Hu (Migration)

[2023] AATA 1423

Hu (Migration) [2023] AATA 1423 (19 May 2023)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANTS:  Ms Sau Lan Hu
Mr Hon Hui Lim
Miss Joanne Hui Ting Lim

REPRESENTATIVE:  Mr Nabeel Lang (MARN: 0601921)

CASE NUMBER:  2015217

HOME AFFAIRS REFERENCE(S):          BCC2020/1292298

MEMBER:Susan Hoffman

DATE:19 May 2023

PLACE OF DECISION:  Perth

DECISION:The Tribunal affirms the decision not to grant the applicants Business Innovation and Investment (Permanent) (subclass 888) visas.

Statement made on 19 May 2023 at 8:52am

CATCHWORDS
MIGRATION – Business Skills (Permanent) (Class EC) visa – Subclass 888 (Business Innovation and Investment (Permanent)) – ownership interest in at least one actively operating main business during the two years before the visa application was lodged – began the process of opening a bakery business – made enquiries – premises not acquired – seafood export business – provision of goods and services to the public – single wholesaler owned by the applicant’s family – no sales or expenses during relevant period – decision under review affirmed

LEGISLATION
Migration Act 1958 (Cth), ss 65, 134
Migration Regulations 1994 (Cth), rr 1.03, 1.11; Schedule 2, cl 888.222

CASES
Shahpari & Ors v Minister for Immigration & Anor [2016] FCCA 513
Zhou & Ors v Minister for Immigration [2003] FMCA 169

STATEMENT OF DECISION AND REASONS

APPLICATION FOR REVIEW

1. This is an application for review of a decision made by a delegate of the Minister for Home Affairs on 28 September 2020 to refuse to grant the visa applicants Business Skills (Permanent) (Class EC) visas under s 65 of the Migration Act 1958 (Cth) (the Act).

2. The visa applicants applied for the visas in the Business Innovation stream on 1 April 2020. They were seeking to satisfy the criteria for the grant of a Subclass 888 visa. The delegate refused to grant the visas on the basis that she was not satisfied that the primary applicant had an ownership interest in at least one actively operating business throughout the two-year period immediately before the applications were made.

3. The applicants appeared before the Tribunal on 13 April 2023 to give evidence and present arguments.

4. The Tribunal also received oral evidence from Mr Vun Chan Lim (the applicant’s spouse) and Mr Honn Fatt Lim (their son). Both witnesses attended the hearing in its entirety.

5. The Tribunal hearing was conducted with the assistance of an interpreter in the Mandarin and English languages.

6. The applicants were represented in relation to the review.

7. A pre-hearing submission was made dated 6 April 2023. A post-hearing submission was made dated 24 April 2023. This was followed up by an amended submission dated 29 April 2023. The two post-hearings submissions were almost identical. The second submission updated some financial information and corrected a typographical error included in the first submission.

8. For the following reasons, the Tribunal has concluded that the decision under review should be affirmed.

   CONSIDERATION OF CLAIMS AND EVIDENCE

9. The central issue in the present case is whether there was at least one actively operating main business during the period 1 April 2018 to 31 December 2018. This is a criterion that must be met for clause 888.222 to be satisfied. It reads as follows:

   Cl 888.222 

   (1)  The applicant (the current applicant): 

   (a)  had an ownership interest in at least one actively operating main business in Australia during the 2 years immediately before the application was made; and

   (b)  continues to have the ownership interest in the actively operating main business.

   (2)  If the current applicant acquired the ownership interest from another person who was an applicant for, or held, a Business Skills (Permanent) (Class EC) visa or a Business Skills (Residence) (Class DF) visa at the time of the acquisition, the current applicant must have held the ownership interest with that person as a joint interest for at least one year before the current applicant’s application was made. 

10. “Ownership interest” is defined in section 134(10) of the Act as follows:

    ownership interest, in relation to a business, means an interest in the business as:

    (a)  a shareholder in a company that carries on the business; or

    (b)  a partner in a partnership that carries on the business; or

    (c)  the sole proprietor of the business;

    including such an interest held indirectly through one or more interposed companies, partnerships or trusts.

11. Cl. 888.222(1) refers to a main business. The definition of a main business is set out on Regulation 1.11 and can be found as an attachment to this statement.

