Egrowcery Pty Ltd (Migration)

Egrowcery Pty Ltd (Migration) [2019] AATA 4283 (1 October 2019)
DECISION RECORD
DIVISION:Migration & Refugee Division
APPLICANT:  Egrowcery Pty Ltd
CASE NUMBER:  1804926
DIBP REFERENCE(S):  BCC2017/2054396
MEMBER:Kate Millar
DATE:1 October 2019
PLACE OF DECISION:  Adelaide
DECISION:The Tribunal sets aside the decision under review and substitutes a decision approving the nomination.

Statement made on 01 October 2019 at 3:22pm
CATCHWORDS
MIGRATION – approval of nomination of position – financial capacity to employ nominee – decision under review substituted
LEGISLATION
Migration Regulations 1994 (Cth), r 5.19

STATEMENT OF DECISION AND REASONS
APPLICATION FOR REVIEW

Egrowcery Pty Ltd (Egrowcery) is the software development arm of a business that is developing an information technology system to provides on line ordering, picking of stock, payment and sales reports for supermarkets.
Egrowcery wants to employ Mr Sean Welch as an ICT Project Manager, and on 9 June 2017 applied the approval of a nomination of a position. A delegate of the Minister for Immigration refused to approve the nomination, as the delegate was not satisfied that Egrowcery had the financial capacity to employ Mr Welch full time for two years. Egrowcery has applied for a review of this decision.
Mr Young appeared before the Tribunal on 13 August 2019 to give evidence and present arguments. The Tribunal also received oral evidence from Mr Welch. Egrowcery was represented in relation to the review by its registered migration agent.
For the following reasons, the Tribunal has decided to set aside the decision under review and substitute a decision approving the nomination.
AUTHORISED REPRESENTATION AT THE HEARING
There have been difficulties with the progress of this matter. One hearing date was vacated the day before the hearing as the legal representative for Egrowcery neglected to provide any written submissions, but said it was intended submissions were provided. On the second hearing date, extensive written submissions were provided at midnight the night before a hearing scheduled at 10am.
At the hearing on 13 August 2019, the financial officer of Egrowcery, previously nominated as the person authorised to speak on behalf of Egrowcery, did not attend and the Tribunal was advised she was no longer employed by Egrowcery. The current director did not attend, and the Tribunal advised that he travels quite a bit and was on his way to Manilla.
A new legal representative was appointed immediately prior to the second hearing. The person who signed the appointment of representative form on behalf of the company was a previous director, Mr Alan Young, and not the current director of the company.
Mr Young, who said he is a director of NoQ Inc (NoQ), a company incorporated in the United States, appeared at the hearing. Mr Young does not appear on the ASIC extract of Egrowcery as a director or secretary of Egrowcery. It was submitted that NoQ is the parent company of Hub IT Holdings Pty Ltd (Hub IT), which in turns holds all of the shares of Egrowcery. At the time of the hearing, no documentary evidence of the corporate structure of these entities had been provided.
It also became apparent in the course of the hearing that the offices of Egrowcery had been relocated to Mr Young’s business premises, from which he operates a separate stockbroking business. The lease held for Egrowcery ceased in November 2018, and Mr Young ceased as a director of Egrowcery in October 2018.
After the hearing, two separate power of attorney documents were was provided, signed by the current director of Egrowcery and Hub IT, appointing Mr Alan Young as attorney for Egrowcery and Hub IT. This is expressed to be under s.127 of the Corporations Act. This provision relates to a company’s power to make, vary, ratify or discharge a contract. These proceedings do not involve making, varying, ratifying or discharging a contract. The powers of attorney are not expressed to be under the Powers of Attorney and Agency Act 1984 (SA). They are therefore of questionable authority, they do not comply with the requirements for appointing a power of attorney in this jurisdiction.
A State of Delaware Certificate of Incorporation provided after the hearing shows that NoQ Holding Company, has Mr Young as the sole office holder. He is also listed as its President.
A state of Delaware Certificate of Incorporation states that NoQ Holding Company is the incorporator of NoQ Inc. The officers of NoQ Inc are Mr Jerome Abbott and Mr Hok Lee. NoQ trades as Egrowcery in the United States.
NoQ Inc is the sole shareholder of the Australian company Hub IT Holdings Pty Ltd (Hub IT). The officeholders of Hub IT are Mr Hok Lee and Mr Gregory Frisbee. Mr Young ceased as a director of Hub IT in October 2018. Mr Frisbee provided a statement in which he says that NoQ Holding has a substantial interest in NoQ, and represent “a large cohort of Australian based investors”.
Hub IT is the sole shareholder of Egrowcery. The sole officeholder of Egrowcery is Mr Hok Lee. Egrowcery was previously known as NoQ Pty Ltd, and changed its name in March 2017. Prior to being known as NoQ Pty Ltd it was called Hub IT Pty Ltd.
Mr Hok Lee is the director common to all entities other than NoQ Holdings. He is the current director of Egrowcery and Hub IT. It was of significant concern to the Tribunal that he did not appear. It was also of concern to the Tribunal that Mr Young signed an appointment of a representative form appointing a new representative prior to the hearing (albeit from the same firm) without having authority to do so.
Nevertheless, while the Tribunal does not regard the powers of attorney binding, it does show Mr Lee intended Mr Young to represent Egrowcery in these proceedings. Ultimately, the Tribunal has proceeded on the basis that Mr Young is authorised to appear on behalf of Egrowcery.
In the assessment of any further matters concerning Egrowcery, it will be necessary to ensure that the representative of Egrowcery is properly authorised.
THE BUSINESS
Egrowcery develops the software for a suite of services to assist supermarket pick, manage, order and deliver stock. The intellectual property for the software developed by Egrowcery is held by Hub IT.
Mr Young said that the pattern of trading for Egrowcery is typical for a start-up venture. He said it takes five to eight years to develop the software. In this case, this phase was completed at the end of 2018 when the software was robust, and became commercially viable. Mr Young stated the commercial viability of the software is shown by a contract NoQ has with Alliance Retail Group Inc. (ARG) in the United States. This is a master franchise agreement to license the software to individual stores.
