Barnett and Minister for Immigration and Citizenship

[2007] AATA 1454

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1454

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2006/1041

GENERAL ADMINISTRATIVE DIVISION		)
Re		ARTHUR ELLIS BARNETT

Applicant

And MINISTER FOR IMMIGRATION AND CITIZENSHIP

Respondent

DECISION

Tribunal Senior Member M D Allen
Mr D Connolly, Member

Date22 June 2007

PlaceSydney

Decision The Tribunal affirms the decision under review.

............[sgd]..........

M D Allen
Presiding Member

CATCHWORDS

MIGRATION - business skills visa - cancellation - not eligible business - whether genuine effort to obtain substantial ownership of eligible business or participate in senior management - exercise of residual discretion – decision under review affirmed.

LEGISLATION

Migration Act (1958) sections 134(1), (2), (3), (5) and (10).

CASE LAW

Re Wong and Minister for Immigration and Multicultural Affairs [2002] AATA 54

Minister for Immigration and Multicultural Affairs v Sharma (1999) 90 FCR 513

Re Bhyat and Minister for Immigration and Multicultural and Indigenous Affairs [2003] AATA 1051

Re Yam v Minister for Immigration and Multicultural and Indigenous Affairs (2004) AATA 283

REASONS FOR DECISION

22 June 2007

Senior Member M D Allen

Mr D Connolly, Member

APPLICATION

1.      Mr Arthur Ellis Barnett aged 54 is a resident of South Africa who was on 16 January 2003 granted a Business Skills (Migrant- subclass 128) Business Owner visa. Secondary visas were also granted to his wife and son.  

2. On 18 July 2006 a delegate of the then Minister for Immigration and (“the Respondent”) pursuant to section 134 of the Migration Act 1958 (“the Act”) cancelled the visa that had been granted to Mr Barnett. The basis of the cancellation was that he had not “demonstrated that he has made or intends to make a genuine effort to comply with the conditions attached to his business visa”. The consequence of this decision was that the visas granted to his family under subsection 134(1) of the Act were also cancelled.

3.      By his present application Mr Barnett seeks to have the cancellation decision set aside.

THE ISSUES

4.      Are whether the Applicant has made a genuine effort to obtain a substantial ownership interest in an eligible business and actively participated in the day to day management of that business; and following the cancellation of the Applicant’s visa on 18 July 2006 whether the decision to cancel was the correct or preferable decision as at the time of the said decision, as pointed out in Re Wong and Minister for Immigration and Multicultural Affairs [2002] AATA 54 at para 37. This does not mean of course that latter events cannot be examined to see what light they throw upon circumstances at the time of cancellation.

RELEVANT LEGISLATION AND INSTRUCTIONS  

5. The decision to cancel was taken pursuant to subsection 134(1) of the Migration Act 1958 which states:

Cancellation of business visas

(1)  Subject to subsection (2) and to section 135, the Minister may cancel a business visa (other than an established business in Australia visa, an investment‑linked visa or a family member's visa), by written notice given to its holder, if the Minister is satisfied that its holder:

(a)  has not obtained a substantial ownership interest in an eligible business in Australia; or

(b)  is not utilising his or her skills in actively participating at a senior level in the day‑to‑day management of that business; or

(c)  does not intend to continue to:

(i)  hold a substantial ownership interest in; and

(ii)  utilise his or her skills in actively participating at a senior level in the    day‑to‑day management of;

an eligible business in Australia.

6.     Subsection 134(2) provides:

(2)  The Minister must not cancel a business visa under subsection (1) if the Minister is satisfied that its holder:

(a)  has made a genuine effort to obtain a substantial ownership interest in an eligible business in Australia; and

(b)  has made a genuine effort to utilise his or her skills in actively participating at a senior level in the day‑to‑day management of that business; and

(c)  intends to continue to make such genuine efforts.

