Lai and Minister for Immigration and Multicultural Affairs
[2001] AATA 458
•28 May 2001
DECISION AND REASONS FOR DECISION [2001] AATA 458
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2000/173
GENERAL ADMINISTRATIVE DIVISION )
Re YIU WAH LAI
Applicant
And MINISTER FOR IMMIGRATION AND MULTICULTURAL AFFAIRS
Respondent
DECISION
Tribunal Deputy President J Block
Date28 May 2001
PlaceSydney
Decision The decision under review is affirmed.
(signed J Block)
Deputy President
CATCHWORDS
CITIZENSHIP - where applicant does not meet permanent residency requirements - whether engaged in activities overseas that are beneficial to the interests of Australia.
Australian Citizenship Act 1948 – subsections 13(1)(d), 13(1)(e), 13(4)(b)(i).
Australian Citizen Instructions 1997 – clauses 4.5.10, 4.5.11, 4.5.12, 4.5.13.
Re Drake and Minister for Immigration & Ethnic Affairs (No 2) (1979) 2 ALD 634
Re Ho and Minister for Immigration & Ethnic Affairs (1994) 34 ALD 664
Re McCarthy and Minister for Immigration, Local Government & Ethnic Affairs (1993) 30 ALD 447
Minister for Immigration, Local Government & Ethnic Affairs v Roberts (1993) 113 ALR 151
REASONS FOR DECISION
28 May 2001 Deputy President Block
The decision under review is the refusal dated 14 February 2000 by the Respondent of the Applicant's application 28 May 1999 for the grant of Australian citizenship under section 13 of the Australian Citizen Act 1948 ("the Act").
(a) The Applicant was self-represented and Mr Nathan Cureton of Blake Dawson Waldron appeared for the Respondent.
(b) The Tribunal had before it the T Documents and also Supplementary T Documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. Because the Supplementary T Documents are not numbered sequentially, after the T Documents, references to the T Documents are preceded by the letter "T", while references to the Supplementary T Documents are preceded by the letters "ST". The decision in this matter was made by a delegate of the Respondent Minister; it is for this reason that the Minister of Immigration & Multicultural Affairs is cited as the Respondent, notwithstanding references in the T Documents and the Supplementary T Documents to the Department of Immigration & Multicultural Affairs as the Respondent.
(c) In addition to the T Documents and the Supplementary T Documents the Tribunal accepted the tender of one exhibit (R1); Exhibit R1 is the result of a search of the Companies Registry – Hong Kong by the Respondent (made on 6 April 2000) which indicates that the Applicant was then a director of seventeen (17) companies incorporated in Hong Kong.
(a) Despite the great length of both the T Documents and the Supplementary T Documents, the issue before the Tribunal falls within a narrow compass, and that is as to whether the Applicant is entitled to the exercise in his favour of the Respondent's discretion contained in section 13(4)(b)(i) of the Act on the basis that the Applicant was engaged in activities beneficial to Australia during, the "2 years in the last 5" and the "one year in the last 2" residency requirement. The Tribunal notes in this context that the Applicant applied for citizenship on 28 May 1999; the term "relevant period" as used in these Reasons thus refers to the period of 5 years immediately preceding that date.
(b) There was no debate before the Tribunal as to the discretion contained in section 13(9)(c) of the Act; in particular the Applicant did not present any arguments of any kind as to that discretion. On the basis that the Tribunal should and does have regard to the Australian Citizenship Instructions 1997 ("ACI"), the Applicant does not qualify, having regard to the fact that he does not meet the requirements of clause 4.2.2 ie living in Australia for one year, nor for that matter did he present any argument as to hardship or disadvantage.
(c) The Tribunal considers that the background in respect of this matter is well set out in the Respondent's Facts and Contentions dated 17 August 2000; having regard to sub-clause (b) above it is unnecessary for the Tribunal to set out clauses 38 – 43 (inclusive) of those Facts and Contentions; clauses 1 – 37 inclusive, of those Facts and Contentions read as follows:FACTS
1.The Applicant, Mr Yiu Wah Lai (also known as Mr Thomson Lai) was born on 5 July 1955 in Hong Kong (T5, p67).
2.Mr Lai first arrived in Australia with his wife Ms Yin Fan Anita Lau and daughter Miss Sunnie Lai on 23 January 1990 (T5, p68). The Applicant and his family were granted permanent residency on 26 July 1991 (T5, P68).
