Jung (Migration)

[2019] AATA 1209

Jung (Migration) [2019] AATA 1209 (2 April 2019)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANTS:  Mrs Jong Soon Jung
Mr Young Woo Chae
Mr Young Kook Chae
Mr Young Keon Chae
Mr Deok Soo Chae

CASE NUMBER:  1514192

DIBP REFERENCE(S):  CLF2014/119690 CLF2014/119691 CLF2014/119692 CLF2016/3645

MEMBER:Robyn Anderson

DATE:2 April 2019

PLACE OF DECISION:  Melbourne

DECISION:The Tribunal remits the applications for Business Skills (Residence) (Class DF) visas for reconsideration, with the direction that the applicant meets the following criteria for a Subclass State/Territory Sponsored Business Owner (Residence) visa:

· Subclause 892.211(1) of Schedule 2 to the Regulations.

Statement made on 02 April 2019 at 5.00pm.

CATCHWORDS
MIGRATION – Business Skills (Residence) (Class DF) visa – Subclass 892 (State/Territory Sponsored Business Owner) – main business – direct and continuous involvement in management – making decisions affecting the overall direction and performance – similar type of business operated by long-time friend – applicant purchased stock from friend – ownership interest in applicant’s business premises – part-time employee of applicant’s business – decision under review remitted

LEGISLATION
Migration Act 1958 (Cth), s 65
Migration Regulations 1994 (Cth), r 1.11; Schedule 2, cl 892.211

CASES
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60

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 Immigration on 9 October 2015 to refuse to grant the visa applicant a Business Skills (Residence) (Class DF) Subclass 892 visa under s.65 of the Migration Act 1958 (the Act).

2. The visa applicants applied for the visa on 5 September 2014. The delegate refused to grant the visa on the basis that the first named applicant (Ms Jung) did not satisfy subclause 892.211(1) of Schedule 2 to the Migration Regulations 1994 (the Regulations). The delegate was not satisfied that Ms Jung maintains, or 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. Consequently, Exceedo Pty Ltd, the nominated main business, did not meet the criteria to be considered a ‘main business’ in accordance with regulation 1.11(1).

3. The applicants appeared before the Tribunal on 14 March 2019 to give evidence and present arguments. The Tribunal also received oral evidence from Ms Tian Tian Li. The Tribunal hearing was conducted with the assistance of interpreters in the Korean, Mandarin and English languages.

4. The applicants were represented in relation to the review by their registered migration agent.

5. For the following reasons, the Tribunal has concluded that the matter should be remitted for reconsideration.

   CONSIDERATION OF CLAIMS AND EVIDENCE

6. Ms Jung and her husband, Mr Chae, have three sons, all of whom have completed a university education in Australia and are working independently. Each son commenced Year 10 of their secondary education in Australia, residing with Ms Li, a long-time family friend. Ms Jung gave oral evidence that her children spoke to her and her husband about their desire to remain in Australia. At the time, Ms Jung and Mr Chae resided in China, where Mr Chae operated a successful manufacturing business. Consequently, Ms Jung lodged an application for a skilled business visa in the hope that the entire family may reside together permanently in Australia.

7. The issue in the present case is whether at the time of application Ms Jung met the requirements of subclause 892.211(1) of Schedule 2 to the Regulations.

8. Clause 892.211 of the Regulations sets out two main criteria. The first, under subclause 892.211(1), is of relevance in respect of this review. It requires the applicant, for at least two years immediately before the application was made, to have an ownership interest in the main business. In this case the application was made on 5 September 2014. As such, the two years immediately before is from 5 September 2012 to 4 September 2014, being the relevant period.

9. The applicant nominated Exceedo Pty Ltd as the ‘main business’. In order for a business to be considered a ‘main business’, regulation 1.11(1) sets out four criteria which must be satisfied. The criteria are not mutually exclusive and must all be met before a nominated business can be considered as the ‘main business’.

10. The first criterion requires the applicant to have or have had an ownership interest in the main business. As a private company with an annual turnover of less than $400,000, the third criterion under regulation 1.11(1)(c)(iii) requires the applicant or the applicant and the applicant’s spouse to hold at least 51% of the total value of Exceedo Pty Ltd.

11. ASIC records clearly indicate that Ms Jung has been the sole shareholder and director of Exceedo Pty Ltd since registration on 31 January 2012. This fact is not disputed. Consequently the first and third criteria are satisfied.

12. In this case it was the second criterion under regulation 1.11(1)(b) that the delegate was not satisfied was met and as such is the central issue before the Tribunal. The delegate considered the relationships of Ms Jung and Ms Li to Exceedo Pty Ltd were sufficiently blurred so as not to be satisfied that it was Ms Jung alone who controlled the overall management and direction of Flowers and Things, operating through Exceedo Pty Ltd (the Business).

