Harsono and Minister for Immigration, Multicultural and Indigenous Affairs

[2005] AATA 550

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 550

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No   W2004/120

GENERAL ADMINISTRATIVE DIVISION		)
Re		Sutjipto Harsono

Applicant

And Minister for Immigration, Multicultural and Indigenous Affairs

Respondent

DECISION

Tribunal Ms L Savage Davis, Member

Date9 June 2005

PlacePerth

Decision  The Tribunal affirms the decision under review.

.[sgd Linda Savage Davis]

Member

CATCHWORDS

MIGRATION – business skills visa subclass 127 – cancellation of visa – Applicant’s failure to obtain a substantial ownership interest in a business in an eligible business in Australia – active participation in day to day management at senior level of business – whether genuine effort made – discretion not to cancel visa

Migration Act 1958 s 134, 137

Migration Series Instructions No 133

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

Lau v Minister for Immigration and Multicultural Affairs [2002?] AATA 703

Hope v Bathurst City Council (1980) 144 CLR 1

REASONS FOR DECISION

9 June 2005   Ms L Savage Davis, Member        

1. This is a an application by Mr Sutjipto Harsono (the applicant) for a review of a decision dated 11 March 2004 of the Minister for Immigration and Multicultural and Indigenous Affairs (the respondent) to cancel the business visa issued to the applicant pursuant to s.134 of the Migration Act 1958.

2.      At the hearing Mr Harsono was represented by Mr Robert Lu of Bristar Migration Services.  The respondent was represented by Mr Aaron Gerrard, of the Australian Government Solicitor.

3. Oral evidence was given by Mr S Harsono and the Tribunal was assisted by an Indonesian Interpreter. The Tribunal had before it the documents (T- documents) lodged pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 (T1 – T28/1-445). In addition the following documents were marked as follows:

Exhibit A1Applicant’s Statement of Facts and Contentions filed 17 June 2004.

Exhibit A2Additional Statement from the applicant with supporting documents filed 7 July 2004.

Exhibit A3 Applicant’s Statement of Response to Respondent’s Contentions filed 2 September 2004.

Exhibit A4Applicant’s Additional Statement of Response filed in two parts on 10 and 12 May 2005 respectively.

Exhibit R1Respondent’s Statement of Facts and Contentions dated 5 August 2004.

4. By way of background I note that on 31 October 2000 Mr Harsono was granted a sub-class 127 business skills visa and first entered Australia on 18 November 2000. On 18 October 2002 he was sent the standard “Survey of Business Skills Migrant – 24 months” form (Survey Form). The applicant indicated in that form (T17/144 -152) dated 14 November 2002 that he had an interest in Merino Tannery Pty Ltd, a business concerned with exporting hide and skins. The respondent in a letter dated 28 March 2003 (T16/142-143) requested further information. In a letter dated 12 November 2003 the applicant was notified of the respondent’s intention to cancel (T19/155 -157). The applicant provided further information (T21/161 - 435) on 10 December 2003. In a letter dated 11 March 2004 the applicant was notified that his visa had been cancelled under s.134 of the Migration Act 1958 (the Act) (T4/ 17-18).

Legislation

5. Section 134 of the Act empowers the respondent to cancel a business visa in certain circumstances. Relevant to consideration of this matter are subsections 134 (1) (2) (3) and (10) of the Act that provide as follows:

“134 Cancellation of business visas

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

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

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

(c)       does not intend to continue to:

(i)        hold a substantial ownership interest in; and

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

an eligible business in Australia.

