Kuang (Migration)

[2021] AATA 268

Kuang (Migration) [2021] AATA 268 (8 February 2021)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANT:  Mr Shunmin Kuang

Mr Xinmao Kuang

Mr Xinyin Kuang

Miss Yangyang Kuang

CASE NUMBER:  1904831

HOME AFFAIRS REFERENCE(S): BCC2017/2784664 BCC2019/1403264

MEMBER:P Ranson

DATE:8 February 2021

PLACE OF DECISION:  Brisbane

DECISION:The Tribunal remits the applications for Business Skills - Business Talent (Permanent) (Class EA) visas for reconsideration, with the direction the first named visa applicant meets the following criteria:

·cl.132.226 of Schedule 2 to the Regulations.

Statement made on 08 February 2021 at 11:27am

CATCHWORDS
MIGRATION – Business Talent (Permanent) (Class EA) visa – Subclass 132 (Business Talent) – significant business history stream – net value of business and personal assets in home country and Australia – lawfully acquired and available to transfer to Australia within 2 years – poor drafting and typographical errors in financial documents – decision under review remitted

LEGISLATION
Migration Act 1958 (Cth), s 65
Migration Regulations 1994 (Cth), Schedule 2, cl 132.226

STATEMENT OF DECISION AND REASONS

Table of Contents

APPLICATION FOR REVIEW

OVERVIEW OF THE RELEVANT PRIMARY CRITERIA

Common criteria

Criteria for Significant Business History stream

CONSIDERATION OF CLAIMS AND EVIDENCE

Businesses relied on by the Applicant

Requirements relating to applicant’s assets

Xizang Changdu Hengxin Property Co., Ltd. (Company 1)

Personal assets

Business assets

Departmental policy

Adjusted net business assets

Were the assets lawfully acquired?

Assets available to transfer to Australia within 2 years

DECISION

APPLICATION FOR REVIEW

1. This is an application for review of a decision made by a delegate of the Minister for Immigration on 28 February 2019 to refuse to grant the visa applicants a Business Skills - Business Talent (Permanent) (Class EA) visas under s.65 of the Migration Act 1958 (the Act).

2. The applicants were invited to apply for the visa on 4 July 2017 and applied for the visas on 4 August 2017. At the time of application, Class EA contained one subclass: Subclass 132 (Business Talent). The criteria for a Subclass 132 visa are set out in Part 132 of Schedule 2 to the Migration Regulations 1994 (the Regulations). An applicant seeking to satisfy the primary criteria for the visa must satisfy the Common Criteria set out in Subdivision 132.21 and one of the stream specific criteria set out in the two alternative streams: Subdivision 132.22 for the Significant Business History stream or Subdivision 132.23 for the Venture Capital Entrepreneur stream as applicable. At least one member of the family unit must satisfy the primary criteria. Other members of the family unit who are applicants for the visa need only satisfy the secondary criteria. In this case, the first named applicant, Mr Shunmin KUANG (the Applicant), is seeking to satisfy the primary criteria for the grant of the visa in the Significant Business History stream. The secondary visa applicants are the children of the Applicant.

3. The delegate in this case refused to grant the visas on the basis the applicant did not satisfy the requirements of cl.132.226 of Schedule 2 to the Regulations because of difficulties in assessing the real value of business net assets and doubts over lawful business practices by the Applicant.

4. The Applicant appeared before the Tribunal on 2 December 2020 to give evidence and present arguments. The Applicant was represented in relation to the review by Mr Bo Li of Zhijievisa Pty Ltd[1] (the Representative). The Applicant and the Representative attended the Tribunal hearing by video conference facilitated by Microsoft Teams.

   [1] Migration Agent Registration Number:  0853061

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

OVERVIEW OF THE RELEVANT PRIMARY CRITERIA

1. The primary criteria for the grant of the visa, including the common criteria and the relevant stream specific criteria, must be satisfied at the time a decision is made on the application.

