Cheung v Migration Review Tribunal

[2004] FCA 1725

FEDERAL COURT OF AUSTRALIA

Cheung v Migration Review Tribunal [2004] FCA 1725

MIGRATION – visas – refusal to grant business skills visa – failure to meet criteria for grant of subclass 840 (Business Owner) visa – whether Migration Review Tribunal erred in construing cl 840.221 of the Migration Regulations 1994 (Cth) as requiring that applicant’s business be in existence at date of decision of Tribunal – whether applicant had beneficial interest in property that was an asset in a qualifying business – whether Migration Review Tribunal erred in drawing distinction between personal assets and business assets in context of sole proprietorship of a business – use of the Procedures Advice Manual 3 by Migration Review Tribunal

Statutes

Migration Act 1958 (Cth)

Migration Regulations 1994 Sch 1, Sch 2, cl 840.211(1), cl 840.212, cl 840.221, cl 840.213, cl 840.213(1), cl 840.213(2), reg 1.03, reg 1.11A, reg 1.11A(2), reg 1.11A(3), cl 840.213(2)(a), cl 840.217, cl 840.214, cl 840.215

Cases

Calverley v Green (1984) 155 CLR 242 Cited

Lobo v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 132 FCR 93 Dist

Napier v Public Trustee (WA) (1980) 55 ALJR 1 Cited

Paramananthan v Minister for Immigration and Multicultural Affairs (1998) 94 FCR 28 Cited

Parra v Minister for Immigration and Multicultural Affairs [2000] FCA 85 Cited

Sellamuthu v Minister for Immigration and Multicultural Affairs (1999) 90 FCR 287 Cited

YAU KEUNG CHEUNG v MIGRATION REVIEW TRIBUNAL AND MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
QUD62 of 2004

KIEFEL J
23 DECEMBER 2004
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD62 OF 2004

BETWEEN:

YAU KEUNG CHEUNG
APPLICANT

AND:

MIGRATION REVIEW TRIBUNAL
FIRST RESPONDENT

MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
SECOND RESPONDENT

JUDGE:

KIEFEL J

DATE OF ORDER:

23 DECEMBER 2004

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.        The application be dismissed.

2.        The applicant pay the respondents’ costs of the application.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD62 OF 2004

BETWEEN:

YAU KEUNG CHEUNG
APPLICANT

AND:

MIGRATION REVIEW TRIBUNAL
FIRST RESPONDENT

MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
SECOND RESPONDENT

JUDGE:	KIEFEL J
DATE:	23 DECEMBER 2004
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. The applicant is a National of Hong Kong.  On 22 July 1999 he applied for a Business Skills (Residence) (Class BH) visa.  The application was refused by the second respondent on 7 February 2001.  A review by the first respondent, the Migration Review Tribunal (‘the Tribunal’), affirmed that decision on 1 March 2004.

2. Schedule 1 of the Migration Regulations 1994 (‘the Regulations’) to the Migration Act 1958 (Cth) provided for a subclass of visa called a subclass 840 (Business Owner) visa. The applicant was required to meet the criteria in Sch 2 of the Regulations for the grant of such a visa. Included in the primary criteria to be satisfied at the time of the application cl 840.211(1) required that the applicant be in Australia and be the holder of a visa of a particular class. In the applicant’s case he held a subclass 457 (Business (Long Stay)) visa. Clause 840.212 required that the applicant ‘has had’ an ownership interest in one or more qualifying businesses throughout any two periods of one fiscal year in the four fiscal years immediately preceding the making of the application.  Under ‘Criteria to be satisfied at time of decision’, clause 840.221 required that ‘The applicant continues to satisfy the criteria in clauses 840.211 to 840.218’.

3. Of special relevance to this application are the requirements of cl 840.213. Paragraph (1) of that provision required that the applicant has overall had a successful business career. Paragraph (2) provided so far as is relevant:

   ‘(2)In any 2 periods of 1 fiscal year in the 4 fiscal years immediately preceding the making of the application:

   (a)       the net assets of:

   (i)        the applicant;  or

   (ii)       the applicant and his or her spouse together;

   in a qualifying business or qualifying businesses were not less than the equivalent of AUD200,000 in each of those years;  …’

   (Sub-par (b) refers to a shareholding in a publicly listed company).

4. The expression ‘qualifying business’ was defined in regulation 1.03 to mean:

   ‘… an enterprise that:

   (a)is operated for the purpose of making profit through the provision of goods, services or goods and services (other than the provision of rental property) to the public;  and

   (b)is not operated primarily or substantially for the purpose of speculative or passive investment.’

