Cheng v Minister for Immigration
[2012] FMCA 911
•16 November 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CHENG & ORS v MINISTER FOR IMMIGRATION & ANOR | [2012] FMCA 911 |
| MIGRATION – Review of Migration Review Tribunal decision – refusal of business skills residence visa – criteria based on business turnover – Tribunal finding that the applicant’s business did not satisfy the turnover criterion because it was in substance an agent and only entitled to commission income – whether the Tribunal’s understanding was correct in law or fact considered. WORDS AND PHRASES – “turnover”. |
| Migration Regulations 1994 (Cth) |
| AnvMinister for Immigration (2007) 160 FCR 480 Aris-Bainbridge v Turner Manufacturing Ltd [1950] 2 All ER 1178 Attorney General (NSW) v Quin (1990) 170 CLR 1 Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Collector of Customs v Agfa-Geveart Ltd (1996) 186 CLR 389 Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41 Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 El Ess v Minister for Immigration (2004) 142 FCR 43 Hope v Bathurst City Council (1980) 144 CLR 1 International Harvester Company of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Company (1958) 100 CLR 644 J. Gliksten & Sons v Green [1929] AC 381 Kennedy v De Trafford [1897] AC 180 at 188 Pepsi Seven-Up Bottlers Perth Pty Ltd v Commissioner of Taxation (1995) 62 FCR 289 Pinkstone v R (2004) 219 CLR 444 Scott v Davis (2000) 204 CLR 333 Soegianto v Minister for Immigration [2001] FCA 1612 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 Vetter v Lake Macquarie City Council (2001) 202 CLR 439 Voxson Sales Pty Ltd v Collector of Customs [1993] FCA 609 |
| First Applicant: | JU CHEN CHENG |
| Second Applicant: | HUNG CHANG CHEN |
| Third Applicant: | POYU CHEN |
| First Respondent: | MINISTER FOR IMMIGRATION & CITIZENSHIP |
| Second Respondent: | MIGRATION REVIEW TRIBUNAL |
| File Number: | SYG 933 of 2012 |
| Judgment of: | Driver FM |
| Hearing date: | 27 September 2012 |
| Delivered at: | Sydney |
| Delivered on: | 16 November 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr L Karp |
| Solicitors for the Applicant: | Christopher Levingston & Associates |
| Counsel for the Respondents: | Mr M Smith |
| Solicitors for the Respondents: | Sparke Helmore |
ORDERS
The further amended application filed on 27 September 2012 is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 933 of 2012
| JU CHEN CHENG |
First Applicant
HUNG CHANG CHEN
Second Applicant
POYU CHEN
Third Applicant
And
| MINISTER FOR IMMIGRATION & CITIZENSHIP |
First Respondent
| MIGRATION REVIEW TRIBUNAL |
Second Respondent
REASONS FOR JUDGMENT
Introduction and background
This is an application to review a decision of the Migration Review Tribunal (the Tribunal). The decision is dated 2 April 2012 on its cover and was certified on behalf of the Tribunal’s district registrar the following day. The Tribunal affirmed a decision of a delegate of the Minister not to grant the applicants Business Skills (Residence) visas.
The following statement of background facts is derived from the submissions of the parties.
On 19 May 2009, the first applicant (Mrs Cheng) lodged an application for a Business Skills (Residence)(Class DF) visa (Subclass 892 visa)[1]. Mrs Cheng is a citizen of the Republic of China (Taiwan)[2]. The second applicant (Mr Chen) is the first applicant’s husband and the third applicant is the son of the first and second applicants[3].
[1] court book (CB) 12-33
[2] CB 13
[3] CB 16-19
In order to be granted a Subclass 892 visa, a visa applicant must satisfy certain primary criteria set out in Schedule 2 to the Migration Regulations 1994 (Cth) (Migration Regulations). At the time that the applicants made their application, the criteria for the grant of a Subclass 892 visa included the following criteria set out in Schedule 2 of the Migration Regulations:
a)the applicant has had, and continues to have, an ownership interest in one or more actively operating main businesses in Australia for at least two years immediately before the application is made[4]; and
b)unless the appropriate regional authority has determined that there are exceptional circumstances, the applicant meets at least two of the following requirements[5]:
i)in the 12 months immediately before the application is made, the main business provided an employee, or employees, other than the applicant or a family member, who were Australian citizens or permanent residents or New Zealand passport holders, with a total number of hours of employment at least equivalent to those that would have been worked by one full-time employee;
ii)the net value of the business and personal assets in Australia of the applicant and/or the applicant’s spouse, is, and has been throughout the 12 months immediately before the application is made, at least AUD250,000;
iii)the total value of the net assets owned by the applicant and/or the applicant’s spouse in the main business is, and has been throughout the 12 months immediately before the application is made, at least AUD75,000; and
c)in the 12 months immediately before the application is made, the applicant’s main business had an annual turnover of at least AUD200,000[6].