7.     Whereas subsection 134(3) provides without limiting the generality of matters the Minister may take into account in determining whether a person has made the genuine effort referred to in subsection 134(2) the following matters namely:

(a)  business proposals that the person has developed;

(b)  the existence of partners or joint venturers for the business proposals;

(c)  research that the person has undertaken into the conduct of an eligible business in Australia;

(d)  the period or periods during which the person has been present in Australia;

(e)  the value of assets transferred to Australia by the person for use in obtaining an interest in an eligible business;

(f)  the value of ownership interest in eligible businesses in Australia that are, or have been, held by the person;

(g)  business activity that is, or has been, undertaken by the person;

(h)  whether the person has failed to comply with a notice under section 137;

(i)  if the person no longer holds a substantial ownership interest in a particular business or no longer utilises his or her skills in actively participating at a senior level of a day‑to‑day management of a business:

(i)  the length of time that the person held the ownership interest or participated in the management (as the case requires); and

(ii)  the reasons why the person no longer holds the interest or participates in the management (as the case requires).

8.     The Migration Series Instructions – 133 Visa Cancellation under subdivision G – Cancellation of Business Visa (“MSI – 133 Guidelines”) provide what is said to be guidance as to whether a genuine effort has been made for the statutory purpose. The guidelines are not binding upon the Tribunal, however, they are of assistance in determining the statutory prerequisites. They are not exhaustive. The factors to be considered as stated in the instructions are:

(a) business proposals hat the person developed;

(b) the existence of partners or joint ventures for the business proposals;

(c) research that the person has undertaken into the conduct of an eligible business in Australia

(d) the period or periods during which the person has been present in Australia;

(e) the value of assets transferred for use in obtaining an interest in an eligible business

(f) the value of ownership interest in eligible businesses in Australia that are, or have been, held by the person;

(g) business activity is, or has been, undertaken by the person;

THE HEARING

9.     The Applicant’s representative made a statement in which he conceded that Mr Barnett had not purchased a business. Consequently, he had not managed a business in Australia. He said that his client’s case turned on whether or not he has made genuine efforts to acquire a business in Australia as required under the Act.

10.     Mr Barnett told the Tribunal that he is a resident of Johannesburg and a citizen of South Africa. He is aged 54 and has an extensive academic and business background. He holds a Bachelor of Science (Honours) in Industrial chemistry and a Masters degree in Business Administration (MBA -1980) from the University of Witswatersrand in Johannesberg. Since 1999 he has been the Chief Executive Officer of Adcock Ingram Critical Care Ltd which produces health care medical products in South Africa. He is responsible for 900 staff and a turnover of in excess of $A160 million per annum.

11.      Mr Barnett confirmed that when he applied for his visa he signed a document which obliged him to acquire a business in Australia and to manage that business on a day-to-day basis. He confirmed that although he had tried to acquire a business in Perth he had for various reasons been unable to do so.

12.     Mr Barnett stated that during his business career he had acquired a number of businesses and four with his present employer over the past four years. This process included in some cases managing and conducting the due diligence process which was critical to ensuring that there were no business failures since acquisition. He was most anxious to ensure that any business acquired by him in Perth would meet his standards of due diligence.

Relevant Date

13.     The Tribunal is to look at the situation as it was at the date the decision under review was made in deciding whether the cancellation decision was at that time the correct or preferable decision (MIMA v Sharma (1999) 90 FCR 513 at 526). This requirement does not preclude this Tribunal from receiving evidence of post cancellation activities provided that there is a relevant nexus between those activities and the events, effort and intentions pre-cancellation and their likely business outcomes (Re Bhyat and MIMIA [2003]AATA 1051 at para 37; Re Yam and MIMIA (2004) AATA 283 at pare 56).

14.     The Applicant’s counsel submitted that the Tribunal should have regard to all the evidence, even that after the cancellation, to the extent that it may help to establish intention and represent the outcome, consequence or flow on effect of activities commenced prior to cancellation. Conversely, a lack of business activity subsequent to cancellation may, but not necessarily must, indicate a lack of genuine effort to carry out such activities.

Evidence about Mr Barnett’s business activities in Australia

15.      In his oral evidence Mr Barnett told the Tribunal that while a senior executive employee of Adcock Ingram Critical Care Ltd he made three visits to Australia in 2000 to 2001 to examine three possible acquisitions for the company in Melbourne prior to the grant of his 128 Business Skills visa. They were Mayne Health Care which was to big and expensive and the margins too low; Research Laboratories Australia Pty Ltd which was not progressed because the sales were inadequate and the buyer disagreed with market forecasts, and Sigma a pharmaceutical company which was valued too high. Mr Barnett said that at the time his employer was interested in purchasing an Australian business. Had this occurred, he would have been able to apply for a visa to move to Australia and be a senior executive in one of the local companies acquired. Subsequently, Adcock Ingram changed its policy and decided to concentrate on growing the company on the African continent, although this policy may again change later this year (2007) as Adcock Ingram may be sold.