5. Reference is also necessary to regulation 1.11A ‘Ownership for the purposes of certain Parts of Schedule 2’ which provided that for Part 840, amongst other Parts, ownership by an applicant, or the applicant’s spouse, of an asset includes beneficial ownership only if the beneficial ownership is evidenced in accordance with subreg (2).  That sub-regulation provides:

   ‘(2)To evidence beneficial ownership of an asset, eligible investment or ownership interest, the applicant must show to the Minister:

   (a)a trust instrument;  or

   (b)a contract; or 

   (c)any other document capable of being used to enforce the rights of the applicant or the applicant’s spouse, as the case requires, in relation to the asset, eligible investment or ownership interest;

   stamped or registered by an appropriate authority under the law of the jurisdiction where the asset, eligible investment or ownership interest is located.’

6. Subregulation (3) provides that a document does not evidence beneficial ownership for any period earlier than the date of registration or stamping by the appropriate authority.

7. The applicant applied for the visa in question on 22 July 1999.  The years from 1995 to 1998 were therefore relevant.  The applicant nominated the years 1997 and 1998 as those which were relevant to the satisfaction of the criteria.  Fiscal years in Hong Kong are said to run from 1 April of each year to 31 March of the next.

8. The applicant nominated two businesses as qualifying businesses: UP Asia Ltd and Cheung Lee Hong. The former was found by the Tribunal not to meet the definition of a qualifying business as defined in the Regulations. No issue is taken with that part of the Tribunal’s decision. The focus of the applicant’s case is upon the business known as Cheung Lee Hong which was not incorporated and was operated by the applicant as a sole proprietor. The company had been in operation since 1985 and it traded principally in the purchase and sale of steel and metal products. It had been dormant since 1 April 1998 as a result of the applicant’s migration to Australia as a temporary resident.

9. The Tribunal made findings as to the net assets of the business Cheung Lee Hong in the two nominated fiscal years.  The assets identified were an apartment property at Tsuen Kam Centre, Tsuen Wan in Hong Kong and an apartment at Vantage Park, 22 Conduit Road, Hong Kong (‘the property’).  The Tribunal found that if the latter property was excluded in either year from the calculation of net assets, the applicant would not have net assets of $200 000 as required.  The applicant does not take issue with this finding. 

10. The Tribunal recorded the applicant’s case concerning the property.  It was a leasehold property held in the name of his wife only.  It was said to have been purchased by him for use as office premises of the business Cheung Lee Hong.  However the property was also his family’s domestic residence.  Its purchase was financed by monies generated from the business.  His wife had agreed that it could be mortgaged to raise monies and these monies were invested in the business. 

11. The applicant produced a number of documents at the Tribunal hearing.  They included letters from the Nanyang Commercial Bank Ltd confirming that money had been loaned on the security of the property and that the applicant’s credit facilities were made available on account of a charge over the property.

12. The reason given by the applicant to the Tribunal for his wife’s name appearing as owner was that unincorporated businesses were not permitted to own property.  Amongst the materials before the Tribunal were advices by the applicant’s accountants that they considered the property, and others, should be treated as business assets because they were directly linked to the business.  They had therefore incorporated the cost and liability of the properties in the financial statements for the years ended 31 March 1996 to 31 March 1998.  A perusal of the business accounts as at 31 March 1997 and 31 March 1998, which were also before the Tribunal, shows that the accountants treated the property as part of the fixed assets of the business and they were said to be pledged to a bank for bank facilities.  The accounts were signed by the accountant at a time proximate to each fiscal year.

13. On the applicant’s case before the Tribunal it did not matter that the property was in his wife’s name because they had an agreement that she would allow it to be mortgaged and the monies used for the business.   The applicant’s argument was that the property was his.  The argument before the Tribunal, advanced by the applicant himself, did not include a contention which is now advanced, that he had the beneficial interest in the property.

14. The Tribunal considered that the essential point for its determination was whether the property could be correctly categorised as an asset of the business.  In that regard it referred to the Procedures Advice Manual 3 (‘PAM3’) which provided in part:

    ‘9.4     Sole proprietorships

    9.4.1An applicant who is the sole proprietor can claim all of the owners’ equity.  However, because there is no legal distinction between the business and its owner, the assets of the business may not be readily distinguishable from the applicant’s personal assets if no separate business accounts are maintained:

    ·if separate business accounts are maintained, the applicant’s net assets in the business are the same as the net assets of the business itself;  but

    ·if no separate business accounts are maintained, the business assets need to be identified and separated from the applicant’s personal assts, and the liabilities associated with those business assets must be deducted.

    9.4.2Normally the calculation of net assets in a sole proprietorship would be business net assets less borrowings against those net assets.’