Common criteria

1. The common criteria for both streams of Subclass 132 visa are set out in cl.132.21. Clause 132.211 requires the Applicant and the Applicant’s spouse or de facto partner not to have a history of involvement in business activities of a nature not generally acceptable in Australia. Clause 132.212 requires the nominating State or Territory government agency has not withdrawn the nomination. Clauses 132.213 and 132.214 require the Applicant and each member of the family unit of the Applicant, including those who are not an applicant for a Subclass 132 visa, satisfy certain public interest and special return criteria as applicable.

Criteria for Significant Business History stream

1. The criteria for the Significant Business History stream are set out in sub-div 132.22. Clauses 132.221, 132.222 and 132.223 require the applicant to have been invited in writing by the Minister to apply for the visa; to have not turned 55 at the time of the invitation, or alternatively the applicant is proposing to establish or participate in a business the nominating state or territory government agency has determined is of exceptional economic benefit to the state or territory; and to have had overall a successful business career.

2. Further, for at least two of the four fiscal years immediately before the time of invitation to apply for the visa:

• Clause 132.224 requires the net value of the assets of the Applicant, the Applicant’s spouse or de facto partner, or their assets combined, in a qualifying business or businesses in which the Applicant had an ownership interest was at least A$400,000. If the qualifying business was operated by a publicly listed company the shareholding of the Applicant, the applicant’s spouse or de facto partner, or their shareholding combined was at least 10% of the total issued capital of the company. This necessitates consideration of the elements of ‘qualifying business’, as defined in reg 1.03 of the Regulations and ‘ownership interest’ as defined in s 134(10) of the Act; and

• Clause 132.225 requires the Applicant’s main business, or the Applicant’s main businesses together, had an annual turnover of at least A$3,000,000. This necessitates consideration of the elements of ‘main business’, as defined in reg 1.11 of the Regulations.

10.  Clause 132.226 requires the business and personal assets of the Applicant, the Applicant’s spouse or facto partner, or their assets combined have a net value of at least A$1,500,000, are lawfully acquired and are available to transfer to Australia within two years after the grant of a subclass 132 visa. This is the criterion on which the delegate refused the visa applications.

11.  Clause 132.227 requires the applicant to genuinely have a realistic commitment to:

• establish a qualifying business in Australia or to participate in an existing qualifying business in Australia; and

• maintain a substantial ownership interest in the qualifying business, and maintain direct and continuous involvement in the management of the qualifying business from day-to-day and in making decisions that affect the overall direction and performance of the qualifying business in a manner that benefits the Australian economy.

CONSIDERATION OF CLAIMS AND EVIDENCE

12.  The issue in this case is the value of the net business and personal assets of the Applicant as required by cl.132.226. His business assets are held in two companies, viz, ChangDu City Hengxin Real Estate Development Co., Ltd[2] and Guangxi Laibin Jingcheng Real Estate Development Co., Ltd and doubt exists whether a loan to the Applicant by the first company was validly repaid. Regarding his personal assets, there was a lack of evidence at the time of the delegate’s decision as to the net equity in an Australian property.

[2] As per summary translation of Business Licence Credibility No.: 915403003976803066.

13.  In accordance with the President’s Direction[3], the Tribunal will only address those elements of the criterion on which the delegate made an adverse finding, being the satisfaction of cl.132.226.

[3] Presidents Direction for Conducting Migration and Refugee Reviews dated 1 August 2018

Businesses relied on by the Applicant

14.  The application lodged 4 August 2017 refers to ‘Hengxin Real Estate Development Co., Ltd.’ (referred to in this decision as Company 1). The correct name for Company 1 appears to be Xizang ChangDu Hengxin Real Estate Development Co., Ltd as shown on the translated Articles of Association. Company 1 is also referred to as ChangDu Hengxin Real Estate Development Co., Ltd and Xizang ChangDu Hengxin Property Co., Ltd in various places throughout the submissions supporting the application. The Tribunal accepts all these iterations of the name refer to Company 1.