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

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

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

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

(3)       Without limiting the generality of matters that the Minister may take into account in determining whether a person has made the genuine effort referred to in subsection (2), the Minister may take into account any or all of the following matters:

(a)       business proposals that the person has developed;

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

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

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

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

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

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

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

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

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

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

…

(10)     In this section:

business visa means:

(a)       a visa included in a class of visas, being a class that:

(i)        has the words “Business Skills” in its title; and

(ii)       is prescribed for the purposes of this paragraph; or

(b)       a visa:

(i) to which a prescribed provision of the Migration Reform (Transitional Provisions) Regulations applies; and

(ii)       that is of a kind prescribed for the purposes of this paragraph; or

(c)       a return visa that is granted to a person who is or was the holder of a business permit or business visa;

…”

6.      Section 143(3) of the Act sets out the matters the respondent, without limiting itself only to those matters, may take into account in determining whether a person has made the “genuine effort” referred to in section 134(2) of the Act. In addition the Migration Series Instructions No 133 (MSI) at paragraph 4.5 lists factors, that although not binding on the Tribunal are relevant in considering whether a genuine effort has been made. They are as follows;

“a.business proposal which is considered genuine, realistic and achievable;

b.formal contract with partners or joint venturers;

c.written evidence of detailed consultations with at least three business advisers (accountant, lawyer, bank/financial institution, State/Territory government business development office, Austrade, business/trade association);

d.physical presence in Australia for more than six months since first arrival as a Business Skills class migrant;

e.transferred to, and retained in, Australia at least 50% of the funds indicated as available for transfer within two years (under Factor 4 of the Business Skills Points test);

f.minimum A$100,000 or 10% ownership previously held by the person.  If the person is no longer in business, the reasons for loss of ownership are also relevant.

g.minimum A$100,000 business activity as indicated by turnover.  This may include other business activity not considered “eligible business” but cannot include passive investment, eg, purchase of shares.

h.failure to comply with a notice for information under s 137, ie mandatory monitoring of Australian address and return of survey forms.”

Mr Harsono’s Evidence

7.       Mr Harsono told the Tribunal he was the director of Merino Tannery Pty Ltd (Merino) along with his brother and two other friends from Indonesia who live in Australia.  He was not involved in any other businesses with these friends.  Each owned 25% of the business and all four are directors.  He said that Merino had been gradually increasing the volume of its exports between 2001 and 2004.  Between 1 July 2004 and 1 April 2005 they had exported raw materials worth in the vicinity of $132,000.  There were ongoing contracts for example with Intal Pel International Pty Ltd (Intal Pel). Currently there was a contract for May and June 2005 worth $30,000 which had been previously delayed due to factors as the strong Australian dollar.

8.      Mr Harsono said that all the raw material purchased by Merino from Intal Pel and Starpac Corporation (Starpac), and more recently from Gosh Leather, was exported to his own company in Indonesia, Usaha Loka.  Approximately 50% of the raw material was sold on and 50% was processed by his company.  He said that there was no tannery facility in WA to process the low cost hide and other raw materials that they purchase.  In any event he said it was too expensive to do it in WA and they faced enormous obstacles in terms of environmental controls and finding workers prepared to work in such a demanding and smelly environment.

9.      Mr Harsono said that he believed the exports by Merino added indirectly to employment for Starpac.  They take low quality material which would previously have been thrown away.  This is because they can buy it cheaply and have found a way to create a market in Indonesia.  He said indirectly that they were helping these local companies by saving the cost of throwing away this raw material even though he conceded the amount they purchased was not of a very big volume.  Mr Harsono said Intal Pel sells most of their low quality raw material to Merino and Starpac sold it only to Merino.  Mr Harsono said that his company in Indonesia has a tannery permit to import and the processing facilities to enable them to import it and process it.  