12. Regulation 1.11(d) requires that the business is a qualifying business. The definition of the term “qualifying business” is set out in r.1.03 and is as follows:

    qualifying business means 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.

13. Cl. 888.222(1)(a) requires the applicant to have had an ownership interest in at least one actively operating main business during the two years before the visa application was lodged. As it was lodged on 1 April 2020, the relevant two-year period runs from 1 April 2018 to 31 March 2020.

14. According to the visa application form, the legal registered name of the main business was H&L Corporation Pty Ltd. Two business activities were identified, which were the export of seafood and the production and retail of patisseries.

15. As at 1 April 2018 the seafood export business had been in operation for about two years and the bakery business had not yet opened.

16. As general background, consistent with written and oral submissions, the businesses were run by the primary applicant’s family. The secondary applicants, Mr Hon Hui Lim and Miss Joanne Hui Ting Lim, are the children of the primary applicant and her husband, Mr Vun Chan Lim. Their eldest son is Mr Hon Fatt Lim, known as Mr Hayden Lim. According to the submissions, he is an Australian citizen and is an accountant. The post-hearing submissions stated that Mr Vun Chan Lim and Mr Hayden Lim “were the two key executive decision makers.” As noted earlier, they both attended the hearing in person. Together they gave most of the oral evidence. 

17. The applicant, Mr Vun Chan Lim and Mr Hayden Lim were the directors of H&L Corporation during the two-year period.

18. By way of summary and based on the pre-hearing submission, the seafood export business had been operating profitably from July 2016 to 31 March 2018. Then appreciation of the Australian dollar, which started in late 2017, resulted in Australian seafood – lobsters – being too expensive for overseas markets. The seafood export market collapsed. It picked up again between January 2019 and March 2020.

19. In late 2017, the directors decided to diversify the business and considered establishing a bakery. They had previously run a chain of bakeries in Malaysia. A lease for premises from which to operate the bakery business was signed in July 2019. It opened to the public in January 2020.

20. The Tribunal is satisfied that one or both of the seafood export and bakery businesses were trading from January 2019 to when the visa application was made on 1 April 2020. The question is whether a main business was operating between April 2018 and December 2018.

21. The pre-hearing submission stated that locating suitable retail premises for the bakery and importing the required manufacturing equipment took up most of the time between April 2018 and December 2019.

22. The submission also stated that while seafood sales dropped off between April and December 2018, the seafood export business continued to actively operate and the directors continued, on a daily basis, attempting to find sources of cheaper seafood or for opportunities to export to different markets.

23. The Tribunal will consider each business individually.

    Was the bakery an actively operating main business at any time between April and December 2018?

24. The Tribunal accepts that the directors made steps towards establishing a bakery business during this nine-month period. These included getting quotes for bakery equipment.

25. The post hearing submission included a quote for bakery equipment from a Malaysian company dated 24 April 2018 for RM56,370, worth about AUD19,000 today.

26. The post hearing submission also included a quote dated 18 June 2018 for RMB175,592 for bakery equipment from a company based in Shenzhen, China. At current exchange rates, that is equivalent to about AUD37,500.

27. There were further quotes from Malaysian companies for bakery equipment dated October 2018.

28. In the post hearing submission, there was reference to a trip to China and a travel itinerary. A copy of a travel itinerary was submitted for a trip between Kota Kinabalu, Malaysia and Hong Kong, leaving Malaysia on 12 June 2018 and returning on 19 June 2018. Although given the heading “Travel itinerary for China” the itinerary does not mention China as a destination. There was no mention of price or the passenger’s name. The travel itinerary may be related to the quote dated 18 June 2018 from a Chinese company. Whether or not that is the case would make no difference to the Tribunal’s decision in this review.

29. At the hearing, the Tribunal asked when the orders for the bakery equipment were placed and Mr Hayden Lim said that was in late 2019 after the lease was signed for the premises from which the bakery operated. The lease for the premises was signed in July 2019.

30. There is also evidence of the directors trying to find a suitable location for the bakery during the period April to December 2018. It was claimed that there were negotiations for one location between 9 April and 28 May 2018 and for a second at 2/278 Beaufort Street, Perth between 10 July 2018 and 14 November 2018. The lease for the premises used for the bakery, signed in July 2019, was in relation to a third location, being a shop at the Coventry Village shopping centre in Morley Village.