[4] clause 892.211 (1)
[5] Clause 892.212(a), (b) and (c)
[6] clause 892.213
The applicants sought a Subclass 892 visa on the basis that Mrs Cheng had been sponsored[7] for the grant of a Subclass 892 visa. The second and third applicants’ application for a Subclass 892 visa was dependent upon Mrs Cheng satisfying the relevant criteria[8].
[7] CB 34
[8] clause 892.311 of Schedule 2 to the Migration Regulations
The delegate’s decision
On 7 May 2010, the Minister’s delegate refused to grant the applicants a Subclass 892 visa on the basis that Mrs Cheng did not satisfy the requirements of clause 892.221 of Schedule 2 to the Migration Regulations[9]. The delegate was not satisfied that the main business nominated by the first applicant, Nisi Group (Australia) Pty Ltd (Nisi Group), had been actively operating in the two years immediately prior to the making of the application[10]. It was unnecessary, therefore, for the delegate to consider any other of the applicable criteria for the particular visa sought by Mrs Cheng[11].
[9] CB 471-481
[10] CB 481
[11] CB 481
The Tribunal proceedings
On 20 May 2010, Mrs Cheng lodged an application with the Tribunal to review the delegate’s decision[12]. On 2 April 2012, the Tribunal affirmed the delegate’s decision to refuse to grant Mrs Cheng a Subclass 892 visa, but did so on the basis that she did not satisfy the requirements of clause 892.213 of Schedule 2 of the Migration Regulations[13].
[12] CB 482-488
[13] CB 627-636
At the Tribunal hearing, Mrs Cheng gave evidence and provided documents in relation to the activities of Nisi Group. The evidence was that she and her husband together owned 100 per cent of Nisi Group, which was the “main business” nominated by Mrs Cheng for the purposes of her visa application[14]. Although not recorded in the Tribunal’s reasons, Mrs Cheng stated in her visa application that Nisi Group’s major business activities were the production of stationery and “trade (import/export)”[15].
[14] CB 630 [16]
[15] CB 31
In support of her claim, Mrs Cheng also provided certain material including business activity statements and evidence of export transactions. The Tribunal observed that two export transactions involving a company known as Engagement Manufacturing and Trading Co Ltd (EMT) occurred in the 12 month period immediately preceding the visa application. These export transactions generated, as Mrs Cheng would have it, export sales in excess of $200,000 that should be included as part of the Nisi Group’s “turnover” for the purposes of clause 892.213 of Schedule 2 of the Migration Regulations[16].
[16] CB 630-631 [18]-[20]
When asked about the transactions involving EMT, Mrs Cheng stated that EMT produces crayons in Taiwan. One of the ingredients used in the colouring of crayons is stearic acid. Nisi Group previously purchased stearic acid from Indonesia and Malaysia before Mrs Cheng located Symex Holdings Limited (Symex) as a source in Australia[17].
[17] CB 631 [25]
Mrs Cheng gave evidence that the procedure for ordering stearic acid was that a contact from EMT would ask Nisi Group to obtain a quote for the price of stearic acid from Symex. Nisi Group would also independently obtain quotes from other companies in Indonesia and Malaysia. If the quote from Symex was the cheapest, EMT would contact Nisi Group and ask it to place an order on behalf of EMT. Nisi Group would then place the order with Symex and the stearic acid would then be shipped directly to EMT in Taiwan. Symex would then issue an invoice directly to Nisi Group, and Nisi Group would in turn issue an invoice to EMT. EMT would deposit the invoiced amount in the bank account of Nisi Group, and Nisi Group would then withdraw funds to pay Symex. Depending on the quantity of stearic acid that was obtained, Nisi Group would retain US$100-150 per unit[18].
