rice.
·All Rice negotiated a line of credit of $300,000 from its banker for the purpose of buying the mining equipment required by IIMS from the suppliers.
·Once All Rice had paid the suppliers for the goods, it issued invoices to IIMS for the goods.
·The goods were not sent to All Rice by the suppliers. IIMS arranged the delivery of the goods direct from the suppliers to it.
·All Rice did not insure the goods purchased from the suppliers.
·The total amount of the ten transactions, comprising items procured for IIMS by All Rice during the relevant period, amounted to $287,531.97. They comprised the following amounts[15]:
[15] Folio 69 of the Tribunal file –Appendix I
o20 June 2014 $28,600
$19,878
$19,415
$17,439
o17 July 2014   $41,146
o24 July 2014    $19,164
o28 July 2104   $11,014
o30 July 2014   $9,144
o11 August 2014 $77,440
·Aside from the ten transactions which occurred during the relevant period ending in September 2014, there have been no further procurement transactions by All Rice for IIMS.
Mr Alcock indicated that regular meetings were held with IIMS to discuss the setting up of the whole arrangement and the progress of it, to ascertain whether it was working. He said that they had started to talk about other products.
The applicants assert that:
·The verbal agreement between All Rice and IIMS was entered into in an attempt for All Rice to gain valuable commercial experience and in an attempt to break into the mining industry market. The applicants indicated that mining companies require food products and they thought that there were opportunities to provide food products to mining companies through this arrangement. Mr Alcock thought that there was a huge opportunity through IIMS in relation to those facilities which would be progressed in the future.
·The transactions took place in Western Australia and the Western Australian Sale of Goods Act governs the transactions.
·The ownership of the goods passed from the suppliers to All Rice and, as a consequence, All Rice carried all the commercial risk of the purchased items.
·All Rice could have had the goods delivered to someone other than IIMS as it had the legal ownership of the goods.
·All Rice did not ask for, nor did it receive, a commission or other reward for these transactions because Mr Alcock considered that he benefited from exposure to the mining sector[16]. All Rice paid income tax on the revenue derived from the supply of goods to IIMS.
·All Rice was the owner of the goods it supplied to IIMS and as such the revenue (‘turnover’), was properly attributed to All Rice.
[16] I note that the accountant, in her letter dated 14 April 2016, makes reference to All Rice being entitled to raise commission invoices for procurement work done on a monthly basis but that Mr Alcock had decided not to pursue it. I have not placed any reliance on this evidence in reaching a decision in this matter.
Based on the evidence, it appears that the advantage of the arrangement to IIMS was that there was an extended time for payment of the invoices, such that all invoices were paid by IIMS in the one lump sum on 30 September 2014. This is the case even though some of the invoices were apparently rendered in June 2014. I note a very large credit of $287,531.97, which appears in the Westpac bank account of All Rice for 30 September 2014. There was no dispute about this payment.
Based on the bank documentation which was provided to the Tribunal, I note that significant interest charges were incurred by the applicants in relation to the credit facility in entering into these transactions. All Rice purchased the items from the suppliers for the same amount that it charged IIMS so no profit was made on the transactions and credit expenses were incurred by it. Whilst these facts are not determinative, they form part of the matrix of facts in this matter.
Consideration of “Turnover”
The term “turnover” is not defined in the Migration Regulations.
I have had regard to the decisions of Cheng[17] in the Federal Magistrates Court of Australia and in the Federal Court of Australia, respectively. I note and am bound by the cases. In particular I note that Judge Driver states, [after noting that the word “turnover” has not acquired a legal meaning and noting that it has not been suggested that it has acquired a secondary meaning through trade usage which differs from its ordinary meaning]:
“Accordingly, in the absence of a definition of ‘turnover’ in the Migration Regulations, the ordinary meaning of the word ‘turnover’, and the consideration of which amounts fall within the expression ‘turnover’ in the particular context, was a question of fact to be decided by the Tribunal.”[18]
[17] Cheng & Ors v Minister for Immigration & Anor [2012] FMCA 911
[18] At paragraph 30 of Cheng & Ors v Minister for Immigration & Anor [2012] FMCA 911
I also note that Judge Driver looked at various dictionary meanings of “turnover,” at paragraph 48 of the decision. He notes that four of the seven definitions, which relate to business activity, might be available for the purpose of application of the visa criterion. They are:
(a) “the number of times that capital is invested and reinvested in a line of merchandise during a specific period of time:
(b) the turning over of the capital or stock of goods involved in a particular transaction or course of business;
(c) the total revenue generated from the provision of goods or services for a particular accounting period; and
(d) the total amount of business done in a given time.”