13. Ms Jung told the Tribunal that she had an interest in flowers and “pretty things”. Around the time of her arrival in Australia in late 2011, Ms Li was struggling to operate a business in artificial flowers, located at Docklands, while also caring for her young daughter as a single parent. Her intention was to close down her business at the expiration of the current lease, being November 2012. Given Ms Jung’s interest in operating a similar type of business, Ms Li offered her a large portion of her existing stock. Ms Jung accepted the offer. In the meantime, Mr Chae purchased a shop in Docklands in partnership with Ms Li, with the intention that Ms Jung would rent the premises for the Business. Ms Jung opened the doors of the Business in mid-2012.

14. The Tribunal took extensive evidence from Ms Jung in regards to all facets of management of the Business, including marketing and sales strategies, purchasing processes, financial management, ATO compliance in respect of GST, income tax and employer obligations, banking procedures, initial goals and the way they have changed over time and future plans for the Business.

15. Ms Jung had no hesitation in answering all of the Tribunal’s questions with confidence and knowledge. Supporting evidence included numerous invoices, emails, purchase orders and rental lease agreements addressing Ms Jung as the representative of the Business. An official purchase agreement was also in place between Ms Li’s company, Impeltek Australia Pty Ltd and the Business. Ms Jung gave oral evidence that Ms Li did not open the store every day and concentrated on selling her remaining stock on a wholesale basis in anticipation of ceasing operation of her business when the current lease expired in November 2012. The financial statements of Impeltek Australia Pty Ltd were before the Tribunal and supported the oral evidence of Ms Jung and Ms Li, clearly showing that no purchases of stock were made after 30 June 2012, the stock being fully depleted by 30 June 2015. Ms Li gave oral evidence that Impeltek Australia Pty Ltd remains active purely due to a foreign investment it holds that was initiated by Ms Li’s mother. The investment was evident on the balance sheet of Impeltek Australia Pty Ltd.

16. It was also clear from supporting evidence that the Business purchased stock from other suppliers both in Australia and overseas. The Tribunal is satisfied that the decision to purchase stock from Ms Li was simply an arms-length business decision, noting that Ms Li is by no means the sole supplier of stock to the Business. Similarly, the decision for the Business to operate out of premises owned by the partnership of Ms Li and Mr Chae, a completely independent entity from the Business with no duplication of persons with authority in respect of the Business and partnership, can be seen as nothing more than an arms-length business decision. The Tribunal sees no reason why such decisions would impact on Ms Jung’s role in managing the Business.

17. The fact that Ms Li was a part-time employee of the Business in the period 22 April 2013 to mid-2015 is not, in the Tribunal’s view, indicative of Ms Jung failing to manage the Business. To the contrary, such decision-making is supportive of Ms Jung’s management role in the Business. A second employee was also engaged by the Business from August 2012 to April 2016. From April 2016, Ms Jung has had no employees. Independent questioning of Ms Jung and Ms Li resulted in corresponding evidence that Ms Li’s role was largely to arrange the artificial flowers. Ms Li told the Tribunal that only on occasion did she liaise with customers, generally finishing work by 2pm in order to collect her daughter. In response to a question from the Tribunal, Ms Jung stated that she works daily in the Business, generally taking one day off per week to seek out different stock and to collect stock purchases from suppliers. During the relevant period, Ms Jung had two employees to leave at the shop, both of whom followed the guidance and instruction of Ms Jung. It is noteworthy that in seven years, Ms Jung has spent an average of less than four weeks per annum out of Australia.

18. Ms Jung told the Tribunal that in March 2013 she had the opportunity to take over a second shop in the vicinity of the original at a reduced rental rate. She further stated that at times she would display some of her items in this shop also. In her view, this gave her the opportunity to concentrate on outdoor items such as large pots in one shop and maintain the smaller, prettier items in the original shop, where they did not detract from the larger, outdoor home wares. Ms Jung gave oral evidence that when the lease came up for renewal in March 2015, she made the decision not to renew the lease, as she did not consider the increased rent to be sustainable and in the best interests of the Business. At this point, Ms Li ceased her employment with the Business, followed by the second employee in early 2016.

19. Ms Jung is the sole signatory on the Business bank account. Ms Jung gave oral evidence that she has no plans to repay the loan to Mr Chae, other than her one-off decision in mid-2015 to repay $40,000. It is Ms Jung alone who performs the record-keeping duties and liaises with the accountant. In response to a question from the Tribunal, Ms Jung stated that her intention is to expand into a second shop again to diversify her stock further into children’s items and maybe even a café once her husband is here on a permanent basis and able to assist her. Her future plans also include drawing of a regular wage.

20. The Tribunal is well satisfied that Ms Jung has managed the Business according to her own decisions, with little if any delegation of management duties to either of the part-time employees. She has also made significant decisions at appropriate times in relation to expansion and again to down-size. Furthermore, she understands her obligations as an employer and based on the evidence before the Tribunal, she has also maintained timely lodgement of business activity statements and income tax returns.

21. The Tribunal has no hesitation in concluding that Ms Li’s role has been limited to assistance as a long-time friend at the outset in terms of language and initial set-up of the Business. Since then, the Tribunal is also satisfied that agreements between Ms Li’s company, Impeltek Australia Pty Ltd and the Business have been purely business-based and accounted for accordingly. Furthermore, the Tribunal is satisfied that part-time employment of Ms Li to assist in artificial flower arranging has had no impact on the managerial decision-making of Ms Jung. As such, the Tribunal finds that the second criterion is also satisfied, in that Ms Jung maintains, or 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.