Mr Young said that as Egrowcery is the development part of the business, and was funded “hand to mouth”. He said capital was first raised in Egrowcery, but that shareholding was transferred to NoQ in 2015/2016 under a scheme of arrangement approved at that time. He said the current phase of the business is to commercialise the software and adapt the software so it can be applied in a number of different stores.
CONSIDERATION OF CLAIMS AND EVIDENCE
This is an application for review of a decision made by a delegate of the Minister for Immigration on 8 February 2018 to reject the applicant’s application for approval of the nomination of a position in Australia under r.5.19 of the Migration Regulations 1994 (the Regulations).
The applicant applied for approval on 9 June 2017. The requirements for the approval of the nomination of a position in Australia are found in r.5.19 of the Regulations which contains two alternative streams: a Temporary Residence Transition nomination (r.5.19(3)) stream and a Direct Entry nomination (r.5.19(4)) stream. If the application is made in accordance with r.5.19(2) and meets the requirements of either stream, then the application must be approved. If any of the requirements are not met then the application must be refused: r.5.19(5).
In this case, the applicant has applied for approval of a nomination, seeking to satisfy the criteria in the Direct Entry Nomination stream. The delegate refused the application on the basis the applicant’s nomination did not satisfy r.5.19(4)(d) of the Regulations, which requires that Mr Welsh be employed in the nominated position for at last two years full time.
The issue in this case is whether the applicant meets the requirements for approval of the nomination under the Direct Entry nomination stream set out in r.5.19(4), which is extracted in the attachment to this decision. For the nomination to be approved, all the requirements must be met.
The application is compliant: r.5.19(4)(a)
Regulation 5.19(4)(a) requires that the application for approval must be in the approved form, must be accompanied by the prescribed fee, and, where applicable, must include the required written certification relating to conduct that contravenes s.245AR(1). The application must also identify a need for the nominator to employ a paid employee to work in the position under their direct control.
The application was made on the approved form and includes the required certification. It identified is a need for it to employ a paid employee to work in the position under its direct control. Accordingly, the requirement in 5.19(4)(a) is met.
Nominator is actively and lawfully operating a business in Australia: r.5.19(4)(b)
Regulation 5.19(4)(b) requires that applicant is actively, lawfully and directly operating a business in Australia.
Egrowcery lodges Business Activity Statements and is currently operating in Australia. The BAS statements provided to the Tribunal state there were sales of $16,133 in the quarter October – December 2017, sales of $28,699 in the quarter July – September 2018, and $26,337 in the quarter October – December 2018.
On being asked who Egrowcery trades with, Mr Young said it trades with an internal subsidiary as NoQ is responsible for the business.
In a written submission, it was state that Egrowcery had entered a contract with ARG in the United States. This is not correct. ARG entered a contract with NoQ Inc, trading as Egrowcery in the United States. NoQ Inc is a separate entity to Egrowcery, which is incorporated in Australia.
As the contracting entity in the United States for the contract with ARG is NoQ, the issue arose during the hearing of whether Egrowcery is operating a business in Australia, or only trades internally with other associated entities.
Egrowcery was asked to provide contracts to show it is actively and lawfully operating a business in Australia. After the hearing it provided a contract signed by Mr Dion Newell on behalf of NoQ Pty Ltd (a previous name of Egrowcery) dated 12 November 2015. This was for a single site IGA store in Victoria. Various sales data was provided, however no income from this contract was before the Tribunal. A second contact dated 17 August 2015 was provided for a supermarket, which services four locations. Activity reports for the software for a supermarket that was not the subject of the contract was provided. Recent software activity for one store the subject of the contract was provided.
While the information about Egrowcery activity operating a business is slim, there is evidence of it operating a business in the form of a contract and related software activity data for one store, and on balance the Tribunal accepts it is actively, lawfully and directly operating a business in Australia.
Position is not labour-hire: r.5.19(4)(c)
Regulation 5.19(4)(c) applies to nominators whose business activities include those relating to labour hire to an unrelated business. In these cases, the nominated position must be within the business activities of the nominator.
This case Egrowcery is not involved in labour hire activities and accordingly the requirement in regulation 5.19(4)(c) does not apply.
Term of employment of the visa holder: r.5.19(4)(d)
Regulation 5.19(4)(d) requires the nominee to be employed in the nominated position for at least 2 years full time, and the terms and conditions of that employment do not expressly exclude the possibility of an extension.
The delegate was not satisfied that the company was in a financial position to employ Mr Welsh full-time for two years.
Mr Young gave evidence that the trading history of Egrowcery was typical for the industry in which it operates. He said Egrowcery is the development arm of the business, and that by the end of 2018 the software was developed. The concept is now being marketed commercially, and NoQ has entered a master partnership agreement with the Alliance Retail Group (ARG) in the United States to license the use of the software.
The contract between ARG and Egrowcery is, on the face of it, a contract between ARG and NoQ Inc, a company incorporated in the United States. In submissions it is stated NoQ transfers licence fees for the software to Hub IT in accordance with the terms of a license agreement, as Hub IT owns the intellectual property. The licence agreement between NoQ and Hub IT was not provided. The contract between ARG and NoQ does not contain any mention that would indicate NoQ does not own the intellectual property and states that NoQ will retain the intellectual property in the “offering”, which is not defined in the contract provided to the Tribunal.
The income for Egrowcery in its financial statements includes income that is research and development income, although it is not recorded as such. This research and development income, as shown by the research and development documents, is in fact provided to Hub IT and not Egrowcery.