16.     Mr Barnett told the Tribunal that as a result of the experience he had gained in successful acquisitions for his employer, he was fully familiar with all the commercial aspects of the acquisition business when he decided to examine the possibility of purchasing a business for himself in Perth. He stated that he had funds in excess of $A2 million available for this purpose held in a family trust of which he was the principal beneficiary (The Peepo Trust).

17.     Following the Applicant’s decision to move to Perth with his family, Mr Barnett applied for and was granted a 128 business skills visa. His family also received secondary visas. Subsequently his son became a student in Commerce at the University of Sydney where he is now completing his third year.

18.     Mr Barnett said that he undertook his first private visit to Australia in April 2003 after acquiring his visa on 16 January in the same year. The Applicant set out for the Tribunal his efforts since then to acquire a business in Perth.

19.     In 2002 a close friend, Mr Ian Palmer migrated to Australia on a 128 business visa and settled in Perth. Prior to his departure, they entered a verbal agreement covering the possibility of a joint venture should Mr Palmer be able to find a suitable business for them to purchase in Perth or for him to seek out suitable businesses in which one or other of them could have a significant equity holding and which Mr Barnett could manage on a day-to-day basis.  Following his arrival Mr Palmer proceeded to be Mr Barnett’s “eyes and ears” seeking out business possibilities.

20.     Subsequently, the two businesses Mr Palmer acquired for himself both failed. Mr Barnett told the Tribunal that he had formed the view that there is a virtual industry in Australia based upon selling non-viable businesses to persons seeking an investment in a business to meet their visa requirements, this increased the need for him not to compromise with due diligence prior to making any investments.

21.    Following his settlement in Perth, Mr Palmer sourced a number of business prospects and forwarded the details to Mr Barnett. They communicated primarily by telephone, and when Mr Palmer visited South Africa and Zimbabwe, which he did from time to time, they would meet to discuss the prospects. Between 2003 and 2005 Messrs Barnett and Mr Palmer considered investing in 10 businesses in Western Australia, ranging from grape growing and wine making in the Margaret River region to scallop and abalone farming, olive growing, property development, mortgage broking, a leisure and health centre, boat chartering and software consulting. For various reasons, Mr Barnett concluded that none of these investments, with the exception of mortgage broking and olive farming were viable. He was unable to proceed with an offer in the case of these two businesses because other investors took the olive investment, and he was gazumped in regard to the mortgage broking business.

22.     In late 2005 Mr Kevin Rawnsley also a close colleague of Mr Barnett migrated to Perth. Prior to his departure, Mr Barnett discussed with him a similar arrangement as he then had with Mr Palmer by which his friend would also source possible business investments in Perth. It was Mr Barnett’s intention that his two friends should work independently although they were both aware of each others involvement with him.

23.     Following his settlement in Perth, Mr Rawnsley sourced 12 business prospects during 2006 and forwarded the details to Mr Barnett, all of which he  rejected, with the exception of ATX Medical Solutions which he claimed is currently under investigation. In cross examination, Mr Barnett confirmed to the Tribunal that all but two of the investments on Schedule 2 of the statement tabled at the hearing (not including ATX Medical Solutions) had been received by him after receiving advice that his visa was being cancelled on 18 July 2006.

24.     Mr Barnett told the Tribunal that notwithstanding the cancellation of his visa, his intention remained to continue the search for a suitable business, to acquire such a business and then to re-locate to Perth immediately thereafter. He was continuing to seek out proposals and was currently considering a medical products company (ATX Medical Solutions) based in Perth with operations in Sydney and Brisbane which he had sourced from a newspaper advertisement. A confidentiality agreement has been signed and he was assessing the target company’s viability prior to undertaking due diligence in Perth. 