15.  The application also refers to ‘Guangxi Laibin Jingcheng Real Estate’ (referred to in this decision as Company 2). The delegate conducted a search of the official State Administration for Industry and Commerce (SAIC) website and determined this is a reference to Guangxi Laibin Jingcheng Real Estate Development Co., Ltd, a company owned by the Applicant and his former spouse.

16.  The business relied on by the Applicant to satisfy the selection criteria for subclass 132 visa, as shown on the application, was in 2017 a real estate development, renting and property management business (the Development Business) operated by Company 1 and the years nominated for consideration were 2015 and 2016. The Tribunal notes the sole source of revenue for Company 1 for the year ended 31 December 2020 is rental income from investment properties.[4]

[4] Note 15 to the Financial Statements for the year ended 31 December 2020, page 18.

17.  Company 1 was established on 17 June 2014 with a paid-up capital of RMB8m. The Applicants spouse at the time was Ms Yehong Liu (Ms Liu) who held 1% of the issued capital and the Applicant held 99% of the issued capital. The Applicant and Ms Liu divorced and pursuant to a Civil Judgment dated 17 February 2017 the shareholding in Company 1 became 51% to Ms Liu and 49% to the Applicant.

18.  The delegate identified a second business thought to be relied on by the Applicant, viz, a construction, selling and renting real estate services (the Construction Business) operated by Company 2, which was also jointly owned by the Applicant and Ms Liu.

Requirements relating to applicant’s assets

19.  As mentioned above, cl.132.226 requires the Applicant to hold net business and personal assets of at least A$1,500,000, which have been lawfully acquired and are available for transfer to Australia within two years after the grant of the Subclass 132 visa. In order to test the Applicant’s compliance with this criterion the Applicant must provide the most recent financial statements for all businesses, main businesses or otherwise.

20.  Accordingly, it is not necessary to test whether each business relied on satisfies the requirements of a main business, as that is dealt with in other criterion. Is clearly preferable for the applicant to provide audited financial statements, or as a minimum, financial statements which have been prepared by a third party such as an external accountant. If unaudited financial statements are provided, they must at least be in auditable form.

Xizang Changdu Hengxin Property Co., Ltd. (Company 1)

21.  On 25 January 2021 the Tribunal received from the Representative an undated submission entitled ‘Tribunal Book’ which included a Submission letter and three attachments being an audit report, a Form 1139A and a Westpac bank statement dated 31 December 2021. Clearly the reference to 31 December 2021 is an error and should be 31 December 2020. Despite this carelessness in drafting the material provided, and other errors discussed later, the Tribunal has nonetheless considered it in this decision.

22.  The Representative also provided a submission on 24 December 2020 and the submission received on 25 January 2021 seeks to build on that. The Form 1139A is a Statement of Assets and Liabilities Position (SALP) as at 31 December 2020, which does not include Company 2. It states the net assets of the Applicant on that date were:

Item	Description	% Interest	A$
Personal Assets:
1	Westpac bank account ending #2459	100%	304,195
2	HSBC account ending #7135	50%	220,000
3	Property at Delamere Avenue, Springfield SA 5062 (the Springfield Property)	50%	1,150,000
4	HSBC loan #7258 in respect of Springfield Property.	50%	(691,022)
Total personal assets	983,173
Business assets:
5	‘Changdu Hengxin Real Estate Development Co., Ltd.’[5]	49%	5,038,431
6	Payment on behalf of the Company, Changdu Hengxin5	100%	44,629
Total business assets	5,083,060
Net business and personal assets	$10,166,120

[5] In a further example of carelessness in preparing this submission, the Tribunal takes this to be a reference to Company 1.

Personal assets

23.  A copy of statement 34 on Westpac account ending #2459 shows the account holder as the Applicant alone and a balance as at 31 December 2021 of A$304,195.07. Accordingly, Item 1 on the SALP is accepted.

24.  HSBC statement for the Applicant and Ms Yehong Liu includes account #7135 being an offset account to account #7258 being the home loan in respect of the Springfield Property. The statement covers the period ended 9 November 2020 and shows the following balances:

Account description	Account Number ending	Balance as at 9 November 2020	Applicant’s share of the balance
Home loan	7258	1,373,107.34	686,553.67
Current account	7135	454,053.78	227,026.89

25.  The Tribunal accepts the balances of Items 2 and 4 on the SALP are different to the amounts shown in the table above however the differences are not material, and this decision does not turn on those differences. Accordingly, the Tribunal accepts the balances shown above for Item 2 and Item 4.