The number of employees at Egrowcery has reduced significantly since the date of the application to approve the nomination, culminating with the financial controller, previously nominated as the representative of the company, ceasing two weeks before the hearing. At the time of the application, there were 19 employees including the nominee Mr Welch and excluding the CEO. By the time of the hearing there were seven employees. Mr Young said that there have been changes in the staff and directors of Egrowcery as the software approaches a commercialisation phase as fewer IT staff are required. Mr Young said there was also a reduction in development staff as the business is focussed on the market in the United States as the largest market.
Mr Young said the focus of the business in Australia was “saleability”. On being asked to explain this, he said that the role is to prove the concept of the software. Egrowcery is operating a number of outlets and is scaling up to multiple stores. As the layout of different stores is different, the software must be adapted so it can cope with multiple stores.
The income for Egrowcery stated in its 2018 tax return is $1,987,140 with expenses of $3,048,029 resulting in a loss of $1,060,889. Due to other non-deductable expenses, the taxable income was negative $986,746. The majority source of income for Egrowcery was classified as “other revenue” of $1,766,492.
The 2019 tax return lists income of $1,483,168 with $1,361,243 other revenue. There is a loss of $1,003,427 for the year. Accumulated losses in 2019 are $9,720,391.
Financial statement to 31 December 2018 records loans from Hub IT of $7,800,746 and from NoQ of $1,061,672.
It was suggested the “other revenue” is income from Hub IT research and development grants from the Australian government.
Various references are made to the investment and involvement in the business of Mr Raymond Spencer. Mr Spencer provides a letter in support of the nomination. Mr Spencer states he is a major shareholder and past chairman of Egrowcery. The statement infers an involvement in Egrowcery in Australia, however the ASIC extract does not disclose Mr Spencer being a current shareholder of this business. Similarly Mr Jerome Abbot writes in support of the nomination, but also does not have any involvement in Egrowcery, and conflates this entity with the US entity. He refers to the contract with ARG, and states that in his opinion Egrowcery is solvent due to the agreement with ARG. He also states that “we” have commenced negotiations with IGA to incorporate the technology in IGA supermarkets in Australia. While the Tribunal does not doubt the involvement of Mr Abbot in the business, this is the part of the business operated in the United States.
Mr Welch commenced with Egrowcery in June 2019, and has been employed for over three years. His PAYG payment summaries show he was paid close to the amount specified in his contract. It is stated Mr Welch is crucial to Egrowcery’s current and future success.
The financial capacity of other companies in the group including Hub IT, NoQ Inc and NoQ Holdings is not before the Tribunal. This, together with the non-attendance of an officeholder and the significant reduction is staff of Egrowcery and the change in premises is cause for concern about the ongoing viability of Egrowcery.
However, the Tribunal acknowledges the corporate structure adopted by the group does mean that Egrowcery itself hold the income for the group. The Tribunal accepts Egrowcery is funded by other companies within the group, with Hub IT and NoQ having significant loans to Egrowcery.
On balance, the Tribunal accepts that Egrowcery will continue to be funded by other companies within the group of companies and that Mr Welch will be employed full time for at least two years.
Accordingly, the requirement in r.5.19(4)(d) is met.
No less favourable terms and condition of employment: r.5.19(4)(e)
Regulation 5.19(4)(e) requires that the terms and conditions of employment applicable to the nominated position will be no less favourable than those that are, or would be, provided to an Australian citizen or permanent resident performing equivalent work in the same workplace at the same location.
An employment contract was provided for Mr Welch. The terms and conditions in the contract are consistent with the National Employment Standards. The salary is consistent with the salary of a position of this nature, as cited in Payscale.com.
Accordingly the requirements of r.5.19(4)(e) are met.
No adverse information known to Immigration: r.5.19(4)(f)
Regulation 5.19(4)(f) requires that there is no adverse information known to Immigration about the nominator or person associated with the nominator; or it is reasonable to disregard any such information. For these purposes, ‘adverse information’ and ‘associated with’ have the meaning given in rr.1.13A and 1.13B.
There is no adverse information on the Department file. On being asked, Mr Young said there had been four actions against Egrowcery relating to creditor issues he thought action may have been taken against it for failing to pay creditors, and there had been an issue involving the previous premises and making good of the premises. He could not recall of there was a judgement by a Court.
The Tribunal could not locate any such adverse information that was before Immigration, and on the information before it there was no adverse information known to Immigration about Egrowcery or a person associated with it.
Accordingly the requirements of r.5.19(4)(f) are met.
Satisfactory compliance with workplace relations laws: r.5.19(4)(g)
Regulation 5.19(4)(g) requires that the applicant has a satisfactory record of compliance with the laws of the Commonwealth, and of each State or Territory in which the applicant operates a business and employs employees in the business, relating to workplace relations.
There is nothing before the Tribunal to show Egrowcery has other than a satisfactory record of compliance with laws relating to workplace relations.
Accordingly the requirements of r.5.19(4)(g) are met.
Tasks of the position genuine need for the position and training requirements r.5.19(4)(h)
Regulation 5.19(4)(h) contains a number of alternative requirements. These are set out in detail in the attachment to the decision but in relation to this application can be summarised as requiring that:
·the position and nominator’s business is located in regional Australia,
·there is a genuine need for the paid position under the nominator’s direct control
·which cannot be filled by a locally resident Australian citizen or permanent resident,
·the tasks of the position correspond to those of an occupation specified in the relevant legislative instrument,
·the occupation is applicable to the proposed employee in accordance with the specification of the occupation and
·that a regional certifying body has advised the Minister about certain matters relating to the position.