3. The Applicant owns a residential property in Castle Cove, Sydney (T1, P10).
4.The Applicant's wife and child are both Australian Citizens, having been granted citizenship on 8 September 1999. They reside in Sydney, and Sunnie is a student at Ravenswood School for Girls (T5, P78).
5.Mr Lai claims to be a director of the company "R D & S Trading", incorporated in Hong Kong in the 1980's, which, between 1994 and 1997, imported Australian chemical products into Hong Kong, and then sold them to various factories in China (S4, p145).
6.Mr Lai established the company Smart Leader (Australia) Pty Ltd (CAN 053472307) in 1991 "to facilitate future exploration of business opportunities in Australia" (T5, p77). Mr Lai provided copies of the company's tax returns (annexed to his letter to the Department dated 12 June 2000, S4: p196-204; p217-221; p234-237). These returns show that the company's profit for the 1994/95 year was $1428; for the 1995/96 year $1798; for the 1996/97 year $1278; and for the 1997/98 year a loss of $451 was recorded.
The Applicant has stated that he is the majority shareholder and managing director of the following Hong Kong incorporated private companies, his business partners being several friends (T5, P78):
Aussie Global Trading Ltd
Aussie Global (China) Ltd
City Health Promotions Ltd8.At the first AAT telephone conference on 27 April 2000, Mr Lai stated that only other business interest he had was an interest of approximately 7% in one of his family's companies (S3, p144).
9.Aussie Global Trading Ltd was formed in 1997 to market in Hong Kong Australian- manufactured health food products (S4, p147). The main product marketed is a food supplement named "Rejuva" (later renamed "Rejuva Bio 18")(S4, p148). The products are purchased from the Australian company RU Healthy Australia, the chairman of the company being Mr Russell Fehlberg (T5, p78). Mr Fehlberg has stated that he has been working with Mr Lai on the introduction of his company's Australian made health products onto the Hong Kong and China markets since 4 February 1997 (T5, p84).
10.Mr Lai has a 40% shareholding in Aussie Global Trading Ltd (S4, p147). He has purchased health products on the company's behalf to the value of $97 671.35 from his Australian suppliers (S2, p25). The company however is currently running at a loss (T5, p79).
Aussie Global (China) Ltd was incorporated in 1997 or 1998 (S4, p145). Its role is to market health food products in China. Mr Lai has stated that the products marketed would initially be only Australian products, then later health products from various areas in Hong Kong (S4, p145). In his letter to the Department dated 12 June 2000, Mr Lai has stated that 40% of the products sold were from areas other than Australia (S4, p149).
12.City Health Promotions Limited was also incorporated in 1997 or 1998 (S4, p145), its role being to expand the sales and marketing network for Aussie Global Trading Ltd (T5, p83). Mr Lai holds a 40% interest in the company. He reports that for the two months prior to 30 April 1997, the company sold (in Hong Kong dollars) $11 801 worth of health care products; $49 058 worth of Rejuva; and $28 712 worth of health food products (S4, p150).
13.A retail premises was leased to Aussie Global for 12 months from 1 May 1998 for the purposes of opening a shop on a trial basis to sell the Australian products (Supporting document 9: S2, p94). However, Mr Lai decided instead to sell the products through employing a team of sales personnel from March 1999 (S4, p148).
14.Mr Lai claimed in his citizenship application that he was a practicing accountant in Hong Kong (T5, p79). He later stated that: "in substance I have not been really involved as a practicing accountant in Hong Kong since early 1997 even though I am still holding a practicing certificate."(T1, p12). Mr Lai had been a partner of the accounting firm "Lai & Fan, Southertons". He relinquished the majority of his equity interest in the firm on January 22 1997, retaining a nominal 1% interest in the partnership pursuant to the Sale & Purchase Agreement in order to preserve the firm's goodwill. By a further agreement dated 30 July 1999, Mr Lai completed the sale of his interest in the partnership after the firm merged with another international accounting firm.
15.Mr Lai claims that he does not own any other companies other than R D & S Trading and the two "Aussie Global" companies that were engaged in activities of benefit to Australia (S4, p150).