26.  Included in a submission on 24 December 2020 was a copy of a document entitled ‘Property Valuation Report’[6] in respect of the Springfield Property, which states the valuation of A$2,300,000 is retrospective to 30 September 2020. The Springfield Property is owned by the Applicant and Ms Yehong Liu, his former spouse[7], as joint tenants[8]. Even though the Certificate of Title is dated November 2018 and the title could have changed since then, the HSBC statement for loan account #7258 continues to show the borrowers as the Applicant and Ms Yehong Liu. Accordingly, the Tribunal accepts the Applicant’s share of the property is 50%, which equates to A$1,150,000. Accordingly, Item 3 on the SALP is accepted.

[6] Prepared by Paul De Gilio of Adelaide Property Valuers dated 11 December 2020.

[7] Refer to ‘Paper of Civil Judgment People’s Court of Shandong County, Hunan Province’ dated 17 February 2017.

[8] Refer to Certificate of Title dated 28 November 2018 issued by the Department of Planning, Transport and Infrastructure of the Government of South Australia.

27.  The ‘Certificate of Title’8, which was included with the submission received on 24 December 2020, shows under the heading ‘Schedule of Dealings’ an ‘Encumbrance to Convent of Mercy (Adelaide) Inc. (Single Copy Only)’.[9] The Tribunal understands this refers to an easement in favour of the nearby Mercedes College operated by the Sisters of Mercy and has no bearing on the value of the Springfield Property.

[9] Dealing number 5298022.

Business assets

28.  On or about 22 January 2021, the Tribunal records the receipt of a document entitled ‘Accounting Review Report for the period end 31 December 2020’ prepared by Yu Pei of Paramount Professional Tax and Accounting Services Pty Ltd (PPTA Advisory) of Sydney (the 2020 Accounting Review Report). This report includes financial statements for the year ended 31 December 2020 for ‘Changdu Hengxin Real Estate Development Co., Ltd.’, which the Tribunal understands is intended to be for Company 1.

29.  Item 9 of the 2020 Accounting Review Report is titled ‘Breakdown of business turnovers [sic - turnover]’. It says in the second paragraph: ‘All the income of the business was generated from the sales of the products in China’s local market during the period January to September 2020.’ Either this is another typographical error or Company 1 derived no income during the period 1 October 2020 to 31 December 2020.

30.  Appendix 1 to the 2020 Accounting Review Report is titled ‘Independence Declaration’. It states in the first paragraph: ‘… appointed by Mr. SHUNMIN KUANG (the “Applicant”) to prepare the review report of the financial statements in support of her (emphasis added) visa application for Business talent Stream subclass 132 VISA …’. This appears to be another example of poor drafting of the 2020 Accounting Review Report, as Mr Kuang is the Applicant and he is male. This error also arose in a similar report prepared for the period ended 30 September 2020.

31.  The 2020 Accounting Review Report includes a schedule entitled ‘Summary of the financial review procedures and findings’, which the Tribunal considers contains two material errors:

No.	Review Procedures Performed Findings	Tribunal Comment
6.2	Obtained details for additions and disposals for the period ended 30 September and accounting for gains and loss on sales or retirements. There is no assets additions and disposal during the period from January to December 2020.	The reference to 30 September does not specify the year, although it is reasonable to conclude 2020 is intended. The finding states there are no additions or disposals for the whole of the 2020 year, yet the review procedure has only been conducted up to 30 September.
12.1	Obtained from management latest interim financial statement and compare them with the financial statement being reviewed. We have obtained finical [sic – financial] statement for period ended December 2020 and compared with financial statement being reviewed. No unusual matters were noted.	The 2020 Accounting Review Report is dated 21 January 2021, that is, 21 days after the end of the review period. The date of the latest interim financial statement is not identified. If the latest interim financial statement is dated 31 December 2020 the finding implies the report has been compared with itself. Alternatively, the comparison was not done at all because there were no financial, statements, interim or otherwise, dated later than 31 December 2020.

