Chen and Minister for Immigration and Citizenship
[2008] AATA 977
•4 November 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 977
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2007/3638
GENERAL ADMINISTRATIVE DIVISION ) Re HAIBO CHEN Applicant
And
MINISTER FOR IMMIGRATION AND CITIZENSHIP
Respondent
DECISION
Tribunal Mrs Josephine Kelly, Senior Member Date4 November 2008
PlaceSydney
Decision The reviewable decision is affirmed. ....................[sgd]........................
Senior Member
Mrs Josephine Kelly
CATCHWORDS
MIGRATION – Business Skills Visa – Cancellation – Applicant and wife set up electronics export company – Whether business – Evidence of business activity considered – Held not a business – Whether genuine efforts – Held no genuine efforts - Residual discretion not exercised – Decision affirmed
Administrative Appeals Tribunal Act 1975, s 37
Migration Act 1958, s 134
Hope v Bathurst City Council (1980) 144 CLR 1
Kim v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 38 AAR 304
Shi v Migration Agents Registration Authority (2007) 158 FCR 525
Shi v Migration Agents Registration Authority (2008) 248 ALR 390
REASONS FOR DECISION
4 November 2008 Mrs Josephine Kelly, Senior Member 1. Mr Haibo Chen is a successful businessman who lives in China. He was granted a Business Skills (Migrant) Class AD) (Subclass 127 – Business Owner) under the Migration Act 1958 (the Act) on 5 November 2003. It was cancelled on 10 July 2007. He seeks the review of that decision. For the reasons that follow, I have decided to affirm the decision to cancel Mr Chen’s visa.
Issues
2. The issues in this application are:
(a) Has Mr Chen obtained a substantial ownership interest in an eligible business in Australia for the purposes of s 134(1)(a) of the Act?
(b) Is Mr Chen utilising his skills in actively participating at a senior level in the day-today- management of an eligible business in Australia (s 134(1)(b) of the Act)?
(c) Does Mr Chen intend to continue to hold a substantial ownership interest in Wisdom and utilise his skills in actively participating at a senior level in the day-to-day management of the business?
(d) Has Mr Chen made a genuine effort:
(i) to obtain a substantial ownership interest in an eligible business in Australia; and
(ii) to utilise his skills in actively participating at a senor level in the day-to-day management of that business; and
(iii) does he intend to continue to do so (s 134(2)(a), (b) and (c) of the Act)?
(e) Should the Tribunal exercise the residual discretion not to cancel Mr Chen's visa?
Has Mr Chen obtained a substantial ownership interest in an eligible business in Australia for the purposes of s 134(1)(a) of the Act?
The case for Mr Chen
3. The case for Mr Chen was that he owns 80% of an Australian registered company called Wisdom Electronics Pty Ltd (Wisdom) which is an eligible business.
Consideration
4. The evidence available to the Tribunal included the documents provided pursuant to s 37 of the Administrative Appeals Act 1975, a written statement and oral evidence from Mr Chen and his wife, Ms Zhang, and various documents tendered in support of the cases of both parties. Mr Chen was in China at the time of the hearing and gave evidence by telephone.
5. Mr Chen lodged his application for a Business Skills (Migrant) Class AD (Subclass 127 – Business Owner) on 13 February 2003. In his application he indicated that he has a Chinese “Bachelor Degree of Engineering” from the Hefei University of Technology. He is now General Manager of Wisdom Multimedia (Shenzen) Ltd, a Chinese based company.
6. A business plan prepared in September 2003 referred to establishing a manufacturing plant in Melbourne and detailed how the business was to:
operate as an OEM and the the products will mainly be Car Audio & Video, DVD & MP players, portable VCD & MP3 and SKDs. It will purchase raw materials from China and assemble in Australia.
It proposed that A$345,000 – A$355,000.00 worth of capital be invested in Australia.
7. The visa was granted in November 2003. Mr Chen entered Australia for the first time on 4 May 2004 and left three days later. A 24 month survey was sent to him on 12 April 2006, and a response was sent by his migration agent on 7 November 2006. Mr Chen had returned to Australia on 6 November 2006 and left the next day, that is the day his migration agent sent the response. He came back to Australia on 22 March 2008 and left on 3 April 2008. Between 9 July 2002 and 7 November 2006 Mr Chen had spent 6 days in Australia (and 1155 days outside Australia).
8. It seems on the evidence that Ms Zhang and the two children came to Australia on 6 November 2006 and have been here ever since. The children were enrolled at Willoughby Public School on 27 November 2006, and were aged 12 and 9 at the time of the hearing.