The position and business is located in ‘regional Australia’ as specified in IMMI 17/059. All of South Australia is specified as regional Australia in this instrument.
The business of Egrowcery is software development. The position is that of an ICT Project Manager, and the Tribunal is satisfied there is a genuine need to employ a paid employee to work in this position under Egrowcery’s direct control.
In looking to whether the position cannot be filled by an Australian citizen or permanent resident who is living in the same local area, Egrowcery refers to the particular skills and experience of Mr Welch, including skills US market and with Amazon. A submission from the representative states the position was advertised in November 2016 and Mr Welch was selected. An invoice from Seek shows the position of manager of product development was advertised on 18 November 2016.
Documents provided by Egrowcery show three applicants for the position and all three were shortlisted. No further information was provided on the suitability of those candidates. Mr Young said he was not involved in the recruitment process, however he referred Mr Walsh to the company. In being asked about any efforts to recruit from within Australia, Mr Young said he was advised there was an attempt to recruit with a number of applications received, however the applicants were not of the quality of Mr Welsh.
Given the particular corporate structure and markets for Egrowcery, and the particular skills required for the position, the Tribunal accepts the position could not be filled by a locally resident Australian citizen or permanent resident.
The tasks to be performed in the position correspond to the tasks of an occupation specified by instrument IMMI 17/058, being an ICT Project Manager. The tasks specified in the contract correspond to the tasks, and there are no additional applicability requirements for that occupation.
A Regional Certifying Body specified in IMMI 17/058 located in the same State or Territory as the position has advised the Minister about the matters in r.5.19(4)(e) and r.5.19(4)(h)(ii)(B) & (C). The Department of State Development, the regional certifying body for South Australia, has provided the required certification.
Accordingly the requirements of r.5.19(4)(h) are met.
Based on the findings above, the Tribunal is satisfied that the applicant meets the requirements of r.5.19 for approval of the nomination of the position in Australia.
DECISION
The Tribunal sets aside the decision under review and substitutes a decision approving the nomination.
Kate Millar
Senior Member