[18] CB 631-632 [26]-[27]
Mrs Cheng stated that no general contractual arrangements were entered into between Nisi Group and Symex. Insurance on the stearic acid was arranged by Symex[19].
[19] CB 632 [28]
After hearing Mrs Cheng’s explanation of the relationship between Nisi Group, EMT and Symex, the Tribunal member put to her that it might consider that these arrangements indicated that Nisi Group was acting as an agent for EMT, given that Nisi Group’s role in the transaction appeared to be that of a conduit for communications and funds between EMT and Symex. The Tribunal member also suggested that the transactions did not appear to be at “arms-length” given the fact that Mrs Cheng’s father held the position of Chief Executive Officer of EMT. The Tribunal member also explained that if it concluded that Nisi Group was acting in the capacity of an agent, the Departmental policy indicates that only the service revenue (as opposed to the sale revenue or invoice value of the goods) should be included as part of Nisi Group’s turnover[20].
[20] CB 632 [29]-[30]
Mrs Cheng was also offered the opportunity to provide the Tribunal with evidence of any instances where quotes for stearic acid provided by Symex were rejected in favour of a quote obtained from companies in Indonesia or Malaysia. A few days after the hearing, Mrs Cheng provided a document that, according to her, demonstrated that Nisi Group had attempted to source stearic acid from companies in Indonesia or Malaysia[21].
[21] CB 632-633 [35]-[36]
The Tribunal did not accept Mrs Cheng’s explanation and concluded that Nisi Group had acted as agent for EMT in its dealings with Symex[22] and that the money retained by Nisi Group was properly characterised as commission[23].
[22] CB 635 [42]
[23] CB 635 [44]
The Tribunal stated that, given its finding that Nisi Group had acted as agent for EMT in its dealing with Symex, only the service revenue that had been derived could be included as part of Nisi Group’s turnover. The Tribunal concluded that an amount of $193,250 should be deduced from the total purported “turnover” stated by Nisi Group in its business activities statement. The effect of this deduction was that the “turnover” of Nisi Group, the main business nominated by the first applicant for the purposes of the visa application, had been less than $200,000 in the 12 months prior to 19 May 2009 (the date of the first applicant’s visa application). As such, Mrs Cheng failed to meet the requirements of clause 892.213 and was therefore not entitled to the grant of a Subclass 892 visa[24].
[24] CB 635-636 [48]
It should be noted that the Tribunal did not make any specific findings about the position of the second and third applicants. However, it is clear that, given the second and third applicants’ application for a Subclass 892 visa was dependent upon Mrs Cheng satisfying the relevant criteria[25], the failure of the Tribunal to make any specific findings about the second and third applicants’ claims is of no consequence.
[25] clause 892.31 (CB 16-19)
The judicial review application
These proceedings began with a show cause application filed on 27 April 2012. The applicants ultimately relied upon a further amended application filed in court by leave on 27 September 2012. The grounds in that application are:
1. The Tribunal erred in its interpretation and application of the word, “turnover” in Cl.892.213 of Schedule 2 of the Migration Regulations.
Particulars
(a) In the course of assessing the “turnover” of the first applicant’s main business in Australia, the Tribunal erred in its consideration of whether the entity which carried on that business (Nisi Group (Australia) Pty Ltd – (“Nisi)) was an agent of the ultimate recipient of the goods which Nisi sourced from Australia (“Engagement Manufacturing”).
Further Particulars
(i) The Tribunal failed to consider whether Nisi had an authority or capacity to create legal relations between the Australian supplier of good (“Symex”) and Engagement Manufacturing.
(ii) There was no evidence of such an authority or capacity.
(iii) There was no evidence of any legal relationship between Engagement Manufacturing and Symex.
(iv) The evidence was that the contracts for the supply of goods were between Nisi Group and Symex.
2. Alternatively, if the Tribunal did not consider the question of agency in a formal, legal sense, it erred in assessing the “turnover” of the first applicant’s main business in Australia by failing to consider the effects of the contracts by which property in the goods supplied by Symex Holdings Limited was passed.
I received as evidence the court book filed on 7 June 2012.