9. The notice of intention to cancel the visa was given on 9 February 2007 and the decision made to cancel the visa on 10 July 2007. The application to this Tribunal was filed on 3 August 2007.
10. Wisdom was registered on 23 February 2007. Mr Chen relied on his 80% share holding of 50,000 $1 shares in Wisdom as satisfying the requirement that he have a substantial ownership interest in an eligible business. Ms Zhang owns 20% of the shares. Wisdom registered for GST and obtained a tax file number in March 2007. Wisdom's address is the rented house in Australia where Ms Zhang and the children live. An undated ASIC form filed in the Tribunal by facsimile on 30 January 2008 indicated that as of that date 20,000 shares were paid and 30,000 shares were unpaid. However, as of 15 April 2008 all the shares were fully paid.
11. The first question that was argued is whether Wisdom is a "business" within the definition of "eligible business" in s 134(10) of the Act. What activities has it undertaken? The evidence on behalf of Mr Chen was that Wisdom imports into Australia and sells to a buyer in Australia, locks and door hardware. He said that he located the Chinese manufacturer and Australian buyer on the internet. Ms Zhang said that there had been two sales of hardware and locks in the six month before the hearing. Mr Chen gives her the price she charges to Mr Lee who usually buys them, although sometimes it is another person. Mr Chen's evidence was that at least four further importations would occur in the year.
12. Material supplied to the Tribunal in January 2008 with a letter signed by Ms Zhang was tendered during the hearing. A business activity forecast prepared by Ms Zhang, described the activity undertaken by Wisdom as: continuing to import door hardware, continuing efforts to import electronic goods, and to open new markets for importing synthetic jewellery and exporting Australian building material to China. A company structure stated that aside from Mr Chen and Ms Zhang, there were two employees, a Company Secretary and an assistant. The structure proposed the future employment of a market officer and a purchaser officer. A financial document reported a turnover of $93,000 and costs of sales of $63,000 for the period September 2007 to January 2008. Projected profit/loss for the financial years 08/09, 09/11, 10/11 showed turnovers of $300,000, $500,000 and $800,000 for those years. A Business Activity Statement for the December 2007 quarter showed total sales of $61,262, GST of $4,469 and and wages of $8300, A Business Activity Statement for the period 1 January to 31 March 2008 showed total sales of $44,570, including GST, and wages of $13,088.
13. Pay records on Wisdom letterhead for Ms Zhang and two other employees for the period October 2007 to January 2008 were in evidence. Bank receipts for payments to each of them for that period were also included. Letters to superannuation funds for contributions for the employers for the December 2007 quarter were also provided.
14. The Respondent's statement of facts and contentions dated 20 March 2008 stated that Wisdom made a profit of $4,287 September 2007 to January 2008. I infer that this figure was taken from a Profit/Loss statement for Wisdom tendered on behalf of Mr Chen.
15. A management report for Wisdom for the period 1 July 2007 to 31 March 2008 showed sales of $96,210.85, less the cost of goods sold of $53,384.30. The report showed that salaries and wages were $21,388 and customs and duty $10,609.58. The gross profit from trading was $42,826.55. The total profit recorded (before income tax) was $19,160.95, which is in contrast to the loss in the previous year (2006/2007) of ($180.00) The accountant projected sales of more than $200,000 for the year and net profit of approximately $50,000. The Balance Sheet showed 50,000 fully paid $1 shares and assets included shorter-term deposits with St George of $300,000. The accountant's financial plan forecast $150,000 revenue for the six months, April to September 2008. Mr Chen considered that in the current sales conditions, he could realize a turnover of $A250,000 for the first year, earning a net profit of 20% ($A50,000). He estimated turnovers of $400,000 and $500,000 for the second and third years, with profits of $A80,0000 and $100,000 respectively.
16. Evidence of a shipment in the final quarter of 2007 included a packing list, an invoice to Wisdom from a Chinese company, Zhongshan Hua Feng Lock Product Co Ltd, dated 10 October 2007, for US$28,745.62, and an invoice from Wisdom to Décor Lock and Hardware P/L dated 5 November 2007 for A$58,402.30. No foreign exchange record supported this transaction.
17. A foreign exchange record showed a payment dated 3 January 2008 from Wisdom of US$4,500 to Shanghai Fengwan Import and Export. There was also a transfer of US$2,000 from Wisdom to an account name Ye Cui Min in China, dated 8 January 2008. The payment of 3 January 2008 may relate to the following shipment.