10.     Mr Harsono described his role for Merino as marketing to the Indonesian and Chinese markets.  He said he spends approximately 20 hours a week working on behalf of Usaha Loka, a tannery business, which was established by his family in the 1930s.  He said currently he and his brother are the two directors of this family business.  He said that he spends additional time outside the office marketing and collecting money.  Initially Mr Harsono said that he thought he would spend approximately 14 hours per week working on behalf of Merino. This included overseeing the processing of products imported by Usaha Loka from Merino and promoting it by taking samples of raw material to potential buyers.  Mr Harsono explained that there is no advertising or specific promotion done in a documented form on behalf of Merino, but he takes pieces of the raw material and also a piece of the raw material once processed by Usaha Loka to prospective buyers.  In this context he agreed that it was more realistic to say that he perhaps spends 7 hours per week working on behalf of Merino and the other 7 hours working on behalf of Usaha Loka.  He indicated that the time involved was partly because of the distance that has to be travelled to potential buyers. 

11.     Mr Harsono described his business, Usaha Loka, as very successful and as his main source of income.   He said he owns approximately 14 out of the 80 shares, the remainder being owned by his 3 brothers and sisters.  Usaha Loka employs 350 people and has a full time manager. Merino on the other hand has no staff and he is not paid for the activities he undertakes on its behalf.  He said that a friend, who is also not paid, does the paper work at a Calista address in Western Australia.  Mr Harsono was not sure whether Merino was listed in the telephone book.

12.     Mr Harsono told the Tribunal that he applied for a Business Skills Visa because it made it easier for him to come back and forward into Australia and to look for the resources.  He had been involved in exporting the raw material from Australia since 1999.  On one occasion this was done via a company in Australia, but then he and his brother decided to come to Australia and set up their own export company.  That led to the establishment of Merino in 1999, and subsequently the seeking and granting of the Business Skills Visa in 2000.  When he first started to look for suppliers he went through the Yellow Pages.  He contacted Starpac and they provided information about other suppliers, including Intal Pel and Caps.  He said that he visits these companies with his brother and other directors if they are in Perth when he visits.

13.     Mr Harsono was referred to his Survey Form and to question 33 where he had said that he spent 1 hour per week working on behalf of Merino (T17/148). Mr Harsono said that this was correct when he had completed the form in November 2002.  He said in 1999 he was just looking and then in 2001 and 2002 Merino was trading.  Mr Harsono also agreed that he had answered question 41 indicating that there had been $120,000 in exports for the previous year.  Mr Harsono said that since 2003 he had been working 14 hours per week (later 7 hours per week) and this commenced not long after completing the form.  He said this was because he was doing more marketing in Indonesia and collecting money.  He said that whilst all exports go to Usaha Loka that is because it has the tannery licence.  Usaha Loka buys the product from Merino and when it is sold both Merino and Usaha Loka gets a small profit.  Mr Harsono agreed that the profit that Merino had made had been small but he said that this was because of the strong Australian currency and it was his hope that the business would improve and turnover would increase.  Mr Harsono agreed that for example on one transaction (T21/ 261-262) Intal Pel had been paid $5500 for raw material by Merino.  Merino then sold it to Usaha Loka for $5250. Once the GST paid was recouped Merino only made a profit of $250. Mr Harsono said Usaha Loka would have made approximately five percent profit.  Mr Harsono said that the share holders in Merino and Usaha Loka were not the same, but did agree that he and his brother were involved in both.  Mr Harsono said that he would sell his interest Usaha Loka if he was offered enough. He would use the proceeds to buy more investment property in Indonesia.  He was not currently considering this as the tannery business is still worth having.

14.     Mr Harsono said he first entered Australia in November 2000.  He had only spent 63 days in Australia up to the cancellation of his visa because he needed to spend most of his time at his Indonesian business because he depends on that for his living.  He was planning to move to Australia within a couple of years.

15.     Mr Harsono said that Merino would not survive if it sought greater profits.   He had had some preliminary discussions recently about the possibility of setting up a processing plant with Starpac.  He said it would be very difficult in both Indonesia and WA to set up a new tannery because of the cost and environmental issues. He felt satisfied doing something with raw material that would otherwise be thrown away. The business would be difficult to continue if his visa was cancelled.