The parties made written and oral submissions. The applicants’ contention is a simple one. That is that the Tribunal erred in its understanding of commercial agency and the meaning of the word “turnover” with the result that the turnover of the Nisi Group failed to meet the requirements of regulation 892.213 of the Migration Regulations. The Minister contends that the Tribunal was correct in finding that the applicants failed to meet the visa criteria in respect of the business turnover.
Consideration
The applicants’ contentions
The Tribunal relied on its understanding of agency to find that the turnover of Nisi Group failed to meet the requirements of clause 892.213. Its lack of satisfaction that legal title to the stearic acid purchased ever passed to Nisi Group, and its conclusions that the only money that was to be counted towards turnover was what it referred to as “commission” for these transactions[26] stemmed from that understanding. It follows, in the applicants’ submission, that whether the Tribunal’s assessment of turnover was correct in law depended on whether it had been correct in its understanding of the law of agency.
[26] at CB 635 [43]
In Aris-Bainbridge v Turner Manufacturing Ltd[27], McNair J said:
The “turnover of the company’s annual business” ... must be taken to include all sums received and receivable in the year as the result of the defendant company’s trading, whether normal or abnormal.
[27] [1950] 2 All ER 1178, 1178
That takes the question only so far. If money is received as an agent, that is to pay a debt of a principal, the receiver has no equitable ownership of such monies. Thus is raised the question of whether Nisi Group was, in law, an agent.
In International Harvester Company of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Company[28], the High Court said[29]:
Agency is a word used in the law to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties.
[28] (1958) 100 CLR 644, 652
[29] Approved, inter alia, in PinkstonevR (2004) 219 CLR 444, 465-6 [60] per McHugh and Gummow JJ
Gummow J, in Scott v Davis[30], cited International Harvester and observed that the legal relations so created will be contractual in nature, with the contract formed between the principal and the third party, there being no contract between the agent and the third party which is attributable to the principal.
[30] (2000) 204 CLR 333 at 408-9 [228]
The evidence in the present case is that:
a)contracts did exist between Symex and Nisi Group, as evidenced by, for example the commercial invoice issued by Symex to Nisi Group[31] and the purchase order issued by Nisi Group to Symex[32];
b)contracts also existed between Nisi Group and EMT, as evidenced by invoices issued by Nisi Group to EMT[33];
c)there was no contract, and indeed no evidence of a contract, between EMT and Symex;
d)Symex’s action, in the case of non payment for the stearic acid shipped to Taiwan was against Nisi Group – the “buyer” noted on its invoices – and not against EMT.
[31] at CB 345
[32] at CB 359
[33] at CB 213 and 611
The applicants submit that the Tribunal’s conception of an “agent” was thus legally flawed. It did not consider whether there was any legal relationship between EMT and Symex, and it did not consider whether there was such a relationship between Nisi Group and either or both the other parties. Those errors are said to have fatally infected the Tribunal’s consideration of Nisi Group’s turnover.
The Minister’s contentions
The first point to consider is that the applicants do not cavil (and nor could they) with the Tribunal’s conclusion that where a business operates as an agent for another person, as opposed to operating as merchant in its own right, only the “service revenue” or “commission” that was derived can be considered as part of that business’ turnover. Secondly, it is clear from the particulars of the asserted ground of review that the applicants’ real complaint concerns the Tribunal’s finding that Nisi Group acted as an “agent” for EMT in its dealings with Symex.
Before considering the applicants’ ground of review, it is worth recalling the structure of the Tribunal’s reasons. The Tribunal undertook two enquires that were critical to its overall review. First, the Tribunal was required to identify the meaning of the word “turnover” in circumstances where a business operates as an agent for another person, as opposed to operating as a merchant in its own right[34]. Having done so, the Tribunal was then required to consider whether, having regard to the nature of Nisi Group’s dealings with EMT, the income derived from such dealings met the description of “turnover”[35]. The Minister contends that the two questions for the Tribunal set out above were questions of fact and the findings made by the Tribunal were entirely open to it.