ATTACHMENT - EXTRACTS FROM THE MIGRATION REGULATIONS 1994
5.19Approval of nominated positions (employer nomination)
…
(2)The application must:
(a)be made in accordance with approved form 1395…; and
(aa) include a written certification by the nominator stating whether or not the nominator has engaged in conduct, in relation to the nomination, that constitutes a contravention of subsection 245AR(1) of the Act; and
(b)be accompanied by the fee mentioned in regulation 5.37.
…
Direct Entry nomination
(4)The Minister must, in writing, approve a nomination if:
(a)the application for approval:
(i)       is made in accordance with subregulation (2); and
(ii)      identifies a need for the nominator to employ a paid employee to work in the position under the nominator’s direct control; and
(b)the nominator:
(i)       is actively and lawfully operating a business in Australia; and
(ii)      directly operates the business; and
(c)for a nominator whose business activities include activities relating to the hiring of labour to other unrelated businesses — the position is within the business activities of the nominator and not for hire to other unrelated businesses; and
(d)both of the following apply:
(i)       the employee will be employed on a full-time basis in the position for at least 2 years;
(ii)      the terms and conditions of the employee’s employment will not include an express exclusion of the possibility of extending the period of employment; and
(e)the terms and conditions of employment applicable to the position will be no less favourable than the terms and conditions that:
(i)       are provided; or
(ii)      would be provided;
to an Australian citizen or an Australian permanent resident for performing equivalent work in the same workplace at the same location; and
(f)either:
(i)       there is no adverse information known to Immigration about the nominator or a person associated with the nominator; or
(ii)      it is reasonable to disregard any adverse information known to Immigration about the nominator or a person associated with the nominator; and
(g)the nominator has a satisfactory record of compliance with the laws of the Commonwealth, and of each State or Territory in which the applicant operates a business and employs employees in the business, relating to workplace relations; and
(h)either:
(i)       both of the following apply:
(A)the tasks to be performed in the position will be performed in Australia and correspond to the tasks of an occupation specified by the Minister in an instrument in writing for this sub-subparagraph;
(AAA)the occupation is applicable to the person identified under subparagraph (a)(ii) in accordance with the specification of the occupation;
(B)either:
(I)the nominator’s business has operated for at least 12 months, and the nominator meets the requirements for the training of Australian citizens and Australian permanent residents that are specified by the Minister in an instrument in writing for this sub-sub-subparagraph; or
(II)the nominator’s business has operated for less than 12 months, and the nominator has an auditable plan for meeting the requirements specified in the instrument mentioned in sub-sub-subparagraph (I); or
(ii)      all of the following apply:
(A)the position is located in regional Australia;
(B)there is a genuine need for the nominator to employ a paid employee to work in the position under the nominator’s direct control;
(C)the position cannot be filled by an Australian citizen or an Australian permanent resident who is living in the same local area as that place;
(D)the tasks to be performed in the position correspond to the tasks of an occupation specified by the Minister in an instrument in writing for this sub-subparagraph;
(DA)the occupation is applicable to the person identified under subparagraph (a)(ii) in accordance with the specification of the occupation;
(E)the business operated by the nominator is located at that place;
(F)a body that is:
(I)specified by the Minister in an instrument in writing for this sub-subparagraph; and
(II)located in the same State or Territory as the location of the position;
has advised the Minister about the matters mentioned in paragraph (e) and sub-subparagraphs (B) and (C).

[2019] AATA 4283

1 October 2019

Key Legal Topics

Areas of Law

Immigration

Administrative Law

Legal Concepts

Judicial Review

Statutory Construction

Jurisdiction

Procedural Fairness