18. The following was evidence of a shipment on about 3 February 2008 : a bill of lading, an insurance document, and a packing declaration dated 21 January 2008 showing a shipment to Wisdom from Shanghai Fengwan Import & Export Co Ltd, Shanghai, to Sydney of 511 cartons of locks, door handles and bathroom fittings (door hardware) valued at US$20,357. There was also an invoice to Wisdom from an Australian freight forwarder dated 20 February 2008 for the cost of transporting goods, for $4,432.47.
19. The evidence of the sale of the imported goods is a two-page invoice dated 29 February 2008 from Wisdom to Décor Lock & Hardware for $14,360.30 and $27,902.60, that is a total invoice of $42,262.90.
20. A foreign exchange record of Wisdom, made by Ms Zhang, shows a transfer of A$1,895.77 to Shanghai Fengwan Import and Export Co Ltd on 25 February 2008. The evidence of transfers to that company for the imported goods is therefore only in the order of A$10,000 in total.
21. Mr Chen gave evidence that because of the small size of the market for locks and hardware in Australia, he was considering establishing other businesses. He has other ideas, including a business servicing popular brands of domestic electronic appliances manufactured in China and sold in Australia, for which there is presently no after-sales servicing, which reduces their popularity. He would train the staff. This seemed to contradict other evidence he gave that when he tried unsuccessfully in about 2007 to sell his Chinese company's electronic devices in Australia, he found that Australians buy according to brand names, not quality and price.
22. I find that the evidence discloses that Wisdom imported door hardware on two occasions, the first in October 2007, and the second in February 2008. Both imports occurred after the cancellation of the visa. I find that that is the only activity that Wisdom has carried out. Other activities carried out in 2003, 2006 and 2007 were not carried out by Wisdom and will be dealt with below in relation to the question of whether Mr Chen has made genuine efforts to satisfy the criteria set out in s 134(2) of the Act.
23. An invoice from Shanghai Fengwan Import & Export for door hardware totalling US$18,506.40 and dated 21 June 2008 was filed with the Tribunal on January 2008. I give no weight to this as evidence supporting that Wisdom is a business. I also accord no weight to an order from Decor Lock & Hardware dated 16 May 2008 for $52,426 worth of goods, which was provided after the hearing. It was also the only order from that company in evidence, although it was the purchaser of goods imported in February.
24. This case was heard before the High Court gave its decision in Shi v Migration Agents Registration Authority (2008) 248 ALR 390 on 30 July 2008. On behalf of the Minister for Immigration and Citizenship, it was argued that I should not take into account evidence occurring after the cancellation decision, save as any such evidence may have cast light upon the decision as of the date of cancellation. This argument was based on the decision of the Full Court of the Federal Court in Shi v Migration Agents Registration Authority (2007) 158 FCR 525 which was overruled by the High Court. In my view, the legislative scheme of the Migration Act does not limit my consideration in the way the Full Federal Court found.
25. Taking into account Wisdom's activity as disclosed by the evidence before me,, I am not persuaded that Wisdom was a "business" within the meaning of s 134 of the Act. The discussion of what a business is in Hope v Bathurst City Council is helpful. A business may be regarded as being a "commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis" (at pages 8 and 9). The Court also found that a business may be conducted in a small way (page 10). I am not persuaded that Wisdom's activities are being carried on for profit, or on a continuous and repetitive basis. It has apparently one purchaser and has had two suppliers. There have been only two shipments, both of which occurred after the cancellation of the visa. There is no basis for the projected earnings for 2008 or beyond as stated in the management report, or by Mr Chen. Mr Chen's own evidence seems to contradict that bright future. He said that he was looking at other kinds of businesses because the manufacturer could not meet the purchaser's requirements, and conflicting evidence that the Australian market was too small. Further, there was no evidence that Mr Chen had tried to find another manufacturer in China to meet the asserted demand, which would have seemed an obvious step to take to expand the business.
26. As I have found that Wisdom is not a business, it follows that Wisdom is not an “eligible business”, as defined in s 134(10) of the Act. That is a sufficient ground for the cancellation of Mr Chen’s visa. It follows that issues (b) and (c) do not strictly arise for consideration. However, given the emphasis on Mr Chen's involvement in Wisdom, I think it appropriate to make the following findings. On the evidence before me, assuming s 134(1)(a) was satisfied, I would not have found that Mr Chen utilised his skills in actively participating at a senior level in the day-to-day management of Wisdom. The evidence demonstrates clearly that Ms Zhang dealt with all aspects of the activity in which Wisdom was involved. I accept that he and Ms Zhang communicated frequently, perhaps every day, by email, telephone and internet telephony. However, I infer that that was because of their relationship as husband and wife, and parents of two children, living in separate countries. Much of the business correspondence included personal greetings between them and conveyed personal family information,, for example, about how the children were doing in Australia.
