4D High Tech Biochemistry Pty Ltd (Migration)

[2018] AATA 1070

4D High Tech Biochemistry Pty Ltd (Migration) [2018] AATA 1070 (28 February 2018)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANT:  4D High Tech Biochemistry Pty Ltd

CASE NUMBER:  1600441

DIBP REFERENCE(S):  BCC2015/1319995

MEMBER:Wan Shum

DATE:28 February 2018

PLACE OF DECISION:  Sydney

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

Statement made on 28 February 2018 at 3:40pm

CATCHWORDS
Migration – Employer Nomination – Financial position of nominating position – No salary paid – Limited business activities – Sales to friends – Change in business focus

LEGISLATION
Migration Act 1994, r 5.19

STATEMENT OF DECISION AND REASONS

APPLICATION FOR REVIEW

1. This is an application for review of a decision made by a delegate of the Minister for Immigration on 23 December 2015 to reject an application for approval of the nomination of a position in Australia under r.5.19 of the Migration Regulations 1994 (the Regulations).

2. 4D High Tech Biochemistry Pty Ltd (the business) applied for approval on 7 May 2015. 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).

3. In this case, the business has applied for approval of a nomination, seeking to satisfy the criteria in the Direct Entry Nomination stream. The business was seeking to employ Ms Ying Huang Lee as the Managing Director. A related visa application was filed by Ms Lee as the main applicant and included her spouse and child.

4. The delegate refused the application on the basis the nomination did not satisfy r.5.19(4)(b) of the Regulations because the business had not demonstrated that it was actively and lawfully operating a business in Australia. The delegate also found that r.5.19(4)(d) was not met as the delegate considered that the business had not demonstrated that it would provide the nominee with a full time paid position for at least the next two years.

5. An application for review of that decision was received and the business was represented in relation to the review by a registered migration agent.

6. Ms Ying Huang Lee, the director of the business, appeared before the Tribunal on 22 February 2018 to give evidence and present arguments. The Tribunal hearing was conducted with the assistance of an interpreter in the Mandarin and English languages.

7. When the departmental file regarding the nomination application was provided to the Tribunal for review, there was not any information which was the subject of a non-disclosure certificate. Subsequently, additional information was forwarded to the Tribunal with non-disclosure certificates indicating that there was information which should not be disclosed regarding concerns as to [certain sensitive information]. The Tribunal disclosed the existence of the certificates, and showed a copy of one of the certificates issued [in] December 2016 from Ms Lee’s file to the representative. The representative indicated that they were aware of the concerns the department had as to [and] that they had made extensive submissions regarding this to the department. The Tribunal initially indicated that it would forward copies of the certificates following the hearing for their comments on the validity of the certificates, but after further consideration did not proceed to do so as it did not consider the information to be relevant to whether or not the nominating business was actively and lawfully operating and able to employ a managing director on a full-time basis for the next two years. The representative was informed of this.

8. For the reasons set out below, the Tribunal has decided to affirm the decision under review to refuse the nomination.

   CONSIDERATION OF CLAIMS AND EVIDENCE

9. The nominating business, trading as 4D High Tech Biochemistry, is a registered business with Australian Business Number (ABN) 22169504536. The business began trading in May 2014.

10. The issue in this case is whether the business meets the requirements for approval of the nomination under the Direct Entry nomination stream set out in r.5.19(4), which is extracted in the attachment to this decision. For the nomination to be approved, all the requirements must be met.

11. Regulation 5.19(4)(d) requires the nominee to be employed in the nominated position for at least 2 years full time, and the terms and conditions of that employment are not to expressly exclude extension of the employment.

12. The material and evidence provided in respect of the financial position of the nominating business indicates to the Tribunal that the business is not currently in a position to provide full-time employment of at least two years. The director stated that she is the only employee, but also claimed that she has not been paid a salary to date. She explained in her written statement that a former director of the business, Ms Annie Zhao, had also not been paid a salary, but that the rental agreement for the premises in Spring St Bondi Junction, which is also the director’s residential address, were leased in Ms Zhao’s name.