[34] CB 633-634 [40]-[42]
[35] CB 635-636 [43]-[48]
The Tribunal’s finding as to the ordinary meaning or common understanding of “turnover”
Although the meaning of a technical legal term is a question of law, the ordinary meaning of a word or its non-legal technical meaning is a question of fact[36]. The word “turnover” has not acquired a legal meaning and the applicant has not suggested that the word “turnover” has acquired a secondary meaning through trade usage that differs from its ordinary meaning[37]. 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[38].
[36] Collector of Customs v Agfa-Geveart Ltd (1996) 186 CLR 389 at 395
[37] Voxson Sales Pty Ltd v Collector of Customs [1993] FCA 609 at [34]
[38] Pepsi Seven-Up Bottlers Perth Pty Ltd v Commissioner of Taxation (1995) 62 FCR 289 at 299 per Hill J
In considering whether the entirety of the amount recorded as turnover by Nisi Group could be considered “turnover” for the purposes of clause 892.213, the Tribunal found that where a business operates as an “agent” involved in the provision of services, as opposed to a merchant involved in the sale of goods to the public, only the amount of the service revenue could be considered part of the “turnover” of the business[39]. The Tribunal did so by concluding that relevant Departmental Guidelines “accord with the Tribunal’s own understanding in relation to service revenue and turnover…”[40]. The Tribunal was quite properly guided by the relevant Departmental Guidelines, bearing in mind that they were not binding on a decision-maker and cannot be the source of relevant considerations in the sense of considerations that the decision-maker is bound by legislation to take into account[41].
[39] CB 632 [30]
[40] CB 634 [42]
[41] El Ess v Minister for Immigration (2004) 142 FCR 43 at [45] per Gray J referring to Peko Wallsend at 39-40; Soegianto v Minister for Immigration [2001] FCA 1612 at [15]-[16]
The “agency” issue
In their amended application, and in their submissions, the applicants allege that the Tribunal’s approach to the question of whether Nisi Group was acting as an agent for EMT in its dealings with Symex (as opposed to a merchant in its own right) was flawed. The nub of the applicants’ complaint appears to be twofold: first, that the Tribunal failed to adopt as its understanding of “agency” the strict legal meaning of that word, and secondly, that had the Tribunal properly assessed all the evidence that was before it, it could not have concluded that Nisi Group was acting as an “agent” (as that word is understood in law) for EMT in its dealings with Symex.
The Minister contends that the applicants’ contention is flawed. On a fair reading of the Tribunal’s reasons it is clear that the Tribunal was not using the word “agency” in its strict legal sense (ie the Tribunal was not using “agency” to describe the situation where a person is cloaked with authority to create legal relations with another person). As long ago as 1897 Lord Herschell observed that “agent” has a protean meaning and that “[n]o word is more commonly and constantly abused than the word ‘agent’”[42]. Similarly, in International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co[43] the High Court said:
Agency is a word used in the law to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties. But in the business world its significance is by no means thus restricted. (Emphasis added)
[42] Kennedy v De Trafford [1897] AC 180 at 188; Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41 at 50 per Dixon J. In Kennedy v De Trafford [1897] AC 180 at 188 Lord Herschell went on to say that, “A person may be spoken of as an agent and no doubt in the popular sense of the word may properly be said to be an agent, although when it is attempted to suggest that he is an agent under such circumstances as create the legal obligations attaching to agency that use of the word is only misleading”
[43] at 652
More recently, in Tonto Home Loans Australia Pty Ltd v Tavares[44] Allsop P, whilst acknowledging that agency has a particular legal meaning, noted that the word “agency” is a “common business expression with a potentially wide and varying meaning.”
[44] [2011] NSWCA 389 at [170]
The Minister contends that the fact that the Tribunal was not using the word “agent” in the strict legal sense but in a “business” sense is apparent having regard to the Departmental Guidelines to which the Tribunal had regard. Indeed, the Departmental Guidelines make no suggestion that “agent” should be applied according to its strict legal meaning. Rather, the Departmental Guidelines spoke of the distinction between “merchants” and “agents”[45]. The key distinction between “merchants” and “agents” was that “agents” were involved in the provision of services to others, whereas “merchants” take possession, and become the legal owner, of goods before they are sold. The Department Guidelines stated[46]:
Agents provide goods and services on behalf of an independent entity. The goods/services remain the property of the principal entity and the agent normally receives a commission or fee for any sales.