The term “turnover” is referred to in the policy guidelines of the department[19] and in describing what turnover is it states; “Turnover is the revenue generated by an entity as a result of the ordinary activities of a business.” I do not regard myself as bound by policy but I should have regard to it in so far as it is consistent with the law. In this case I do not need to rely on it, but this description accords with my conclusion.
[19] 2016>01/07/2016->PAM3-Migration Regulations-OTHER>PAM-GenGuideM-Business visas-Visa application and related procedures “Turnover”
I have also had regard to the case of He[20] which the representative referred to in his submissions. I regard the cases of Cheng as directly relevant as they were dealing with the issue of “turnover” whereas the case of He dealt with term “asset”. I accept that the principle raised in He, as to whether the policy goes beyond what is in the statute, is one of general application about which the Tribunal needs to be cautious.
Application of the facts to the term “turnover”
[20] He v Minister for Immigration & Anor [2015] FCCA 2915

In the current case the applicants, through the company All Rice, paid for goods from various suppliers and then rendered invoices for the same amounts to IIMS. Essentially, the company had interposed itself as a middleperson between IIMS and its suppliers. However, IIMS still ordered the goods and the goods were directly despatched to IIMS. They were highly specialised goods and consequently the ordering of those goods took place directly between IIMS and its suppliers. The goods were not in the physical possession of All Rice. Essentially all that All Rice was doing was paying suppliers for the goods and then billing IIMS the same amounts for those goods.
Based on the oral and documentary evidence before me, I reach the following conclusions:
·There was not an arms-length relationship between IIMS and All Rice, each sharing a common director.
·Officers of IIMS carried out the ordering of the goods direct with the suppliers and arranged for delivery of the goods direct with the suppliers. All Rice was not involved in the ordering or delivery of the goods. All Rice did not take possession of, or insure, the goods.
·All Rice’s role was limited to being invoiced for the goods by the suppliers; paying the suppliers and then invoicing and receiving funds from IIMS in the same amount as the costs of the goods. It did not source alternative suppliers of the goods.
·The documentation evidencing the arrangement comprise suppliers’ invoices which name All Rice as the entity billed and tax invoices from All Rice to IIMS.
I conclude these ten transactions during the relevant period in relation to All Rice being invoiced for goods from suppliers and in turn invoicing IIMS for those goods are artificial, in that the applicants’ company was interposed as an intermediary between the suppliers and the purchasing company, and where the purchase and sales were for the same sum of money. They are artificial in the sense that I am not satisfied that they occurred in the ordinary course of the business of All Rice. The applicants had to expend money, by way of interest on their credit facility, to purchase the goods and then there is a delayed payment for them by IIMS. The fact that the applicants indicated that they hoped the transactions would lead to further business with the mining industry cannot render them to be “turnover” in circumstances where they are not. In my view All Rice was no more than a conduit for the purchase of the goods between the suppliers and IIMS. I find that the “IIMS” transactions have no plausible relevance to the operations of the ordinary business of All Rice.
Substance over form
In this case, I have had regard to the substance of the transactions rather than their appearance. In Cheng[21] the Court endorsed the Tribunal looking behind the superficial appearance of the transactions and to examine the substance of the business. Whilst the circumstances in the matter of Cheng were different to those in the current case, some of the judicial comments made in that case are apposite to the current case. The Tribunal notes in particular the comments of the court in Cheng[22], “The real question in this case was whether Nisi Group was engaged in the trade of goods in substance in its own right or whether, in substance, it was acting as an intermediary, regardless of the apparent form of the transactions from a strictly legal or accounting perspective”.