Funds for Investment and other Australian Investments

25.    Mr Barnett confirmed to the Tribunal that he had slightly in excess of $A2 million available for transfer to Australia for a suitable investment. The funds were in SUS.1.3 million (approximately) and held in a family trust set up in Jersey. (The  Pepo Trust, see  Document A4). In addition, Mr Barnett has a Money Market Call account with the Standard Bank of South Africa holding equivalent funds in excess of $A600,000.               

26.   The Tribunal asked Mr Barnett whether he had made any investments in Australia. He told the Tribunal that his only investment was a placement of  $A50,000 in a bank account of which approximately $A24,000 had been spent in meeting his expenses when he made his four visits to Australia and the remainder had been spent by his son a student at Sydney University. The account had been subsequently replenished.

27.   The Tribunal asked Mr Barnett why he had concentrated exclusively on possible investments in Perth when there were many more opportunities elsewhere in Australia more suitable to his skills set. He replied that having visited various capital cities, his family wanted to settle in Perth where they knew other South African migrants.

Has Mr Barnett made a genuine effort to obtain substantial ownership of an eligible business?

28.    According to Departmental records Mr Barnett has made four visits and has spent only 36 days in Australia since he was granted his business visa on 16 January 2003. The Tribunal noted that the Ministerial guidelines suggest that the holder of a business visa should remain in Australia for a minimum of six months following the grant of a visa. While the Tribunal appreciates that with his current employment responsibilities in South Africa this would have been impractical, nevertheless, it regards his very limited time in Australia and his apparent determination to find an investment in Perth despite the opportunities elsewhere in Australia as serious impediments to his claim.

29.    Furthermore, the Tribunal was not convinced, on the basis of the paucity of documentary evidence provided to it by the Applicant  that he had undertaken alone or in concert with his two “eyes and ears” in Perth, or elsewhere in Australia, a level of search for a suitable business which the Tribunal would consider to be a “genuine effort. In fact Mr Barnett’s clear determination to restrict the search for a suitable business to Western Australia and preferably to the Peth region left the Tribunal with the firm view that he was not interested in locating elsewhere in Australia regardless of the opportunities which may exist there.

30.   Furthermore, the value of assets transferred to a bank account in Australia $A50,000 for incidental expenditure on his visits and for the use by his son a student at the University of Sydney, are plainly inadequate to meet and were not intended to meet the intent of the legislation. Under cross examination by the Tribunal Mr Barnett did not demonstrate any interest in making investments on the Australian stock exchange even though he told the Tribunal that his hobby was to invest in shares. He stated that the funds he was holding in the family trust for future investment were denominated in $US and none of which were invested in Australia. 

Has Mr Barnett used his skills in senior management?

31.     In his cross-examination by Ms McDonald for the Respondent, Mr Barnett told the Tribunal that he had a fairly demanding role as CEO of Adcock Ingram and in a normal week he would spend nine hours a day, for five days a week on company business. Mr Barnett also confirmed that in his original visa application he had stated that it was his intention to establish a health care business in Australia as that was where his natural expertise lay.  

32.     When asked why he had only spent 26 days in Australia since obtaining his visa, Mr Barnett replied that he had not found an adequate opportunity to relocate. He denied that his current responsibilities with Adcock stopped him from coming nor had they hindered his endeavours to acquire a suitable business in Australia.

33.    Mr Barnett was asked to explain his comment in the Department’s “1010 Survey of Business Skills Migrant – figures 24 months” on page 105 to109 question 33 (contained in the T Documents). Where the visa holder was asked what are the main reasons you have not engaged in business in Australia? Mr Barnett had responded “Difficulty sourcing products as well as still managing business at home.” However, under cross-examination, he continued to assert that it was the lack of suitable targets for acquisition, not his present responsibilities, which prevented him from spending more time in Australia. The Tribunal does not believe this explanation is credible.

34.     The Tribunal also noted Mr Barnett’s responses to cross examination in regard to his claims that of the companies noted in his Schedule 1, the Applicant  only provided, at page 71, a single company analysis covering the Australian health care market, despite the fact that prior to applying for a visa, he had identified on behalf of his employer, three companies within this sector, Mayne Health Care, Research laboratories and Sigma Pharmaceuticals, which he had regarded as primary targets in keeping with his experience and qualifications at the time he applied for his visa.