Merchants are experienced international traders who buy from a supplier/manufacturer and sell overseas. They take full possession of the commodity and are responsible for onward trading of the stock.
Agents seek out potential customers and may be used to facilitate and promote a product in their respective markets but do not take legal title of the goods. Agents may be paid a salary, retainer, commission or a combination of all three. See also the definition of a commission agent in Business skills legislated & policy terms.
The key difference between a merchant and an agent is whether at some stage the business takes legal title to the goods. See section 29.2 Legal title.
If a business operates as a commission agent, service agent or export agent who is engaged in the provision of services instead of sale of goods to the public, only the amount of the service revenue (ie. as opposed to the sale value or invoice value) is to be counted towards the turnover of the business. (emphasis added)
[45] CB 633 [40]-[42]
[46] CB 633 [40]
Moreover, the Tribunal makes no suggestion that, in addition to what is stated in the Departmental Guidelines, the word “agent” should also be understood and applied in accordance with its strict legal meaning. To the contrary, the Tribunal accepted the understanding of “agency” set out in the Departmental Guidelines[47]. The Minister submits that, in the absence of any legislative mandate as to how the Tribunal is to understand the concept of “agency” when determining a business’ “turnover”, the Tribunal’s adoption of its understanding of “agent” was open to it. The secondary contention advanced by the applicants that the evidence before the Tribunal was not sufficient to enable it to conclude that Nisi Group was acting as an “agent” (as that word is understood in law) for EMT in its dealings with Symex therefore is said not to arise.
[47] CB 634 [42]
The Tribunal’s finding of fact –Nisi Group was operating as an agent
The Tribunal considered whether Nisi Group was in fact operating as an agent (having regard to the distinction between agents and merchants identified in the Departmental Guidelines) for EMT in its dealings with Symex and whether the entire amounts invoiced to EMT could be counted towards Nisi Group’s overall turnover. In doing so, the Tribunal was again guided by the relevant Departmental Guidelines, concluding that the Departmental Guidelines correctly set out matters that demonstrated the distinction between agents and merchants[48].
[48] CB 634 [42]
Ultimately, the Tribunal concluded that Nisi Group had acted as an agent for EMT in its dealings with Symex. The following represents a summary of the Tribunal’s findings that were critical to this determination:
a)although Nisi Group would place an order for the purchase of steraic acid with Symex, at no stage would Nisi Group take actual delivery of the stearic acid[49];
b)EMT would deposit funds into the bank account of Nisi Group. Nisi Group would then disburse the bulk of these funds to Symex while retaining a small portion of the funds for itself[50];
c)no general contractual arrangements were ever entered into between Nisi Group and Symex[51];
d)legal title to the stearic acid did not transfer to Nisi Group[52];
e)the relationship between Nisi Group and for EMT was not an “arms-length” relationship[53];
f)there was no evidence that EMT sought prices for the supply of stearic acid from any other entity other than Nisi Group[54]; and
g)although it appears that on one occasion Nisi Group attempted to source stearic acid from entities other than Symex, this was not inconsistent with Nisi Group acting as an agent[55].
[49] CB 635 [43]
[50] CB 635 [43]
[51] CB 635 [43]
[52] CB 635 [44]
[53] CB 635 [45]
[54] CB 635 [46]
[55] CB 635 [47]
The Tribunal’s finding that Nisi Group was operating as an agent for EMT in its dealings with Symex (as opposed to operating as a merchant in its own right) and that only the service revenue derived from such dealings could be considered turnover, were findings of fact that were, in the Minister’s submission, entirely open to the Tribunal[56]. On that basis, no question of law arises[57]. To the extent that the applicants seek a review of these factual findings, this Court is not permitted to embark on such an examination[58].
[56] Hope v Bathurst City Council (1980) 144 CLR 1 at 7-8
[57] Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 395 -396; Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at 108 per Hayne J
[58] Attorney General (NSW) v Quin (1990) 170 CLR 1 at 35-36; Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 341
The applicants’ reply
The applicants’ replied that the Minister’s contention, that the meaning of the word, “turnover” in clause 892.213(2) to Schedule 2 of the Migration Regulations is simply a question of fact, is an insufficient basis upon which to consider the issues raised in this case. This is said to be so because:
a)an error of law in finding a jurisdictional fact can undermine the legality of the decision;
b)as Lindgren J explained in AnvMinister for Immigration[59], the statutory context of a term can determine its meaning.