32.  The Tribunal understands typographical errors occasionally arise in documents and such errors are accepted as not diminishing the value of the document. However, the numerous examples of poor drafting of the 2020 Accounting Review Report, coupled with typographical errors, diminishes its value and the Tribunal places less weight on it as a result.

Departmental policy

33.  Departmental policy regarding net business assets seeks to establish the Applicant has a record of financial commitment to business through personal financial involvement and exposure to risk by investing a substantial amount of money sourced from their own funds. Whilst departmental policy is not the law or the regulations, it can be a useful guide in determining net business assets, unless the circumstances of the case dictate otherwise.

34.  The Tribunal adopts a conservative approach to the valuation of privately held entities. Related party loans are generally disregarded unless they are documented on commercial terms, including security, in a legally binding loan agreement.

35.  According to departmental policy, the steps to determine net business assets are:

a)From the reported financial statements, establish the net assets, which equals net equity, then

b)Add back any unsecured related party loans, then

c)Calculate the proportionate share of the adjusted net assets, then

d)Add the balance of any loans advanced to the business by the Applicant (or deduct funds loaned to the Applicant by the business) net of any loans the Applicant may have taken out to finance their investment in the business.

36.  The reported net assets of Company 1, before adjustment for related party loans, are RMB51,412,563 as at 31 December 2020. Other than the related party loans, that is, the loans to and from the Applicant and Ms Yehong Liu, the Tribunal is satisfied the items on the balance sheet can be taken at face value as they are considered normal for the type of business conducted by Company 1.

Adjusted net business assets

37.  Adjusting the reported net business assets for unsecured related party loans results in the following net asset position for the Applicant:

31/12/2020 (CNY)
Reported net assets	51,412,563
Add back shareholder loan:	0
Yehong Liu (Receivable)	(17,318,546)
Yehong Liu (Payable)	1,336,051
Shunmin Kuang (Payable)	223,149
Adjusted net assets	1,559,200
Applicants’ share (49%)[10]	17,470,076
Add: Shunmin Kuang (Payable)	223,149
Applicant’s net business assets:
CNY	17,693,225
AUD	3,517,680[11]

[10] The Applicant and the Second Visa Applicant held 100% of Zhixun at the time of visa application and in the 12 months immediately before the time of application, see paragraph [‎14].

[11] Reserve Bank of Australia, exchange rates on 31/12/2020: 1 AUD = 5.0298 CNY

38.  The adjusted net assets shown above of RMB35,653,217 as at 31 December 2020 represent the ‘hard’ assets of the business less its external liabilities, that is, cash on hand and at the bank, receivables, investment properties plus plant and equipment at written down value, less amounts owing to creditors and for taxes and wages.

39.  Included on the list of business assets is an amount of A$44,629 described as ‘Payment on behalf of the Company, Changdu Hengxin’. The Tribunal ascribes a value of Nil to this item as no evidence has been provided to substantiate it and the decision does not turn on its exclusion.

40.  As can be seen from the table of adjusted net business assets, see paragraph [‎37], even allowing for the less weight the Tribunal can place on the 2020 Accounting Review Report, the Applicant’s share of the net assets of Company 1 is significantly in excess of A$1,500,000 without adding his personal assets of A$983,173, see paragraph [‎22].

Were the assets lawfully acquired?