35. Subsection 134(2) provides exculpatory provisions which, if met, prevent the cancellation of a business visa. The tests for ascertaining whether the “genuine effort” has been made are set out in ss134(3) Migration Act but are not exclusive.
The Tribunal noted that Mr Barnett confirmed under cross-examination that he had no other documents relating to the due diligence which he claimed to have conducted on target companies, he replied, “not with me. What I had and what I kept is enclosed in the documents submitted.”  In view of the lack of business plans, even for the two businesses which the Applicant claimed were definitely of initial interest but later lost to him, the Tribunal is not convinced by Mr Barnett’s explanations. There was a paucity of compelling evidence that he conducted his preliminary investigations to the extent the Tribunal would have expected, in view of his stated insistence upon always making careful and detailed due diligence investigations of target companies.

Should  the Tribunal exercise its residual discretion?

36.      The Tribunal has taken into account the limited time Mr Barnett has spent in Australia in pursuit of his intention to purchase an eligible business, and the corresponding time he has spent in South Africa on his other commercial interests. On the evidence, there appears to be no correlation between his South African employment and his proposed Australian interests as under its present owners his employers have no interest in purchasing an Australian company and thus Mr Barnett has no opportunity to become a substantial shareholder of an eligible business under the Act.

37.     Mr Barnett has claimed that he is currently investigating a company ATX Medical Solutions which is based in Perth. He confirmed to the Tribunal that his interest in this company post dated the cancellation of his visa on 18 July 2006. He stated that a confidentiality agreement has been signed and he is assessing the company’s viability prior to conducting a due diligence in Perth. The Tribunal has considered whether the cancellation of his visa would, in the event of him conducting  further due diligence, or proceeding to a purchase, warrant the exercise of the residual discretion in his favour. As Mr Barnett would be eligible to apply for other visas so that he could visit Australia for this purpose, The Tribunal can find no reason justifying the exercise of the residual discretion to restore Mr Barnett’s visa.

Would members of his family suffer hardship if their visas were cancelled?

38. Section 134(5) provides, in relation to a visa held by a person who is a member of the family of a person whose business visa has been cancelled:

The minister must not cancel the other person’s business visa under subsection (4) if the cancellation of that visa would result in extreme hardship to the person.

39.     In Re Setia Wan and Minister for Immigration and Multicultural Affairs [2002] AATA 260 the Tribunal noted the terms “extreme hardship” was considered by the Federal Court in Man Ki Kim v Minister for Immigration and Ethnic Affairs (1995) 37 ALD 481 at page 487:

“…..it is my opinion, important to approach the phrase “extreme hardship” in a broad way. Clearly, it imports a high degree, perhaps a very high degree of hardship….”

40.    Mr Barnett’s family consists of his wife and a son who is a student at the University of Sydney. They were issued visas concurrently with Mr Barnett and consequently, their visas would be cancelled at the same time. However, the Applicant told the Tribunal that he did not wish his son’s situation to be considered in the context of his visa as his son was able to obtain a student visa in his own right.

41.     In all the circumstances, the Tribunal does not consider that any difficulties or disruption constituting hardship that is exceptional, unexpected or exceedingly great in degree has fallen upon members of Mr Barnett’s family. Consequently, it finds that the cancellation of his wife’s and son’s concurrent visas would not result in extreme hardship to them.

CONCLUSION

42.    Having regard to all the material before the Tribunal in this matter, it is satisfied that the Applicant did not:

make a genuine effort to obtain a substantial ownership in an eligible business in Australia as defined in subsection 134(10) of the Act;
nor did he utilise his skills in activity participating at a senior level in the day-to-day management of an eligible business in Australia as defined by paragraph 134(1)(b) of the Act at the time of cancellation of his visa.

43.     The decision under review is affirmed.

I certify that the 43 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member M D Allen and Mr D Connolly, Member

Signed:         [sgd] ……Mwela Kapapa........

Associate

Dates of Hearing  25 May 2007
Date of Decision  22 June 2007

Solicitor for the Applicant          Diamond Conway Lawyers

Solicitor for the Respondent    DLA Phillips Fox