Final Submissions

16.     Submissions were made on behalf of the applicant and can be summarised as follows:

·that Merino, of which the applicant owns 25%, was an eligible business in the sense that it was formed with the intention to source raw material from Australia to export which would promote local industry;

·that whilst the profit margin had been very low the applicant had at the end of June 2004 injected $40,000 into Merino by way of a loan;

·that the adverse environment, including the strength of the Australian dollar had made it difficult for Merino to operate and if not for the loan of $40,000 it would have resulted in the business closing down;

·that the Australian component of the raw material accounted for 10% of Usaha Loka’s business;

·that sourcing this raw material requires Mr Harsono to negotiate with local suppliers to get good quality and quantity of products;

·that the applicant must follow up on the export to ensure that there is a market so that Merino can survive by developing buyers for the raw material in Asia;

·that Mr Harsono, it was submitted, had to make sure that payments are collected;

·that as a director in Usaha Loka and a shareholder and director of Merino he must wear two hats to consider the interests of both companies;

·that it was difficult to quantify the time he actually spent travelling around Indonesia showing products to local suppliers and customers on behalf of Merino;

·that the low profit margin was necessary for Merino to survive;

·that Mr Harsono had made a genuine effort and has continued to do so in relation to Merino and its success

17.     The Tribunal was referred to Exhibit R1 and the following additional submissions were made which can be summarised as follows:

·that whilst Merino is involved in activity of a continuous and repetitive nature, its focus was on sourcing raw material for the applicant’s Indonesian  business, Usaha Loka and therefore, it was submitted, it was doubtful whether it was actually a business in the sense of being commercial enterprise;

·there appeared, it was submitted, not to be any profit motive and that Merino was a vehicle for purchasing raw materials and selling them on to Usaha Loka only marginally above the cost price and no meaningful profits were recouped.  As a result there was little or no benefit to the Australian economy which it was submitted was reflected in the fact that Merino pays little tax;

·the respondent concedes that the applicant has a substantial ownership in Merino, having a 25% shareholding but submits, however, Merino is not an eligible business and at the date of cancellation the actual net worth of the business was very low;

·it was submitted that whilst Starpac and Intal Pel may have developed international links, the issue is whether Merino has developed these links, which is relevant to the criteria in s 134 of the Act; supplying Australian goods to your own business, as in this case, could not be said to be the development of a business link it was submitted;

·it was submitted there is no evidence as to what actually happens to the raw material after it has left Australia;

·the evidence was that no one is employed by Merino or receives any payment;

·whilst the applicant’s evidence is that the sale of raw material benefits local business there is no evidence of the extent of that benefit and at best, the evidence of the contracts show that it is of limited economic value to Australia;

·it was submitted that essentially Starpac and Intal Pel export to Usaha Loka using Merino as a conduit and that essentially the transaction is between Usaha Loka and Starpac or Intal Pel; the relationship between the applicant and Starpac and Intal Pel is essentially a relationship between them and Usaha Loka of which the applicant is a director.  There is no evidence, it was submitted, as to why the raw material needs to be bought by Merino rather than sold directly by Starpac and Intal Pel to Usaha Loka.  In effect the applicant it was submitted is a director of an Indonesian business which imports Australian goods, rather than the director of an Australian business that exports Australian goods;

·it was submitted that it is difficult to see how Merino had led to an increase in commercial activity in the export of the rawhide sector.  In fact it could be said that Merino’s activities act against interests of an Australian company that genuinely wishes to export hides to Indonesia and employ people for that purpose and make a profit;

·the applicant, it was submitted, had failed to demonstrate that he has utilised his skills and actively participated at a senior level in the day to day management of Merino.  This is evident by the fact that the applicant had only spent 63 days in Australia at the date of cancellation of his visa and his evidence of initially 14 hours per week and then 7 hours per week is not of a magnitude that shows that he is using his skills at a senior level for the day to day management of Merino;