27. The activity carried out by Wisdom has been limited, and in my view would not have required daily communication. This limited amount of activity also caused me to doubt the evidence given by Ms Zhang and Mr Chen about the role of two employees. The documentary evidence about payment of employees apart from Ms Zhang was limited to the period of October 2007 to January 2008. Later accounting material records amounts for "salaries and wages", but there was no break up for individual employees. Given the little activity that occurred, I am not persuaded that Wisdom had employees apart from Ms Zhang for any period other than October 2007 to January 2008. Mr Chen said during his evidence that he thought that Wisdom employed two or three part-time workers. He did not know their names or roles. He said that his wife conducted the day-to-day management of the business. She managed the employees and engaged the accountant, whom Mr Chen did not know. Mr Chen said that "we are husband and wife", which I infer means that they work together as a team. He said that:
I will sign documents if needed; have fully authorised wife to conduct business.
Has Mr Chen made a genuine effort:
(i) to obtain a substantial ownership interest in an eligible business in Australia; and
(ii) to utilise his skills in actively participating at a senor level in the day-to-day management of that business; and
(iii) does he intend to continue to do so (s 134(2)(a), (b) and (c) of the Act)?
Mr Chen's position
28. Mr Chen explained that there was a delay in his moving to Australia because a matter arose which was of significance to his Chinese business. In early 2004, the Chinese government changed its policy. A producer of high-tech products was entitled to purchase industrial land at a preferential price. Mr Chen's business was eligible, but the process was unexpectedly lengthy. He applied to purchase land in mid-2004 but did not obtain the land use certificate until 16 June 2006.
29. He also said that he needs to stay in China to manage his Chinese business to maintain goodwill by providing after-sales service, and to support his family before his Australian business makes money.
30. Mr Chen gave evidence that they transported DVDs by air and tried to sell them in Australia through a person who had been their prior sales agent in Australia. However, the product had a very limited market because of its high-tech nature. Another reason he gave for the marketing failure was that Australians buy according to brand, and not quality and price. Ms Zhang surveyed many markets and shops with little success and they sold the goods at a loss. She said that the products were worth A$30,000.
31. Mr Chen said that he had to reconsider other businesses that he might get involved in. He said that he was advised to open a small restaurant or a grocery shop, which would require small investment but would meet migration requirements. He decided to try to engage in a business that might bring "our" business skills, relating to trade and electronic products. He had sold the majority of his business and land use rights in China by 30 July 2007. On 30 August 2007 he transferred A$400,000 into Wisdom's bank account in Australia which was more than he had indicated in his application.
32. Mr Chen stated that although many of his business activities occurred after the cancellation of the visa, they were the result of his preparations before that, and they complied with the commitment he made in his application. He said that he intended to fulfil his visa obligations and to move to Australia in the future.
33. He also said that when he visited before the hearing, which I infer was March – April 2008, he and his wife had inspected the property market as they plan to buy a house. He said that all their efforts demonstrated their continuous and genuine intention to settle down and operate businesses in Australia.
34. Mr Chen said that he suffers acrophobia and has had heart surgery in the past. His acrophobia makes it stressful to be in high places and it harmed his heart. He avoids flights. He asked to appear at the hearing by telephone from China for that reason.
Consideration
35. In his visa application in 2003, Mr Chen indicated that he would invest approximately $A350,000 to build a company in Australia and employ five Australians. He stated that his business in China involved the development, production and sale of a home DVD player. The company's annual turnover was the equivalent of A$5 million, and total assets were equivalent to A$A2.5 million.
36. As discussed above, there was evidence of various business proposals and forecasts for Wisdom. I find that no effort was made to establish the business proposed at the time Mr Chen applied for his visa. Later business proposals and forecasts were speculative and ad hoc.
37. According to Mr Chen's lawyers in a letter dated 30 April 2007, Mr Chen's Chinese company had just shipped various electronic goods to Wisdom in Australia. It also stated that Mr Chen had found a purchaser for 65% of his interest in the land in China and would receive about A$1,965,079, and would transfer the funds to Australia. A document in Chinese and a translation were provided in support of that assertion. The letter also stated that Mr Chen had transferred funds totalling $65,000 to Australia. His wife held bank accounts with St George and HSBC.