22. The fourth criterion requires the decision-maker to be satisfied that the Business is a ‘qualifying business’. Qualifying business is defined in regulation 1.03 as an enterprise that is operated for the purpose of making a profit through the provision of goods and services to the public and is not operated for the purpose of speculative or passive investment.

23. While ‘public’ is not defined in the Regulations, the Tribunal is satisfied that its ordinary meaning is reasonable, being the wider community with no discrimination. In selling a range of goods through a retail shop in a retail area, the Tribunal is satisfied that the Business provides goods and services to the public.

24. While financial statements of the Business before the Tribunal at hearing in respect of the period 1 July 2012 to 30 June 2014 recorded a net profit in every year, financial statements provided after the hearing reflect a significant decline in sales from the 2015/2016 year until a small upward trend commences again in the 2017/2018 year. It is evident that purchases also reduced, in fact to nil in the 2016/2017 year. Furthermore, as noted above wages to employees ceased in the 2015/2016 year. While it is reasonable to expect a reduction in sales and the corresponding profits in response to the closure of the second shop in March 2015, Ms Jung provided a written submission after the hearing explaining that a large construction development commenced in 2015 in the direct vicinity of her shop. This resulted in severely limited pedestrian access and at times no access at all. Given her reliance on retail patronage of locals and tourists, she resorted to wholesale sales until completion of the works in 2018. The business activity statements reflect a significant decline in sales from late 2016, correlating with zero purchases and significantly decreased rent during the 2016/2017 year, which is to be expected in such a scenario. It is also noteworthy that according to departmental records, Ms Jung remained in Australia for most of the period.

25. Ms Jung submits that sales have since started to increase, which is evident from the business activity statements provided after the hearing to 31 December 2018, albeit slowly. Overall the Business has made a small net loss in the 2016/2017 and 2017/2018 years.

26. The Tribunal notes that no drawings by Ms Jung are recorded since commencement of the Business, other than the $40,000 repayment to Mr Chae in 2015. In response to a question from the Tribunal, Ms Jung gave oral evidence that the Business is able to meet all of its expenses. It is evident that no additional monies have been injected into the Business by Mr Chae or any other party since 22 October 2012. It is also evident from the financial statements that no liabilities are accumulating, despite the interruption to the Business operation throughout 2016 and 2017. Therefore, the Tribunal is satisfied that the Business is meeting all of its expenses.

27. While Ms Jung acknowledged that money transfers from her husband in China enable her to meet the household living expenses, she reiterated her plans to expand the Business further and to hopefully add a café. It is open to her to move forward with such plans if successful with her application and her husband moves permanently to Australia to assist her, as discussed above. At present, he is slowly winding down his manufacturing business in China.

28. The departmental guidelines (PAM3), to which the Tribunal may have regard in appropriate cases, state that it is not necessary for a business to have operated at a profit to be considered a qualifying business, only that it is being operated for the purpose of making a profit. While the Tribunal is not bound by policy, in Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 the Full Federal Court held that a tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the legislation. It is also noteworthy that there is judicial authority to the effect that the policy guidelines in PAM3 cannot go beyond the wording of the legislation, even where they are favourable to an applicant.

29. In this case the Tribunal regards the policy as a useful guide to applying the legislation. The Tribunal is satisfied that Ms Jung is operating the Business for the purpose of making a profit and therefore finds that the fourth criterion under regulation 1.11 is also satisfied. As all four criteria under regulation 1.11 are met, it follows that Exceedo Pty Ltd is a main business for the purposes of clause 892.211 and the Tribunal finds accordingly.

30. As discussed above, the first criterion under subclause 892.211(1) requires the applicant to have an ownership interest in at least one main business in the two-year period immediately preceding the application date, being 5 September 2012 to 4 September 2014. Now satisfied that Exceedo Pty Ltd is the main business for the purposes of an application for a Business Skills (Residence) (Class DF) Subclass 892 visa, the undisputed finding discussed above that Ms Jung has been and continues to be the sole shareholder of Exceedo Pty Ltd since registration on 31 January 2012, means that subclause 892.211(1) of the Regulations is met.

31. It is therefore appropriate for the Tribunal to remit the matter to the Department to consider the remaining criteria for the grant of the Subclass 892 visa. The Tribunal finds that as the second, third, fourth and fifth named applicants applied on the basis of being family unit members of the first named applicant, their applications will be determined by reference to the outcome of the first named applicant’s application on remittal to the Department for reconsideration.

    DECISION

32. The Tribunal remits the applications for Business Skills (Residence) (Class DF) visas for reconsideration, with the direction that the applicant meets the following criteria for a Subclass State/Territory Sponsored Business Owner (Residence) visa:

    ·Subclause 892.211(1) of Schedule 2 to the Regulations.

    Robyn Anderson
    Member