16. The Applicant applied for Australian Citizenship on 28 May 1999 (T5, p67-85).
At the date of application the Applicant had been present in Australia as a permanent resident for 137 out of the requisite 365 days in the 2 years prior to application and 300 days out of the requisite 730 days over the 5 years prior to application (T6, p87).
18.Mr Lai estimated in his letter to the Department dated 12 June 2000 (S4, p149) that he has spent 650 days in the five years from June 1994 to May 1999 (ie. 36 per cent of the time) engaged in business activities beneficial to Australia.
19.His estimate of the days spent in such activities for specific time intervals over the 5 year period is as follows (S4, p146-149):
June 1994 to December 1996: 124 days
January 1997 to November 1999: 165 days
October 1997 to January 1998: 19 days
February 1998 to July 1998: 132 days
August 1998 to mid November 1998: 88 days
Mid November 1998 to May 1999: 92 days.
The total number of days is 620.
20.Therefore, in the five years from May 1994 to May 1999, Mr Lai is claiming he has spent approximately 34 percent of his time engaged in activities beneficial to Australia.
21.He has spent a total of 296 days actually in Australia in the five years prior to applying for citizenship on 8 May 1994 (calculated from the table at S1, p22,23).
22.If the time Mr Lai has spent working overseas is counted as a period of residence in Australia, pursuant to section 13 (4)(b)(i), for the purposes of meeting the residence requirements of section 13(1)(e), he has spent approximately 436 days of the requisite 365 days resident in Australia in the two years prior to applying for citizenship, and 916 days of the requisite 730 days in the five years prior to application.
23.Movement records show that Mr Lai travels to and from Australia several times per year (T7, p93-94). In the two years prior to the submission of his application for citizenship, he travelled to Australia fifteen times, staying an average of 7.9 days on each occasion (S1, p1-21).
24.This pattern has continued since the citizenship application was submitted on 8 May 1999 (when Mr Lai was overseas): Mr Lai has travelled to Australia six times from 24 May 1999 to 23 July 2000, staying an average of nine days on each occasion (S1, p1-4). He has stated that he returns to Australia for family occasions such as birthday celebrations and wedding anniversaries (T1, p11).
25.A decision to refuse to exercise the discretion under s13(4)(b)(i) of the Australian Citizenship Act 1948 (the Act) in Mr Lai's favour was made on 4 January 2000 (T6, p86-92). Mr Lai lodged an application for review of this decision at the AAT on 14 February 2000, the Respondent having consented to an extension of time for lodgement.
CONTENTIONS
Legislation26.In order to be granted Australian citizenship, the applicant must meet the statutory requirements under s 13.(1) of the Australian Citizenship Act 1948 which provides:
Subject to this section, the Minister may, in the Minister's discretion, upon application in accordance with the approved form, grant a certificate of Australian citizenship to a person who satisfies the Minister that:
(a) the person is a permanent resident;
(b) the person has attained the age of 18 years;
(c) the person understands the nature of the application;(d)the person has been present in Australia as a permanent resident for a period of, or for periods amounting in the aggregate to, not less than one year during the period of 2 years immediately preceding the date of the furnishing of the application;
(e)the person has been present in Australia as a permanent resident for a period of, or for periods amounting in the aggregate to, not less than 2 years during the period of 5 years immediately preceding the date of the furnishing of the application;
(f) the person is of good character;
(g)the person possesses a basic knowledge of the English language;
(h)the person has an adequate knowledge of the responsibilities and privileges of Australian citizenship; and
(j)if granted a certificate of Australian citizenship, the person is likely to reside, or to continue to reside, in Australia, or to maintain a close and continuing association with Australia.
Section 13(1A) states:
(1A)The Minister shall not grant a certificate of Australian citizenship to a person under subsection (1) at a time when the person is not present in Australia unless:
(a) the person is a permanent resident; and
(b)the Minister considers that the person is engaged in activities outside Australia that are beneficial to the interests of Australia.