[59] (2007) 160 FCR 480
As used in clause 892.213(2), “turnover” has a specific meaning equating to that set out at [22] above[60]. In simple terms it means the income generated from trading and other means.
[60] cf J. Gliksten & Sons v Green [1929] AC 381, 385 per Viscount Dunedin
The Minister does not appear to disagree with the proposition that the Tribunal applied its understanding of “agency” in finding that the turnover of Nisi Group was in the nature of a commission, and was not represented by the totality of the funds it received from EMT. He submits, however, that the Tribunal used the word, “agent” in a “business sense” rather than a strict legal sense[61].
[61] Minister’s subs [26]
If this is so (which the applicants do not concede), then why was it necessary for the Tribunal to consider the question of agency at all? They assert that the question to be asked was not whether an “agency” existed, but whether Nisi Group had legal title to the goods such that it could sell them onwards.
The applicants submit that, whether or not Nisi Group had legal title to the goods depended on the contracts by which such title was transferred. Had it examined these contracts, rather than relying on statements in the PAM[62], it could not have failed to find that there were contracts between Symex and Nisi Group by which Symex shipped the stearic acid at Nisi Group’s direction to EMT. Under that contract the shipper was Nisi Group and Symex was to be paid upon delivery to Taiwan. The conclusion contended for by the applicants is that property in the goods passed to Nisi Group, probably upon transfer to the container vessel. Another asserted conclusion was that should there have been a default in payment, Nisi Group, and not EMT, would have been liable.
[62] eg that to have legal title a business must take possession (in the sense of take delivery) or intend to take possession of the goods or services (CB 634 [41]). That is incorrect.
Further, there were separate and distinct contracts between EMT and Nisi Group, and the waybills[63] indicate that Nisi Group was sending the goods to EMT without mention of Symex.
[63] eg CB 350
Thus, in the applicants’ submission, even if the Tribunal used, “agent” in a non legal sense it still erred in failing to consider the contracts which were the basis by which property in the stearic acid was passed.
Resolution – form or substance?
Whilst I prefer the submissions of the Minister to those of the applicants, in my view this matter can be resolved by reference to the simple question of whether the Tribunal should have had regard to the form or substance of the transactions it was examining.
The Migration Regulations do not define the word “turnover”. It might be thought to be an ordinary English word carrying a well defined meaning but the Macquarie Dictionary (3rd edition) provides 11 alternative meanings of which only seven relate to business activity. Of those, four might be available for the purpose of the application of the visa criterion. These 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.
It is apparent that the application of these alternative meanings by decision makers for the purposes of the visa criterion could produce significantly different outcomes. In the circumstances, it is appropriate that the Tribunal have regard to policy guidance as to the interpretation of the visa criterion. The Tribunal referred to the guidelines at [40] and [41] of its reasons[64]:
The Departmental guidelines (PAM3) on turnover relevantly state:
Agents provide goods and services on behalf of an independent entity. The goods/services remain the property of the principal entity and the agent normally receives a commission or fee for any sales.
Merchants are experienced international traders who buy from a supplier/manufacturer and sell overseas. They take full possession of the commodity and are responsible for onward trading of the stock.
Agents seek out potential customers and may be used to facilitate and promote a product in their respective markets but do not take legal title of the goods. Agents may be paid a salary, retainer, commission or a combination of all three. See also the definition of a commission agent in Business skills legislated & policy terms.
The key difference between a merchant and an agent is whether at some stage the business takes legal title to the goods. See section 29.2 Legal title.
If a business operates as a commission agent, service agent or export agent who is engaged in the provision of services instead of sale of goods to the public, only the amount of the service revenue (ie. as opposed to the sale value or invoice value) is to be counted towards the turnover of the business.
[64] CB 633-634
The Departmental guidelines make the following comments on legal title:
An agent may arrange the transfer of goods or services from one entity to another without taking legal title. For example, a business in Australia may arrange for the transfer of goods from an Australian business to a single overseas business without taking possession or having legal title of the goods.
To have legal title to goods or services the business must:
· acquire them for payment;
· take possession or intend to take possession of the goods or services; and
· have the right to consume, sell, rent, mortgage, transfer or exchange those goods or services.