31. The Tribunal accepts that during 2018, the directors of the business began the process of opening a bakery business in Australia and were making enquiries to that end, to do with equipment and locating suitable premises. However, intent to operate a business is different to operating that business. The bakery business that was opened by the applicants could not be operated before premises for it were secured.

32. The Tribunal had regard to the matter of Zhou at paragraph 34.[1]

    I find the Tribunal to have been correct in its approach to the definition of “qualifying business” and in particular the requirement that the business must be:

    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.

    On the evidence it is clear that the company Great Wall never commenced trading.  It could not be described as being a business which operated ... through the provision of goods and services … to the public. The filing of annual returns and nothing more did not make it so. In addition, the Tribunal was entitled to find on the evidence that the company, Great Wall, did not satisfy paragraph (b) of the definition of “main business” which required the applicant to have maintained a direct and continuous involvement in the day-to-day management of the business and in making decisions affecting the overall directions and performance of the business.

    [1] Zhou & Ors v Minister for Immigration [2003] FMCA 169

33. A significant difference between Zhou and the case under review is that in Zhou, the company Great Wall, had not commenced trading. In the matter under review, the company H&L Corporation Pty Ltd had begun trading through the operation of the seafood business. However, in relation to the bakery business, premises were not acquired until July 2019 and the bakery business did not start trading until January 2020.  

34. The Tribunal also had regard to Shahpari.[2] In that matter, there was a question as to whether the business Karamadan was an actively operating main business during a particular period. The Court agreed with an interpretation of the words “actively operating” given in another matter which was as follows:

    … the involvement of an applicant must be active in an enterprise that has a repetitive, continuous and permanent character.

    [2] Shahpari & Ors v Minister for Immigration & Anor [2016] FCCA 513 (11 March 2016)

35. It is apparent that the bakery business did not have a repetitive, continuous or permanent character during the period between April and December 2018. The bakery business had not started during that period. Making enquiries about premises and machinery with a view to opening a particular business are activities distinct from actively operating that business., which involved baking and selling the goods baked.

36. The Tribunal is unable to find that the bakery business was actively operating at any time during 2018, when the lease for the premises was not signed until July 2019 and the equipment for the bakery was not ordered until late 2019.

    The seafood export business

    Was the seafood business providing goods to the public?

37. Mr Vun Chan Lim gave evidence about the seafood export business. He said that he worked in the seafood industry in Malaysia. He said that H&L Corporation Pty Ltd sold the seafood to his company in Malaysia, and then his company in Malaysia distributed the goods to different places. Based on the visa application and other documents, his Malaysian company is called Port View Seafood Village.

38. This raised a question as to whether the goods were being provided to the public. The meaning of providing goods to the public in the context of business visas is explained in the departmental policy guide.[3]

    [3] The Tribunal is not bound by departmental policy but will generally follow it unless there is a cogent reason not to do so. See Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634

    3.9.3.5. Goods and services to the public

    If goods and/or services are provided for profit to more than one person or entity (not otherwise related to the operator of the business), the business is considered to provide goods and/or services to the public. Applicants must demonstrate that the qualifying business is providing goods and/or services to the public.

    A business would not be considered to be providing goods and/or services to the public if:

    ·     the customer base of the business is limited to family members

    ·     the goods and/or services have historically been provided to a single person or

    ·     the goods and/or services are provided exclusively to a single entity, unless there is an arms‑length commercial arrangement that does not restrict or limit the business operations. (“Arms‑length” is where a seller and buyer:

    oare not related and

    oare independent of each other and

    oare on an equal footing and

    oare dealing with each other on a commercial basis.

39. As the hearing progressed, Mr Lim said that H&L Corporation sold to another company in Malaysia as well, not just his own. He and Mr Hayden Lim explained that importers in Malaysia needed to hold permits to import fish, and that H&L Corporation exported from Australia to different permit holders in different parts of Malaysia.

40. This was explained further in the post hearing submission. Importing seafood into Malaysia is strictly controlled. The Malaysian government issues an import permit before a Malaysian citizen or business can import seafood into Malaysia.