·it was submitted that the applicant’s contention that he needed to be overseas to market Merino’s goods did not stand up as he exports to his own family company of which he is a shareholder.  Once purchased by Usaha Loka the applicant, it was submitted, undertook marketing on behalf of that business in effect rather than Merino.  This was reinforced by the fact that there was no documented evidence of activities undertaken on behalf of Merino including  brochures, in fact Mr Harsono’s evidence was that he took a raw piece of the hide with him and a finely processed piece done by Usaha Loka.  This it was submitted was not evidence of marketing activities;

·there is no evidence of negotiations between the applicant and Indonesian businesses in the form of emails, evidence of meetings or brochures and it is difficult therefore to see how the time spent overseas could count as participating at a senior level in the day to day management of Merino.  This was reinforced by the fact the Usaha Loka is a large and successful business that takes up the majority of Mr Harsono’s time;

·it was submitted that rather than making a genuine effort to establish an eligible business in Australia, Mr Harsono had acted on behalf of himself and his family business in Indonesia to find improved ways of importing goods to Usaha Loka;

·it was submitted that the fact that Merino was incorporated before the applicant was granted a visa, plus the fact that it only ever supplied Usaha Loka with raw materials supported the conclusion that it existed for the benefit of Usaha Loka;

·it was submitted that in relation to Starpac and Intal Pel it was immaterial whether Mr Harsono acted in his capacity as a director of Usaha Loka or of Merino as in effect both Starpac and Intal Pel are exporting their goods to an Indonesian company;

·it was submitted there was no evidence of research conducted by the applicant apart from consulting the telephone book;

·it was submitted that only in 2003 did export sales exceed the $100,000 benchmark referred to in the MSI and yet profits were somewhat less than $4,500 which is minimal profit for Merino;

·in conclusion it was submitted that Merino was not an eligible business; it was  created to source rawhides for the applicant’s family business in Indonesia.  Any real profits would be made by the Indonesian business and consequently benefit Indonesian economy as opposed to Australian economy.

18.     In considering this matter, I have taken into account the documentary and oral evidence as well as the authorities cited and the submission made at the hearing.  The first issue for the Tribunal to consider is whether it should exercise the discretion to cancel the applicant’s visa because he has not obtained a substantial ownership in an eligible business in Australia.

19.     The Tribunal notes that in conducting its review and reaching its decision, the primary focus is whether the applicant satisfied the requirements of the Act at the time of cancellation.  What occurred after the date of cancellation, however, may be relevant to adequately addressing that matter (Wong v Minister for Immigration and Multicultural Affairs [2002] AATA 54; Lau v Minister for Immigration and Multicultural Affairs [2002?] AATA 703).  Cases such as Hope v Bathurst City Council (1980) 144 CLR 1 provide guidance as to the interpretation of the term ‘business”. Hope (supra) is authority that carrying on a business should be understood as activity undertaken on a continuous and repetitive basis for the purpose of profit. The Tribunal notes also that the business does not have to reach a threshold of size or turnover to qualify. The meaning of an “eligible business” is outlined in s 134(1) of the Act and to qualify it must meet at least one of the criteria.

20. The respondent concedes and the Tribunal agrees that because the applicant has a 25% shareholding, he has a “substantial ownership interest” as required by s 134(1) (a) of the Act. The respondent submits that it is not however an “eligible business” within the meaning of s 134 of the Act.