27.An applicant who fails to meet the requirements of subsections 13(1)(d) and (e) is assessed under subsections 13(4) and 13(9) of the Act which provide:
Section 13(4):
For the purposes of the application of subsection (1) in relation to an applicant for the grant of a certificate of Australian citizenship:
(a)the Minister shall not take into account, as a period during which the applicant has been present in Australia as a permanent resident, any period during which the applicant has been confined in a prison or has been confined in a psychiatric institution by order of a court made in connection with criminal proceedings against the person; and
(b)subject to paragraph (a), the Minister may, in the Minister's discretion:
(i) treat a period during which the applicant:
(A) was a permanent resident;
(B) was not present in Australia; and(C)was engaged in activities that the Minister considers beneficial to the interests of Australia;
as a period during which the applicant was present in Australia as a permanent resident;
(ii) treat a period ending before the period of 5 years referred to in paragraph (1) (e), being a period during which the applicant was present in Australia as a permanent resident, as a period within that period of 5 years;
(iii) if the applicant was, immediately before 16 September 1975, the holder of, or deemed to be included in, an entry permit (not being a temporary entry permit) and has continued to be the holder of, or to be deemed to be included in, such an entry permit, treat:
(A) a period ending before 16 September 1975 during which the applicant was ordinarily resident in Papua or New Guinea; or
(B) a period commencing on or after 16 September 1975 and ending before 16 September 1978 during which the applicant was ordinarily resident in the Independent State of Papua New Guinea;as a period:
(C) within the period of 5 years referred to in paragraph (1) (e); and
(D) during which the applicant was present in Australia as a permanent resident;(iv) if the Minister considers that the applicant would suffer significant hardship or disadvantage if a certificate of Australian citizenship were not granted to the applicant-treat a period during which the applicant was present in Australia otherwise than as a prohibited immigrant, as a prohibited non-citizen, as an illegal entrant, as an unlawful non-citizen, or in contravention of a law of a prescribed Territory, as a period during which the applicant was present in Australia as a permanent resident; or
(v) if the Minister considers that an applicant who is a permanent resident was, by reason of an administrative error, not a permanent resident during a period during which the person was present in Australia - treat the period as a period during which the applicant was present in Australia as a permanent resident.
Section 13(9):
(9) Subject to subsection (11), the Minister may, in the Minister's discretion, upon application in accordance with the approved form, grant a certificate of Australian citizenship to a person:
(c) who is a permanent resident and is the spouse, widow or widower of an Australian citizen;
Policy
The Australian Citizenship Instructions (ACI No. 3, 12 February 1999) outline the policy requirements to be considered.
Residence outside Australia: [s 13(4)(b)(i)]
4.5.10 Periods in which the applicant was outside Australia and engaged in activities beneficial to the interests of Australia may be counted towards the residence. This discretion is available for both residence requirements (ie both "2 years in the last 5" and "1 year in the last 2").
4.5.11 The legal preconditions for use of this discretion are as follows:
• the periods concerned must be within the relevant period (ie the 5 years and/or 2 years before application);
• for any periods counted, the applicant must be a permanent resident (see 1.4 above);
• the applicant must have been engaged in activities overseas (not just, for example, the company or organisation for which the applicant worked);
• the applicant must have been engaged in activities as opposed, for example, to a one-off transaction;
• the activities must be during the relevant period/s under consideration;
• the activities must have been "beneficial to the interests of Australia" during the relevant period/s. The provision will not apply on the basis of future benefits potentially accruing to Australia (McCarthy AAT case).4.5.12 In assessing whether activities are beneficial to the interests of Australia, consider the following:
• It requires "something in the nature of activities which provide some advantage to Australia, whether commercial or otherwise. The concept necessarily connotes some public interest of Australia... and means more than the private interests of the [applicant]. The section requires some objective benefit to Australia." (Federal Court in Roberts.)
• It requires "something in the nature of activities which achieve recognition of Australia or of Australian achievements or commercial advantage for Australia, or increase the international respect and goodwill for Australia... [it] refers to the public interests of Australia." (AAT in Fraser.)
• "The claim that the applicant's employer has enhanced the reputation of its Australian parent company and Australian companies in general, falls short of demonstrating the applicant's activities were beneficial to the interests of Australia." (AAT in McCarthy.)4.5.13 "There should be a close nexus between the overseas activities and the subsequent benefit to Australia to exercise the discretion" (AAT in Tsui). The benefit should be largely as a result of the applicant's activities and must not be residual, remote, indirect or speculative (see, for example the AAT case of McCarthy).