13. Prior to the hearing, the Tribunal requested information regarding the financial performance of the business. It was provided with a financial report for the year ending 30 June 2017, but was advised that the financial report for the year ending 30 June 2016 was “not available”. When asked about this at the hearing, the director initially said she was not sure why but agreed when asked whether it was because there were none or limited business activities in that financial year. However, following the hearing, the financial statements were provided to the Tribunal. The financial statement for year ending 30 June 2016 shows figures for the 30 June 2015 and 30 June 2016 financial years. The statement indicates that there was no income in the 2015 FY and $5.52 from interest in the 2016 FY. There was a loss of $27,473 and $30,849 for the 2015 and 2016 FY respectively. 

14. The financial statements for 30 June 2017 indicate that the business purchased $3,836.81 of goods and had nil gross profit from trading. After deducting expenses, the business had a loss from ordinary activities before income tax of $11,739.60. The director claimed that this was because the business had changed focus in 2017 from importing high quality condoms to importing facial masks. The Tribunal was provided with information and samples of the mask, as well as the results of a regulatory review undertaken in respect of the importation of the facial masks. The applicant gave evidence at the hearing that she was a shareholder of the company in Korea, which had developed and manufactured the facial masks. She said her husband was involved in the research and development side. The representative stated that her husband was a herbalist in China.

15. It appears from the evidence presented of invoices that the business imported 10 cartons of facial masks on one occasion in May 2017, which cost a total of $2,175. The director told the Tribunal at hearing that so far there had only been one shipment. According to the table provided and oral evidence from the director, the first sale occurred on 17 August 2017 and to date, the sales have been to friends. The Tribunal notes that bank statements have only been provided up to 11 August 2017. When asked for the bank statements to show that the money received from sales went into the business bank accounts, the director said that she did not provide these statements because the sales were cash sales and the amounts had not been directly deposited into the business bank accounts. She only recently deposited the money into the bank account of the business because she did not know the rules. According to the table provided, sales have totalled around $2,000. It was submitted that 41 boxes of ‘Run’ masks and 34 boxes of ‘Gong’ masks had been sold to date. The Tribunal was also presented with printouts of the ebay store of seller “4dgroup” which, according to Ms Lee, was set up in 2017. She advised however that the products had been put on the ebay store about two weeks ago.

16. The Tribunal accepts that the nominating business had decided not to pursue the importation and sale of condoms as set out in the nomination application, but has concerns as to when this occurred. The director told the Tribunal at hearing that a decision was made not to pursue the sale of condoms after conducting 6 months of market research after coming to Australia in 2014. When asked why the business nomination lodged in May 2015 relied on financial projections regarding the importation and sale of condoms from China, she said she must have gotten the timing confused. The representative later sought to explain that they had based the business nomination package on the sale of condoms, but in the background there was development of other products. Whether or not this is the case, the Tribunal notes that the applicant had given evidence that the company in Korea which has developed and produced the facial masks that are to be marketed by the nominating business was established in 2016. This is sometime after the business nomination was lodged. The director said that the initial phase of development involved a lot of input and not much output but she appears to be referring to activities undertaken by her business in Korea, as no evidence of business activity undertaken by 4D High Tech Biochemistry Pty Ltd in the 2015 and 2016 years has been presented. The business in Korea is separate to the nominating business, which Ms Lee advised was the buyer and supplier of the masks. The evidence which has been presented of activity by the nominating business occurred in 2017, which includes obtaining regulatory review and the necessary registration for importing products containing chemical substances not found on the Australian Inventory of Chemical Substances, which the Tribunal accepts. The Tribunal has formed the view that the decision not to pursue the sale of condoms occurred in late 2014 or early 2015 as initially stated by the director at the hearing.