38. I accept that on 27 August 2007 Mr Chen transferred $391,990 into a St George Bank account in the name of Wisdom. On the next day $300,000 was transferred from that account to another account, which I infer was a term deposit account. I come to that conclusion because there was evidence that, as at 25 January 2008, a St George term deposit with a maturity date 28 March 2008, had the same balance, that is $300,000. The account holder was not specified. Such a deposit does not represent an investment in a business. Clearly, the investment is short term and redeemable at the end of the fixed period. That is understandable where cancellation of the visa has occurred, and an appeal is underway, however, it does not support a firm intention to carry on business in Australia. There certainly has not been a transfer of funds in the order of the A$1,965,079 which had been suggested in April 2007.
39. In a letter sent to this Tribunal by facsimile on 9 November 2007, Ms Zhang stated that she and her family did not participate in business in Australia because her mother's sickness prevented it, and because of the land purchase and sale. She also stated that their first shipment of electronic goods worth A$20,000 arrived in Australia on 18 April 2007. They had hoped to conduct retail, wholesale, service after sales, technical support and future manufacture and research centre.
40. Material was provided after the hearing, apparently organised by Ms Zhang. She listed electronic goods as a failed business. She alleged that there were successful activities with Galas Electronics in 2003 in relation to a car DVD and home theatre, which were products manufactured by Mr Chen's Chinese company. In 2006 Mr Chen decided to market GPS (global positioning systems) and DPF (digital photograph frames), electronic products, which failed. There was also evidence of sourcing lock samples in China and sending them to Mr Jack Li in March / April 2007.
41. The material provided in support of efforts in 2006 and 2007 to sell electronic goods was unpersuasive. At highest, the efforts made were desultory. For example, there was evidence that three sample DVD players were sent to an Australian firm in December 2006, and a GPS was taken to Australia in February 2007 for trial by someone. A letter headed "China Electonics Australia Pty Ltd" (sic) dated 16 May 2008 states that Mr Chen had contacted that firm from China in late 2006 or early 2007 about selling his products, and later Ms Zhang provided some sample products, unspecified, however, they had difficulty selling them and Ms Zhang eventually took the samples. There were other documents, including some emails, partly in Chinese and with handwritten annotations including "Wisdom", which mentioned electronic products, however, in my opinion, they only reinforce the conclusion expressed above.
42. An undated translated Disease Diagnosis Certificate from a Chinese hospital supported Mr Chen's evidence that he has heart problems and acrophobia. However, Mr Chen's evidence about avoiding flying was inconsistent with his evidence at the hearing that he had travelled to Thailand, the US, Germany, Austria by air to attend exhibitions. The business plan provided in September 2003 stated that in the beginning of that month, Mr Chen had travelled to Germany, Switzerland and Taiwan to visit clients. Mr Chen has only been in Australia for 6 days since the grant of his visa.
43. I find, on the evidence, that Mr Chen's time and effort is devoted to carrying on business activities in China. I am not persuaded that they relate only to finalising the business he said he has sold. I do not accept that he has made or will continue to make the genuine efforts required by s 134(2) of the Act. In coming to that conclusion I have considered all the evidence, and the matters set out in s 134(3).
Should the Tribunal exercise the residual discretion not to cancel Mr Chen's visa?
44. I am not persuaded that the residual discretion should be exercised. Ms Zhang said that there were two reasons for wanting to come to Australia, the instability in Chinese policies affecting business compared to Australia, and also to provide the opportunity for their children to study English.
45. I find that Mr Chen has no intention of residing in Australia or conducting business here. Clearly, he has a successful business in China. I am not persuaded that, if Mr Chen were afforded more time, he would “undertake what was required of him” in terms of s 134 of the Act (Kim v Minister for Immigration and Multicultural and Indigenous Affairs at 310).
46. Mr Chen said that his children would suffer difficulty adjusting to life in China if the visa was cancelled. He said that they cannot write Chinese characters. They do speak Mandarin with him and his wife. He said that if they are returned now, they will have wasted a significant period of their lives.
47. There was no application before me from Ms Zhang or the children asserting extreme hardship under s 134(5) of the Act. The essence of the argument put by Mr Chen is that I should exercise the discretion in order to allow his children to be educated in Australia. That is not a matter that would persuade me to exercise the residual discretion in s 134 of the Act.
Decision
48. For the reasons set out above, the reviewable decision is affirmed.
I certify that the 48 preceding paragraphs are a true copy of the reasons for the decision herein of Mrs Josephine Kelly, Senior Member.
Signed: ………[sgd]……..
Steven Mulipola, Associate
Date of hearing: 8 May 2008
Date of final submissions: 10 June 2008
Date of decision: 4 November 2008
Representative for the Applicant: Southern Hemisphere Consulting Pty Ltd
Solicitors for the Respondent: Clayton Utz
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