Documentation to assess whether a business acquired legal title of goods or services might include contracts, invoices, sales receipts, consignment notices and insurance records.
Some indicators that a business may be operating as an agent include:
· no insurance held by the applicant’s business for loss or damage to the goods
· no evidence that the applicant’s business has taken delivery of the goods or services (ie they are transferred directly between two independent entities)
· no clear evidence that the applicant’s business ever intended take delivery of the goods
· invoices for payment that do not name the applicant’s business as the buyer and seller of the goods
· no evidence that the applicant’s business paid for the goods (for example, payment was made by an independent entity)
· no contract between the applicant’s business and the business providing the goods
· they are bound by agreement/contract to provide the goods or services to a specified third party
· contracts or agreements that restrict rights of the applicant’s business to otherwise consume, sell, transfer or exchange the goods
· they only administer transactions between on Australian business and one overseas business and there is no indication that they have made efforts to source other import/export markets.
At [42] the Tribunal stated[65]:
While the Departmental guidelines are only guidelines, the Tribunal considers it desirable for the purposes of consistency in decision making to apply the Departmental guidelines in the present case. The guidelines accord with the Tribunal’s own understanding in relation to service revenue and turnover, and the difference between merchants and agents.
[65] CB 634
I see no error in the Tribunal’s approach to the application of the guidelines.
The guidelines established that Nisi Group had some indicia of a merchant and some of an agent. There were contracts with Symex for the supply of goods to Nisi Group, but it did not take possession of them, and was bound by agreement to supply them to EMT. It is apparent from the guidelines that decision makers are expected to be alert to the possibility that a visa applicant may artificially construct a business in such a way as to seek to satisfy the visa criteria. 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[66], regardless of the apparent form of the transactions from a strictly legal or accounting perspective. The Tribunal relevantly stated at [43]-[45][67]:
The Tribunal finds that Nisi Group has acted in the role of agent for the Engagement Manufacturing and Trading Co Ltd in its dealings with Symex Holdings Limited. The applicant’s evidence was that she would contact Symex Holdings Limited to obtain pricing details at the request of her contact at the Engagement Manufacturing and Trading Co Ltd. If the Engagement Manufacturing and Trading Co Ltd subsequently decided to source its stearic acid from Symex Holdings Limited, the applicant would proceed to place an order with Symex Holdings Limited. Symex Holdings Limited would sip the steric acid directly to the Engagement Manufacturing and Trading Co Ltd, without Nisi Group ever taking delivery of the goods. The Engagement Manufacturing and Trading Co Ltd would deposit funds into the bank account of Nisi Group, who would then disburse the bulk of those funds to Symex Holdings Limited while retaining a small portion of the funds. No general contractual arrangements were ever entered into between Nisi Group and Symex Holdings Limited.
The Tribunal in these circumstances is unable to be satisfied that legal title to the stearic acid was ever transferred to Nisi Group. The Tribunal considers that the funds retained by Nisi Group in relation to these transactions is properly characterised as a commission.
The Tribunal has also taken into account the fact that the Chief Executive Officer of the Engagement Manufacturing and Trading Co Ltd is the applicant’s father, and that the applicant and her husband have previously worked for lengthy periods at the company. The Tribunal does not consider that the transactions were entered into at “arms-length”, which supports the conclusion that the applicant and Nisi Group were acting as agent on behalf of the Engagement Manufacturing and Trading Co Ltd.
[66] Although the guidelines use the term “agent” rather than intermediary, the latter term in my view conveys more effectively the intention of the guidelines
[67] CB 635
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. That approach would give room for abuse. The Tribunal was correct in looking behind the superficial appearance of the transactions to examine the substance of the business. The substance of the business was that Nisi Group acted as an intermediary between EMT and Symex. As an intermediary, it was not entitled to retain for its own benefit all of the money received by it from EMT for the goods supplied by Symex. It had to pay most of that money to Symex. Although the funds passing through the hands of 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.
Conclusion
The applicants have failed to demonstrate any jurisdictional error in the decision of the Tribunal. The decision is therefore a privative clause decision and the application must therefore be dismissed.
I will hear the parties as to costs.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Driver FM
Date: 16 November 2012
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