4.5.14 If the discretion is available, current policy is that decision-makers should normally follow the guidelines approved by the then Minister in August 1985 that the discretion will usually only be exercised if all of the following requirements are satisfied:
(1) The applicant was:
(i) either for an extended period or on a regular short-term basis:
• required to work overseas by a Federal, State or Territory Department, semi-government authority or private employer; or
• self-employed and frequent travel abroad was essential to the successful operation of their business; or(ii) engaged overseas in activities of a social, cultural, economic or political nature which are clearly beneficial to the interests of Australia and are widely recognised as such either by:
• the Australian community generally; or
• prominent persons associated with their field of endeavour (for example, people engaged in aid programs, artists and entertainers of world standing).(2) The applicant is in Australia. If the applicant is overseas, the discretion will normally not be exercised.
4.5.16 Some procedures relating to the exercise of this discretion:
• Applicants wishing to be considered against this discretion should submit a statement in writing, with appropriate supporting documentation, demonstrating how they meet the legal and policy requirements outlined above. Applicants should record this information for each period of residence outside of Australia under the following headings:
- departure date;
- return date;
- number of days away;
- number of days away beneficial to Australia;
- brief summary of the purpose of the trip and why the activities abroad were beneficial to Australia; and
- number of days away for personal reasons.
The statement should also include the total number of days they have resided outside of Australia and be signed and dated by the applicant.
•
Spouses: 13(9)(c)4.2.1 Paragraph 13(9)(c) of the Act gives a discretion to grant a certificate of Australian citizenship to a permanent resident who is the legal spouse, widow or widower of an Australian citizen.
4.2.2 For applicants in Australia, current policy is to follow the guidelines approved by the then Minister in April 1986 that such applicants are usually required to meet all of the following requirements:
• The applicant is a permanent resident (this is a legal requirement).
• The parties must be living together as husband and wife:
- If the parties are not living together but claim that the marriage exists, the case should be decided by an officer at ASO6 level or higher.
- In the case of a widow or widower, the couple must have been living together at the time the Australian spouse died.
• The applicant is of good character (see 4.8 below);
• the applicant is likely, if granted a certificate of Australian citizenship, to reside, or to continue to reside, in Australia, or to maintain a close and continuing association with Australia. See further 4.4(h) below;
• The applicant has a basic knowledge of the English language and an adequate knowledge of the responsibilities and privileges of citizenship, unless the Australian citizen partner already has fulfilled these requirements and it is evident that there will be on-going support for the applicant spouse in these matters.
- If the applicant does not have this knowledge, the responsibilities and privileges of Australian citizenship [see 4.4(g) below] should be explained to him or her during the citizenship interview. If necessary, this should be done through an interpreter.
• The applicant has been present in Australia as a permanent resident for at least 2 years in the five years immediately before application, at least 12 months of which must have been within the 2 years immediately prior to that date, unless:
- the person has lived in Australia as a lawful permanent resident continuously for the past year (an aggregate period of 4 weeks outside Australia during this period may be counted towards meeting this requirement); and
- the person satisfies 4.5.18 below (relating to certain situations of hardship or disadvantage if not granted citizenship)4.2.3 For applicants outside Australia, s 13(9)(c) is available, but still requires that the applicant is a permanent resident (ie is the holder of a valid resident return visa or equivalent). As a matter of Ministerial policy, spouses overseas are usually required to meet all of the following requirements:
• The applicant can establish that he or she is being prevented from travelling to Australia because he/she lacks Australian citizenship and so cannot get an exit visa from the country of residence.
• The Australian citizen spouse is living abroad with the applicant.
• The applicant and the Australian citizen spouse intend to travel to Australia for residence.
4.5.18 As a matter of policy, this discretion would usually only be exercised in certain situations of hardship or disadvantage, namely any of the following:
• The applicant can demonstrate that he/she has been refused employment solely on the grounds that the employment is restricted only to Australian citizens and that alternative sources of employment are not reasonably available to him/her.
• The applicant would be excluded from travelling internationally because he/she cannot obtain a passport or because he/she is excluded from travelling with immediate Australian family by reason of the nationality of the passport/travel document he/she holds or is entitled to hold.
• The applicant would not otherwise be eligible to represent or be selected to represent Australia in a national representative team/group because Australian citizenship is a pre-requisite to selection. This should be applied uniformly to all sports. People should be of international standard and able to demonstrate that their selection for a national team depends solely upon being granted citizenship.