41. According to the submission, of the seafood exported to Malaysia between April 2019 and March 2020, 52% of sales by value were direct sales to a third party importer in Malaysia, based in Kuala Lumpur.

42. The issue of concern identified by the Tribunal at the hearing was not that the sales were made to seafood wholesalers in Malaysia but that it seemed, based on evidence given at one point in the hearing, that the sales were being made to a single wholesaler which was owned by the applicant’s family.

43. The Tribunal accepts that Australia exporters cannot be expected to sell directly to the general public in other countries. It accepts that export sales are usually made to wholesalers in the receiving country. However, if (as an example) the only customer or customers of an Australian export business are businesses in the receiving country which are owned by family members of the visa applicant, then the requirement set out in r.1.03 that a qualifying business “is operated for the purpose of making a profit through the provision of goods and services … to the public” is not satisfied. The provision of goods in that example would be to a related party not to the public.

44. As noted, it was claimed that 52% of sales by value were direct sales to a third party based in Kuala Lumpur, unrelated to the applicant or her family.

45. The post-hearing submission stated as follows:

    This is evidenced by the statutory declaration from Messrs Sea-Two Seafood Suppliers which confirms the purchase of seafood from H&L but also, relevantly, points to the strict control of importing seafood into Malaysia by demonstrating that even though they had a permit to import seafood themselves, it was restricted to a particular area of Malaysia which led them to purchase seafood from H&L.

46. The statutory declaration from Messrs Sea-Two Seafood Suppliers was dated 10 July 2020 and stated as follows (in part):

    1Our company have been imported [sic] live lobster and frozen prawn from H &L Corporation Pty Ltd since early of 2017, due to we don’t have an import permit for the aforementioned item to Sabah, Malaysia, so that we have to import the aforementioned item through Port View Seafood Village Sdn Bhd.

    2Our company paid cash to Port View Seafood Village Sdn Bhd for onwards payment to H&L Corporation Pty Ltd visa banker’s telegraphic transfer.

47. Given the statutory declaration stated that the imported items were imported from H&L Corporation via Port View Seafood Village and payment to H&L Corporation was made via Port View Seafood Village, the Tribunal is not satisfied that the statutory declaration supports a finding that 52% of H&L Corporation’s sales were made to the public and not to the family business.

48. Put another way, it is still unclear from the post hearing submission and statutory declaration whether H&L Corporation Pty Ltd sold seafood directly to Messrs Sea-Two Seafood or if the sales were made to Mr Vun Chan Lim’s Malaysian company which then onsold to Messrs Sea-Two Seafood.

49. If this was the only issue of concern, the Tribunal would request further evidence to clarify the trading relationship, such as invoices and an explanation of why Port View Seafood Village was involved with transactions between H&L Corporation and Messrs Sea-Two Seafood Suppliers.

50. However, the Tribunal has not sought further evidence on this particular issue as it is not satisfied that the seafood export business was trading during the period of concern. That being the case, this application for review cannot succeed even if evidence was submitted that satisfied the Tribunal that the business was providing goods to the public.

    Was the seafood business actively operating between April and December 2018?

51. Mr Vun Chan Lim said there was a halt in the seafood export business between April and December 2018, and that this happened because of a sudden sharp increase in the price of lobsters and also price increases of prawn and shrimp. He said it was too bad that goods could not be sent to Malaysia during that period.

52. The BAS returns covering the period April to December 2018 do not record any sales or any expenses during that period. Even if there are no sales in a quarter, if a business is actively operating, it is reasonable to expect to see some expenses. Mr Hayden Lim said that everything was run from the family home and he did not include expenses incurred by the family. He said there were no overheads as it was run from the family home.

1. It was also submitted that because the family were operating the business from their home, they felt it was not appropriate to charge themselves rental and other expenses. It was also observed that H&L Corporation could have reflected expenses such as the cost of airfare to China and expenses incurred by other directors and family members dealing with finance brokers and bankers to seek capital to purchase premises and equipment to purchase the bakery business.

2. The Tribunal observes that those expenses incurred before the bakery business was operational in 2019, and had they been recorded, they would not support the claim that the seafood business was in operation during the period April to December 2018.