41.  The application, lodged 4 August 2017, reveals the employment history of the Applicant for the past 10 years at that time. The Applicant states he held high level positions in three organisations some of which he also held an ownership interest in as follows:

Period	Organisation	Position	Ownership Interest
2003 to 2006	Laibin Jingcheng Trading Co., Ltd	General Manager	No evidence provided
2006 to 2014	Company 2	General Manager	Jointly owned with former spouse
2014 to 2017	Company 1	Managing Director	Jointly with former spouse (initially 99% and later 49%)

42.  On 1 August 2017, the Applicant prepared a statement entitled ‘Personal Statement Re: Source of Funds’. In paragraph 2 of that statement he says he formed Company 1 in 2014 with his ex-wife, which is consistent with the application. He then states: ‘The registered capital [of Company 1] was accumulated from my previous business activities. The income was mainly generated from: the basic income and bonus from me working as the general manager of Guangxi Laibin Jingcheng Real Estate Development [Company 2], and the deputy general manager of Guangxi Laibin Guangyuan Real Estate Development.’ The reference to general manager of Company 2 is consistent with the application whereas ‘the deputy general manager of Guangxi Laibin Guangyuan Real Estate Development’ is not.

43.  The Applicant continues in the Personal Statement Re: Source of Funds to list the income and bonuses he received from the various businesses he was associated with supported by copies of bank statements showing amounts received. Despite the inconsistencies in the names of companies discussed above, it is apparent to the Tribunal the Applicant has received income and bonuses from various real estate developments enough to provide the funds to establish Company 1.

44.  The delegate raised concerns about the source of the Applicant’s funds especially his then loan of approximately RMB14.9M (A$3M) from Company 1 and various civil court cases against Company 2. The Representative’s submission of 1 October 2020 addressed these issues and confirmed ‘Xin Xin Mall’ and ‘Laibin New Shopping Mall’ are one and the same development.

45.  According to the Representative’s submission, the loan by Company 1 to the Applicant was repaid and the financial statements for Company 1 for the year ended 31 December 2020 confirm that. The Tribunal has no reason to doubt the veracity of those financial statements notwithstanding the concerns about the veracity of the Accounting Review Report discussed above at paragraph [‎32].

46.  The civil court cases against Company 2 were dealt with by a settlement of RMB2,350,000 paid to the plaintiff in three tranches in September and October 2018 and the Applicant has provided evidence, in the form of copies of bank transfers, of the payment of that amount. In any event, Company 2 is not relied on for the purpose of this decision.

47.  Accordingly, the Tribunal finds the Applicant’s assets have been lawfully acquired.

Assets available to transfer to Australia within 2 years

48.  Departmental policy about the transferability of assets to Australia states:

Nothing requires the applicant to demonstrate the actual transfer of, or an intention to transfer, their (business and personal) assets to Australia. Officers are limited to considering only whether those assets are ‘available for transfer and capable of being transferred’ within the prescribed period.

It is policy that the applicant satisfies this requirement if (but only if) they satisfy officers that their (business and personal) assets can be (not ‘will be’):

·     readily transferred to Australia (for example, cash, current bank deposits, stocks and share, personal possessions) and/or

·     converted to cash within 2 years and transferred to Australia (for example, property, business assets, fixed or long-term deposits falling due within the prescribed 2-year period).

49.  As discussed above, the Applicant has net business assets of approximately A$3.5M from his 49% ownership of Company 1. The Applicant gave evidence at the hearing he would sell his 49% interest in Company 1, probably to his ex-wife, and transfer the funds to Australia. The Applicant indicated his ex-wife would be able to fund the purchase of his shares from her own resources and external funding.

50.  The Applicant already has in excess of A$500K in cash in Australia and so even if the sale of his shares in Company 1 were the subject of an extended settlement, such as an earn out, it seems likely he would get at least A$1M of the sale price within two years.

51.  Accordingly, the Tribunal finds the Applicant has business and personal net assets of at least A$1.5M available to transfer to Australia within two years.

52.  Given the findings above, the Tribunal is satisfied cl.132.226 is met. The appropriate course is to remit the matter to the Minister to consider the remaining criteria for the visa.

53.  The secondary visa applicants are remitted for reconsideration by the Department based on the outcome of the application by the primary visa Applicant.

DECISION

54.  The Tribunal remits the applications for Business Skills - Business Talent (Permanent) (Class EA) visas for reconsideration, with the direction that the first named visa applicant meets the following criteria:

·cl.132.226 of Schedule 2 to the Regulations.