    And:

    ‘9.11    Other items

    9.11.1The following items may also be considered as part of an applicant’s net assets in business:

    ·property held in the name of the applicant, provided the property can be directly linked to the operations of the business (e.g. factory premises, office building, warehouse etc);

    ·cash held on deposit at the need of the financial year, provided

    ·the cash can be shown to have been withdrawn from the business in that same financial year as payment of salaries, dividends or director’s fees to the applicant;

    ·evidence of the amount of cash paid to the applicant, in the form of salaries, dividends or directors fees, is in financial pay roll records, business cheque books and/or journal entries of the business accounts;’

15. In summary the Tribunal reasoned as follows:

    ·The fact that the applicant generated revenue from the business, which he used to purchase the property in question, did not mean that the expenditure was of a non-personal kind.  It did not show that the property purchased was itself a business asset.  Business revenue could be used to purchase a house for personal use.

    ·More was necessary than it be shown that the property was used to provide funds for the applicant’s business activities.  It must be shown that the property be directly linked to the operations of the business, for example by being business premises.  The combination of the property being his residence in Hong Kong and in his wife’s name prevents that direct link.

    ·The Tribunal rejected the applicant’s contention that the property had to be placed in his wife’s name because it could not be held in the business name, noting that it could have been held in his name. 

    ·The applicant had suggested that he was able to deal with the property and if necessary sell it as business owner.  The Tribunal found that he could not, on his own initiative, sell it, since it was not his asset.

    ·In relation to the applicant’s contention concerning the contractual arrangement with his wife, the Tribunal found that the wife remained the  owner and that the financial provider held a mortgage but that the applicant did not have an ownership interest in the property.

    ·The Tribunal found that the property is not an asset of the sole proprietorship.  The requirements of subcl 840.213(2)(a) would therefore not be met.

    ·Further, the Tribunal found that the business had been dormant from 1 April 1998.  It could therefore no longer meet the definition of ‘qualifying business’ in reg 1.03.

16. The applicant’s grounds may be summarised as follows:

    1.The evidence before the Tribunal may have permitted a conclusion that the applicant had an equitable interest in the property.  The Tribunal failed to consider whether his net assets included such an interest.

    2.The property was an asset in a qualifying business.  In this respect the Tribunal incorrectly drew a distinction between personal assets and business assets when none is open in the context of a sole proprietorship of the business.  Alternatively it applied 9.41 of PAM3 which is inconsistent with subcl 840.213(2) and therefore invalid. 

    3.The Tribunal failed to consider whether the applicant’s wife, as legal owner of the property, held an asset in a qualifying business.

    4.The Tribunal was in error in construing cl 840.221 as requiring that the applicant’s business be in existence at the date of its decision.

17. The question as to whether the applicant had a beneficial interest in the property was not raised before the Tribunal.  The applicant points out that all the necessary information which pointed up that possibility was before the Tribunal.  In these circumstances it ought to have given it consideration even if the applicant did not articulate the point.  There is support for this contention:  Paramananthan v Minister for Immigration and Multicultural Affairs (1998) 94 FCR 28 at 62-63; Sellamuthu v Minister for Immigration and Multicultural Affairs (1999) 90 FCR 287 at 294; Parra v Minister for Immigration and Multicultural Affairs [2000] FCA 85 at [13].

18. The first respondent sought to rely upon the non-fulfilment of another aspect of the prescribed criteria namely that referred to in 840.217, which requires a realistic commitment to an Australian business.  The Tribunal recorded the fact that the applicant’s Australian business had been put in liquidation in July 2002 but that the visa applicant had incorporated a new company in September 2002.  I do not consider this amounts to a finding of lack of commitment.

19. It is convenient to deal with the last of the applicant’s grounds first.  If the Tribunal is correct, then none of the other grounds relied on by the applicant will avail him.

20. The definition of a qualifying business in reg 1.03 is expressed in the present tense, but no importance attaches to this. It is the criteria to be satisfied at the time of the decision which will determine the question. Clause 840.221 requires that the applicant ‘continues to satisfy the criteria in clauses 840.211 to 840.218’. Clause 840.212 however refers to a state of affairs which was maintained in two periods of time in the past. It requires that the applicant ‘has had’ an ownership interest in the qualifying business throughout any two periods of one fiscal year in the four fiscal years immediately preceding the application. Each of cll 840.213, 840.214 and 840.215 refer to the applicant’s assets or business activities in the same periods as those referred to in cl 840.212.