17. The Tribunal raised concerns as to the financial performance of the business to date. The director told the Tribunal that the initial work had been finished and they were moving to the next phase. The nominating business was focusing on the facial masks and other herbal skin products and that over the next 3 to 6 months they will have more business partners. She had plans to employ another one or two people. They have set up an ebay store to sell the product and she was confident that there would be a turnaround. The Tribunal notes however that the only income to date have been sales to friends which have totalled less than $2,000 and that the ebay store was set up around two weeks prior to the hearing. It appears that the nominating business has not been involved in any business activities until 2017. While the business activities to date have been limited, it cannot be said that the business is not actively or lawfully operating.

18. In considering whether the nominating business is capable of employing a managing director for the next two years, the Tribunal has considered the financial position of the business based on the financial statements and other supporting documents provided. The financial statements indicate that the nominating business has been operating at a loss for the past three financial years. The only evidence of expenditure on purchases occurred in 2017 for a  total of $3,836.81. The Tribunal does not consider that this reflects a distributor business which can meet its financial obligations such as salary payments.

19. The Tribunal has also considered the evidence provided with the original nomination which includes a letter of support from an accountant and a copy of the employment agreement. Evidence of a rental agreement for offices in Burwood had been provided, but the representative advised the Tribunal that this lease had ended, and that the business was operating out of Ms Lee’s home.

20. The employment agreement originally provided indicated that Ms Lee, the director and visa applicant, was to be employed full time as a managing director on a salary of $185,000 plus 9.5% superannuation. An updated copy of the employment agreement signed by Ms Lee in February 2018 to employ herself has been provided to the Tribunal, for the same salary. The Tribunal has significant doubts that the business will be able to provide employment for the next two years for a salary of $185,000 per year.

21. To date the business has not paid any salary to Ms Lee or to anyone else as reflected in the financial reports provided. As set out above, the business has operated at a loss for the past three financial years and has not paid any salary or wages in this time. While the letter of support dated 30 April 2015 from Johnny Ching, Director of Deloitte Private Pty Ltd referred to the business stated that the business plan included the injection of $500,000 in the first year of operation which would be fully funded by the shareholder, and a further $1,000,000 in the second year to be funded by the shareholder to meet the needs of the company’s operation, the Tribunal notes that the financial statements do not reflect this. The financial statements show that in the 2015 FY, the shareholder loans to the business was $31,000 which was the total liability of the business. While shareholder loans increased to $62,000 in the 2016 FY, the shareholders loans in 2017 FY totalled $17,200.29. Equity in the business for each year reflects accumulated losses only. The planned injections into the business as set out in the letter of support do not appear to have occurred. The letter sets out the company’s date of incorporation, and registration as a company and for GST, but other than that does not contain current information. Given the abandonment of the plans to distribute and sell condoms, the Tribunal considers that the projections set out in the business plan provided with the nomination and the letter of support cannot be relied upon as evidence that the business would be able to employ a managing director for the next two years on a salary of $185,000 per year.

22. The Tribunal accepts that the nominating business has taken some steps to import facial mask packs to sell in Australia, but the evidence provided indicates that the activities of the nominating business has been extremely limited since it was established. The Tribunal was requested to consider that the business was in the early stages; however, the business was established in 2014, around 4 years ago. While the director was confident that the sales of the business would improve in the next 3 to 6 months, the original business proposal and plan submitted with the application was confident of a high volume of sales of condoms which has not been demonstrated. It was also claimed that there was an intention to employ another 1 or 2 people in the next 3 to 6 months; however, the Tribunal does not consider that it will be able to do so based on the information presented of its financial position. In the Tribunal’s view, the evidence does not support a finding that the business will be able to employ a managing director on a salary of $185,000 for the next two years, and certainly not another one or two employees in addition to that. The financial statements and other evidence presented of the financial circumstances of the business simply do not reflect a business which has the capacity to do so. While Ms Lee may have other business interests (such as the business in Korea) and the business of the nominating business may improve in the future, the Tribunal is assessing whether 4D High Tech Biochemistry Pty Ltd will employ her on a full-time basis for at least 2 years from now.