[21] At paragraph 53
[22] At paragraph 52
I note that the accountant witness, Ms Prinsloo, expressed her opinion as to the amount of the turnover. However, I am required to consider the turnover in the context of the migration law. I note the comment of Judge Driver in the case of Cheng in which he said[23], “I see no error in the Tribunal’s approach, which maintained the significance of substance over form. If one takes an unduly legalistic or mechanistic approach to the application of the visa criterion, it would be a simple matter for applicants to so construct their affairs, on a strict legal or accounting interpretation, so as to qualify for the visa”.
[23] At paragraph 53
I accept the facts of the case of Cheng differ from the current case in the sense that a service fee was received by the applicant company in that case however, significantly, the court said, “Although the funds passing through the hands of the Nisi Group were, on one view, included in its ‘turnover’, Nisi Group was in substance only a conduit in the business transactions between EMT and Symex and in substance, the value of its turnover was properly limited to the value of the service Nisi Group provided.”
Agency and Legal Title
I will make some remarks on the issues of “agency” and “legal title” to the procured goods as both were canvassed in the course of the review. In the final analysis I do not believe that it is necessary for me to reach a concluded view on either of these matters, beyond the findings which I have made in these reasons.[24]
[24] I have formed this view based on the remarks of Judge Driver in Cheng & Ors v Minister for Immigration & Anor [2012] FMCA 911at paragraphs 47, 52 and 53 and Justice Cowdroy in Cheng v Minister for Immigration and Citizenship [2013] FCA 405 at paragraphs 21 and 29.
The applicants asserted that they held legal title to the goods and, in theory, could have on sold them elsewhere. As the agreement between All Rice and IIMS was a verbal one, the exact terms of any agreement are difficult to determine. All Rice may or may not have acquired legal title to the goods. I am not necessarily satisfied that the Western Australian legislation governs each of the contracts for the sale of goods, as it depends on specific terms of the contracts with each of the suppliers. I do not necessarily accept that legal title of the goods is with All Rice but I have concluded that I do not need to determine this issue.
In relation to the issue as to whether All Rice was acting as an agent in the assessment of what constitutes turnover, in light of my conclusion as to the artificiality of the transactions and the fact that no service fee was paid to All Rice, it is not necessary for me to make a finding as to the issue of agency for the purpose of this decision. It is not necessary for me to determine whether All Rice was acting as an agent or in its own right. I have concluded that All Rice was no more than a conduit for the purchase of goods between the suppliers and IIMS. The artificiality and the lack of any service fee or commission as part of the transactions render it of no utility to make such a finding.
CONCLUSION
I am not satisfied that the sum of money received by All Rice for the procurement of the ‘IIMS’ goods, comprising ten transactions totalling $287,531.97, constitutes “turnover” in the ordinary meaning of that word in the context of the Migration Regulations. Without that amount, the balance of the turnover of the main business for the relevant period is approximately $25,600. Consequently, it is less than $200,000 and therefore Cl.892.213 is not satisfied. As cl.892.213 is an essential requirement for the grant of the visa, the primary visa applicant, Mr Alcock, cannot meet the requirements for the visa and the decision to refuse his visa must be affirmed.
To be granted a subclass 892 visa, the secondary applicant is dependent on Mr Alcock satisfying the primary requirements for the visa. Consequently, her application also fails.
Consequently, I have determined that the decision to refuse the subclass 892 visas should be affirmed. There is no evidence before the Tribunal to suggest that the criteria for any of the other visa subclasses are made out by the applicants[25].
[25] Noting that cls. 891 and 893 required that certain visa be held by the applicants and that cl.890 also requires a specified annual turnover.
DECISION
The Tribunal affirms the decision not to grant the applicants a Business Skills (Residence) (Class DF) visa
Sue Raymond
Senior Member