3. The Tribunal asked Mr Vun Chan Lim if his Malaysian company imported seafood from other countries during the nine-month period when it was too expensive to do so from Australia. He said it did, it imported from China. That indicates his Malaysian company was operating during the period when there were no sales by H&L Corporation Pty Ltd.

4. Mr Vun Chan Lim said that he was looking for buyers in Malaysia during the nine-month period from April to December 2018. He said that his Malaysian company distributed the seafood it purchased to the end-users which were restaurants. He said that the business continued to operate and he continued to market the product during that nine-month period. He clarified that this marketing was done to the restaurants in Malaysia.

5. Mr Vun Chan Lim said that he was the president (past president) of the Malaysian Restaurant Association and was well-connected within the industry. According to the post hearing submission, he was the past president of the Pan Malaysia Koo Soo Restaurants and Chef Association. Mr Vu Chan Lim said it was easy for him to promote Australian seafood. When asked if he was promoting sales of seafood to the customers of his Malaysian company, he said that was “kind of correct”.

6. Mr Hayden Lim said that when they made sales to Malaysians, they were acting as representatives of the Australian company. The Tribunal is not satisfied that is correct. During the nine-month period when Mr Vun Chan Lim was promoting sales of seafood, his Malaysian company was importing seafood from China but not Australia. It does not make sense that he would be marketing produce they did not have (from Australia) rather than produce they did have.    

7. It was also submitted that the price of lobster and prawns, and the prevailing exchange rate of AUD to USD was checked daily, sometimes multiple times a day, to check whether it was viable to export Australian seafood to Malaysia again; and that H&L Corporation received quotations at least twice a week during the period April to December 2018.

8. Even if Mr Vun Chan Lim was promoting Australian seafood to customers of his Malaysian business, for a time in the future when the exchange rate favoured exporting seafood from Australia, and the prices were being checked regularly and quotes received, the Tribunal is not satisfied that those activities taken together would be sufficient to find that the seafood export business was an actively operating main business during the period April to December 2018.

9. It was submitted that the intention was, at all times, to operate the business in a responsible and profitable manner and that the business ran in a repetitive and continuous manner despite there being no sales or BAS activity.

10. Here the Tribunal refers back to the definition given above of an actively operating business, being “an enterprise that has a repetitive, continuous and permanent character.” The Tribunal is not satisfied that was the case during the period from April to December 2018, given there were no sales or expenses recorded and no seafood was exported which was the central activity of that business. The Tribunal is of the view that if Mr Vun Chan Lim was working for H&L Corporation during that period, rather than his Malaysian company, then that should have been apparent from financial records such as BAS returns.

11. The written submission claimed that while sales dropped off between April and December 2018, the directors continued on a daily basis to try and find sources of cheaper seafood or opportunities to export to different markets. No documentary evidence was submitted to support this claim and it was not supported by evidence given at the hearing.

12. The Tribunal notes that the two key decision makers in the business, according to the post-hearing submission, were Mr Hayden Lim and Mr Vun Chan Lim. Mr Hayden Lim is separately employed as an accountant. The prehearing submission made 5 April 2023 stated that most of the financial and regulatory aspects of the business were undertaken by Mr Hayden Lim.

13. Also according to the prehearing submission, Mr Vun Chan Lim dealt mainly with the business overseas, dealing with customers, taking orders and finding new customers and markets. He had to ensure deliveries were received and distributed to customers. Based on his evidence at hearing, Mr Vun Chan Lim was overseas during the relevant period working with Malaysian restaurants which were the customers of his Malaysian company. Mr Vun Chan Lim’s evidence was that in Malaysia he was looking for customers and buyers, and when questioned about that, he referred to restaurants that would buy seafood from his Malaysian company.

14. As already recorded, it was claimed that seafood imports into Malaysia were restricted through the permit system with only a small number of companies allowed to import seafood. Mr Vun Chan Lim did not give any evidence supporting the claim that he was seeking additional potential importers in Malaysia or elsewhere.

15. The Tribunal observes that if the price of Australian seafood was too high for Mr Vun Chan Lim’s Malaysian company, it does not make sense that he would be seeking alternative importers in Malaysia. As noted, there was no evidence that he tried to find other potential customers for H&L Corporation in other countries during the nine months when the exchange rate worked against Australian exporters.