21. Once these matters are shown to have occurred the criteria are satisfied. Clause 840.221 cannot be read as extending the periods up to and including the time of the making of the application. Although it refers to the criteria continuing to be satisfied, it must be taken to refer only to those criteria which require something to be maintained, for example, the holding of the visa referred to in cl 840.211 and the commitment to establish an eligible business in Australia referred to in cl 840.217. It may be compared with the provision considered in Lobo v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 132 FCR 93 at 98, at [13]. There an applicant was required to have an ownership interest in one or more established main businesses in Australia for a period of eighteen months immediately preceding the making of the application and it was necessary that the applicant ‘continues to have an interest of that kind’. 

22. The Tribunal was in error on this issue. 

23. The monies used to purchase the property were monies from the business which however is not a legal entity distinct from the applicant.  Cheung Lee Hong is simply the name under which the applicant traded.  For all practical purposes he was the provider of the purchase monies.  There is no suggestion that his wife made any contribution.  Where a purchaser directs that a property be held in the name of a third person and there is nothing to indicate that that person is to have the beneficial interest in the property, a trust in the purchaser’s favour may be implied:  Napier v Public Trustee (WA) (1980) 55 ALJR 1 at 3 and Calverley v Green (1984) 155 CLR 242 at 266. Whilst there is a presumption of advancement in favour of a wife against the existence of a trust, this may be rebutted by evidence.

24. The Tribunal did not consider these matters. It may not have directed itself to them because of the provisions of reg 1.11A and subreg (2), which require proof of the existence of a beneficial ownership. There is no trust instrument and no document produced by the applicant by which his rights to beneficial ownership could be enforced. The business accounts provide some evidence of the facts relating to the transaction but they do not meet these evidentiary requirements and they were not signed by an appropriate authority. The applicant cannot rely upon a beneficial ownership in the asset to satisfy the criteria.

25. Clause 840.213(2)(a) has application to businesses such as those conducted by sole traders, in partnership or through a private company. It requires the identification of the assets of the qualifying business and the extent of an applicant’s interest in those assets gleaned by reference to the nature and extent of their interest in the business itself or its assets. In the case of a sole trader, as was the case here, an applicant’s interest in the assets of the business will be in the whole of them.

26. The advice provided in PAM3, 9.4.1, points out that in cases where no separate business accounts are kept, which would list the business assets, it will be necessary for the decision-maker to determine what are business assets and what are the personal assets of the applicant. There is no inconsistency between the advice and cl 840.213(2). The advice does not deny a sole trader’s ownership of the assets of the business. It does however reflect the reality that the sole trader may also have personal assets, assets which are not connected to the operation of the business.

27. Contrary to the applicant’s submissions the Tribunal did not heed the advice. Although business accounts were kept, and they listed the property as a business asset, the Tribunal did not attribute the property to the applicant. There is however no error in the approach taken by the Tribunal. It was open to it to determine what were in fact business assets. PAM3 merely provides advice. Its method of ascertaining what are and are not business assets cannot conclusively determine that question for the purposes of cl 840.213(2). The Tribunal might consider the accounts to be unreliable, or it might regard them as creating merely a presumption which might be rebutted by other factors. These are matters of fact for the Tribunal. In that regard the Tribunal does not seem to have considered that the property was used for business purposes. It appears, impliedly, to have rejected the contention that it was used, in part, as offices of the business. Alternatively it did not consider that a partial use of the property for that purpose meant that it should be characterised as a business asset. It remained the family home and a personal asset.

1. The applicant’s contention was that no distinction can be drawn between business assets and personal assets in the case of a sole trader.  There is no relevant distinction between the applicant and his business.  It would seem to follow logically from such an approach that a house owned by a sole trader was automatically to be considered an asset of the business. 

2. Property owned by a sole trader might be used to provide security in financing a business, but that does not convert it to a business asset.  I understood the Tribunal to be saying as much.  A business asset is one used in and for the purposes of the enterprise.  In that regard I note that the definition of a ‘qualifying business’ would exclude those which involve only ‘passive investments’ which would include the mere holding of property.  No error of law is disclosed in the Tribunal’s conclusion.

3. The last ground, which has regard to the applicant’s wife’s interest in the property, faces two insurmountable hurdles.  The Tribunal was not obliged to conclude that the property was a business asset.  And if it were an asset of the business, the applicant’s wife could not be shown to have any interest in the business.

4. The application will be dismissed with costs.

I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel.

Associate:
Dated:             23 December 2004

Counsel for the Applicant:	Mr D Rangiah
Solicitor for the Applicant:	Redmond van de Graaff
Counsel for the First and Second Respondents:	Mr PG Bickford
Solicitor for the First and Second Respondents:	Blake Dawson Waldron
Date of Hearing:	19 October 2004
Date of Judgment:	23 December 2004