21. The Tribunal is not satisfied that merino is an “eligible business”. The documentary evidence of transactions in Exhibit A3 show, apart from one commercial invoice between Gosh Leather and Merino dated 2 July 2004 some 4 months after cancellation of the applicant’s visa, all transactions involved a sale from Intal Pel or Starpac to Merino and then directly to Usaha Loka. The invoices from Starpac dated 12 July 2004 and 21 June 2004 note Starpac as the exporter and Usaha Loka as the buyer (Exhibit A3). Merino appears to facilitate rather than act as the exporter in the transactions. In all years since 2002 profit for Merino has been minimal. Even in 2002/2003 when sales revenue were recorded by Merino as being $133,599.89 profit was only $8,009.88 (T21/187). No one is employed by Merino. The Tribunal accepts there is some benefit to Starpac and Intal Pel. However, this is because of Usaha Loka which primarily can use the products that are usually disposed of in Australia. It is difficult to see what real benefit Merino brings over and above that that results from the applicant’s relationship with Usaha Loka. Mr Harsono is not even certain whether Merino is listed in the telephone book. Mr Harsono appears to the Tribunal as acting on behalf of Usaha Loka’s interests primarily. Therefore, the Tribunal does not find Merino to be an eligible business as envisaged under s 134(10) of the Act and so the basis for the cancellation of the applicant’s visa under s 134(1)(a) of the Act is met.

22. Even if the Tribunal was satisfied that Merino was an “eligible business”, the applicant is still required to demonstrate, in order to avoid the prospect of visa cancellation, that he utilises his skills “actively participating at a senior level in the day to day management of the business”. The Tribunal understands the grant of a business skills visa under s 134 of the Act to be to enable individuals to settle in Australia and establish and manage an eligible business. Overseas travel may form an important and indeed significant part of the activity required to establish such a business. This is not the case here. Mr Harsono does not dispute that he has spent only 63 days in Australia between 31 October 2000 (date of grant of visa) and 11 March 2004 (date of cancellation), on average less than 3 weeks/year. On the other hand, of all the time spent out of Australia only 1 hour/week was spent on behalf of Merino until 2003. After that Mr Harsono began to spend 7 hours/week on behalf of Merino. Of this 7 hours there was no evidence presented as to who the applicant spoke to and marketed to on behalf of Merino. No brochures have been produced on behalf of Merino; instead a piece of hide and an example of the processing done by Usaha Loka are apparently shown to prospective buyers. Mr Harsono’s evidence was that driving to remote locations accounted for some of the 7 hours/week. Mr Harsono’s evidence was credible but indicated that activities on behalf of Merino were always in tandem with the promotion of Usaha Loka. There was no evidence of specific meetings, ongoing negotiations or records or dates. Whilst the Act does not prescribe any specific period that the visa holder is required to be in Australia, participation at a senior level in the day to day management by necessity would, in the Tribunal’s view, in the usual case require a presence in Australia for greater than the minimal time spent by Mr Harsono. Accordingly, the Tribunal concludes that the applicant has not been actively participating at a senior level in the day to day management of Merino.

23. There is one further matter for the Tribunal to consider. The applicant’s visa must not be cancelled if he has made genuine efforts to obtain a substantial ownership interest and eligible business in Australia and intends to continue to make such genuine efforts (s 134(2) of the Act). Matters that may be taken into account are set out in s 134(1) (3). Guidance may also be sought from the MSI.

24.     In particular the Tribunal does not accept that Mr Harsono has made a genuine effort to utilise his or her skills in actively participating at a senior level in the day to day management of Merino.  His evidence of his activities on behalf of Merino fall far short of what the Tribunal understands to be the commitment required of a subclass 127 business skills visa holder.

25.     The Tribunal is therefore not satisfied on the basis of the evidence before it that the applicant has acquired an interest in an “eligible business in Australia”.  Nor is it satisfied that the applicant has utilised his skills in “actively participating at a senior level in the day to day management of an eligible business” or that he has made “genuine attempts” to do those things and intends to continue to make such genuine efforts.

26.     The Tribunal therefore affirms the decision made on 11 March 2004 to cancel the applicant’s visa.

I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Ms L Savage Davis, Member

Signed:         [sgd June Rainey]
  Associate

Date of Hearing  16 May 2005 
Date of Decision  9 June 2005       
Advocate for the Applicant       Robert Lu   
Solicitor for the Respondent     Arran Gerrard