23. Having considered all the evidence presented, the Tribunal is of the view that the business does not have the financial capacity to employ a managing director full-time for the next 2 years on the proposed salary. Therefore, the requirement that the employee will be employed on a full-time basis in the position for at least 2 years has not been met.

24. Accordingly, the requirement in r.5.19(4)(d) is not met.

25. Given this finding, it is not necessary to assess whether the nominating business meets the remaining requirements set out in r.5.19(4).

26. For the above reasons the Tribunal is not satisfied that the applicant meets the requirements of r.5.19(4). 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). Accordingly, the nomination of the position cannot be approved. Therefore, the Tribunal must affirm the decision under review.

    DECISION

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

    Wan Shum
    Member

    
    

    ATTACHMENT  -  EXTRACTS FROM THE MIGRATION REGULATIONS 1994

    5.19Approval of nominated positions (employer nomination)

    …

    (2)The application must:

    (a)be made in accordance with approved form 1395…; and

    (b)be accompanied by the fee mentioned in regulation 5.37.

    …

    Direct Entry nomination

    (4)The Minister must, in writing, approve a nomination if:

    (a)the application for approval:

    (i)       is made in accordance with subregulation (2); and

    (ii)      identifies a need for the nominator to employ a paid employee to work in the position under the nominator’s direct control; and

    (b)the nominator:

    (i)       is actively and lawfully operating a business in Australia; and

    (ii)      directly operates the business; and

    (c)for a nominator whose business activities include activities relating to the hiring of labour to other unrelated businesses — the position is within the business activities of the nominator and not for hire to other unrelated businesses; and

    (d)both of the following apply:

    (i)       the employee will be employed on a full-time basis in the position for at least 2 years;

    (ii)      the terms and conditions of the employee’s employment will not include an express exclusion of the possibility of extending the period of employment; and

    (e)the terms and conditions of employment applicable to the position will be no less favourable than the terms and conditions that:

    (i)       are provided; or

    (ii)      would be provided;

    to an Australian citizen or an Australian permanent resident for performing equivalent work in the same workplace at the same location; and

    (f)either:

    (i)       there is no adverse information known to Immigration about the nominator or a person associated with the nominator; or

    (ii)      it is reasonable to disregard any adverse information known to Immigration about the nominator or a person associated with the nominator; and

    (g)the nominator has a satisfactory record of compliance with the laws of the Commonwealth, and of each State or Territory in which the applicant operates a business and employs employees in the business, relating to workplace relations; and

    (h)either:

    (i)       both of the following apply:

    (A)the tasks to be performed in the position will be performed in Australia and correspond to the tasks of an occupation specified by the Minister in an instrument in writing for this sub-subparagraph;

    (AAA)the occupation is applicable to the person identified under subparagraph (a)(ii) in accordance with the specification of the occupation;

    (B)either:

    (I)the nominator’s business has operated for at least 12 months, and the nominator meets the requirements for the training of Australian citizens and Australian permanent residents that are specified by the Minister in an instrument in writing for this sub-sub-subparagraph; or

    (II)the nominator’s business has operated for less than 12 months, and the nominator has an auditable plan for meeting the requirements specified in the instrument mentioned in sub-sub-subparagraph (I); or

    (ii)      all of the following apply:

    (A)the position is located in regional Australia;

    (B)there is a genuine need for the nominator to employ a paid employee to work in the position under the nominator’s direct control;

    (C)the position cannot be filled by an Australian citizen or an Australian permanent resident who is living in the same local area as that place;

    (D)the tasks to be performed in the position correspond to the tasks of an occupation at a skill level of ANZSCO skill level 1, 2 or 3;

    (DA)the occupation is applicable to the person identified under subparagraph (a)(ii) in accordance with the specification of the occupation;

    (E)the business operated by the nominator is located at that place;

    (F)a body that is:

    (I)specified by the Minister in an instrument in writing for this sub-subparagraph; and

    (II)located in the same State or Territory as the location of the position;

    has advised the Minister about the matters mentioned in paragraph (e) and sub-subparagraphs (B) and (C).