16. The pre-hearing submission stated that the primary applicant “was involved in the business but at a lower level of engagement because she had the additional family responsibility of seeing to the family home and other domestic matters.”

17. In light of the above, the Tribunal rejects the claim that the directors continued on a daily basis to try and find sources of cheaper seafood or opportunities to export to different markets.

18. It was also submitted that the family could have exported seafood at a loss purely to create an impression that the business was actively operating. The Tribunal observes that had the business continued trading at a loss, then it would have been actively operating. Sometimes businesses choose to operate at a loss through a difficult period so as not to lose customers. The ultimate objective is to make a profit even though there might be a period during which a loss is made.

19. Operating a business at a loss is not inconsistent with r.1.03. That regulation requires that a qualifying business “is operated for the purpose of making profit…”. It is not a requirement that the business does make a profit during any given period but that making a profit is the purpose of the business. Indeed, some businesses operate at a loss for a significant period of time, such as seasonal businesses, new businesses or businesses that hit a problem and attempt to trade through and out of a difficult patch until such time as the business is profitable again.

20. The Tribunal accepts that it was the intention to operate the business in a responsible and profitable manner. However, it is not satisfied for reasons already set out that the seafood export business was actively operating between April and December 2018, given that when operating, its sole business activity was to export seafood and no seafood was exported for nine months. This is a significant proportion of the two-year period that preceded the lodgement of the visa application.

21. To be clear, the Tribunal has not come to the conclusion that the seafood export business was not an actively operating main business between April and December 2018 just because of the BAS returns. Of particular note, is that Mr Vun Chan Lim said there was a halt in the seafood export business between April and December 2018.

    Other evidence submitted relative to the period April to December 2018

22. A series of nine emails dated 26, 27 and 27 June 2018 were submitted. All were quite short. The first was from the primary applicant to a Mr Alby Baker of WAMMCO which, based on its website, stands for Western Australian Meat Marketing Co-operative Limited. The email set out that H&L Corporation was interested in exporting lamb and beef to Malaysia and asked for a meeting.

23. Mr Baker responded that a meeting was pointless without more information as to what product was required. The applicant then sent more details and advised in a separate email that the intention was to deliver the product to Kota Kinabalu kin Sabah, Malaysia. Mr Baker then advised that WAMMCO already had a distributor in Kota Kinabalu which was a sole agent.

24. While these emails demonstrate that efforts were being made to find alternative business opportunities, they do not show – on their own or with other evidence – that a business in which the primary applicant had an ownership interest was actively operating during the period of concern.

    CONCLUDING PARAGRAPHS

25. Given the findings above, the Tribunal is not satisfied that cl 888.222 is met. As one of the essential requirements for the visas is not met, the decision under review must be affirmed.

    DECISION

26. The Tribunal affirms the decision not to grant the applicants Business Innovation and Investment (Permanent) (subclass 888) visas.

    Susan Hoffman
    Member

    
    

    Reg 1.11    Main business 

    (1)  For the purposes of these Regulations and subject to subregulation (2), a business is a main business in relation to an applicant for a visa if:

    (a)  the applicant has, or has had, an ownership interest in the business; and

    (b)  the applicant maintains, or has maintained, direct and continuous involvement in management of the business from day to day and in making decisions affecting the overall direction and performance of the business; and

    (c)  the value of the applicant’s ownership interest or the total value of the ownership interests of the applicant and the applicant’s spouse or de facto partner, in the business is or was:

    (i)  if the business is operated by a publicly listed company — at least 10% of the total value of the business; or

    (ii)  if:

    (A)  the business is not operated by a publicly listed company; and

    (B)  the annual turnover of the business is at least AUD400 000;

    at least 30% of the total value of the business; or

    (iii)  if:

    (A)  the business is not operated by a publicly listed company; and

    (B)  the annual turnover of the business is less than AUD400 000;

    at least 51% of the total value of the business; and

    (d)  the business is a qualifying business.  

    (2)  If an applicant has, or has had, an ownership interest in more than 1 qualifying business that would, except for this subregulation, be a main business in relation to the applicant, the applicant must not nominate more than 2 of those qualifying businesses as main businesses.