The Respondent contends that although the Tribunal is not obliged to apply a policy formulated by a Minister of the Crown, (Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409), it should ordinarily do so in the absence of cogent reasons against the application of the policy in question: Re Drake and Minister for Immigration and Ethnic Affairs (No.2)(1979) 2 ALD 634 at pp.639-645. The Respondent further contends that in the present matter, there are no cogent reasons why the above policy should not be applied.
The question for the Tribunal to determine is whether, having regard to all the relevant factors in this case, the discretion under s 13(4)(b)(i) or s 13(9)(c) of the Act should be exercised in the Applicant's favour.
Exercise of the Discretion under s 13(4)(b)(i)
The Respondent contends that the Applicant has not provided sufficient evidence to prove that the activities of his overseas companies have been of significant benefit to Australia. It is contended that the amount of time Mr Lai has spent outside Australia has not been linked with actual activities that have resulted in a benefit to Australia. It is only the time spent in those activities which may be considered under s 13(4)(b)(i) of the Act.
While Mr Lai's activities in establishing Hong Kong based companies to market Australian health products have resulted in overseas sales of these products, the Respondent contends that the volume of these sales has not been sufficient to demonstrate any tangible economic benefit to Australia.
The Federal Court in Roberts has stated the applicant needs to be engaged in:
"something in the nature of activities which provide some advantage to Australia, whether commercial or otherwise. The concept necessarily connotes some public interest of Australia... and means more than the private interests of the [applicant]. The section requires some objective benefit to Australia."
The Respondent contends that no such objective benefit to Australia has been demonstrated. Any benefits from Mr Lai's business activities have not been extended beyond the private interests of himself and the companies' other shareholders.
The AAT in Fraser has stated that for activities to be considered beneficial to Australia, "something in the nature of activities which achieve recognition of Australia or of Australian achievements or commercial advantage for Australia…" is required. It is contended that the commercial inroads made by Mr Lai's companies are not as yet substantial enough to achieve recognition of Australia or commercial advantage. As evidence of this, the company formed to import Australian health products in Hong Kong, Aussie Global Trading Ltd, is running at a loss.
The AAT in Fraser also stated that the concept of activities beneficial to the interests of Australia refers to "the public interests of Australia". It is contended that the public interests of Australia have not been enhanced by Mr Lai's business activities to date. While his activities may have brought about small scale benefits to himself, his employees, the other shareholders of the Hong Kong companies and the Australian suppliers, these benefits fall short of what is required to demonstrate that Australia's public interests have been enhanced.
The Respondent contends that the Minister's delegate was correct in not treating the time spent outside Australia as a period of permanent residence in Australia. Further, it is submitted that the Minister's delegate properly exercised his discretion under section 13(1) to refuse to grant citizenship to the Applicant.
(d) The Applicant did not file a Statement of Facts and Contentions; Mr Cureton did not object on the basis that the Respondent was, having regard to the T Documents and the Supplementary T Documents, aware of the Applicant's case.
(e) Because the Applicant was self-represented, the proceedings commenced with a brief summary by the Tribunal and Mr Cureton of the case which the Applicant would be required to meet.
(f) Oral evidence was given by each of the Applicant, his wife, Mrs Anita Lai, and (by telephone) by each of Mrs Lilian Ching (whose Chinese name is Ching Chang Kwok Hing) and Mr Russell Fehlberg, who is the managing director of and the sole shareholder in RU Healthy Australia Pty Ltd) ("RU").
In respect of the evidence of the Applicant:
(a) He is perfectly fluent in English having been educated in Hong Kong in that language from primary school through to his tertiary education as a chartered accountant.
(b) The entities which are central to this matter are three companies incorporated in Hong Kong in the first quarter of 1998, styled City Health Promotions Limited ("City"), Aussie Global (China) Limited ("Global") and Aussie Global Trading Limited ("Trading"). In respect of City, ST page 90 indicates that on 6th May 1998 - 999,998 shares of $HK1 each were issued and allotted as follows:
Detail of Allottees
NAME ADDRESS SHARES
LAI YIU WAH Flat 107, Kent Mansion, 95 Tin Hau Temple Road, Hong Kong 400,000
-Merchant- MAK KIT YEE Flat 7, 19/F., Ngar Tsui Hse, Hiu Tsui Court, Siu Sai Wan, Hong Kong 199,999
-Merchant- LUK KIN KEUNG Flat A, 4 Tai Yue Mansion, Tai Koo Shing, Hong Kong 199,999
-Merchant- LEE LUN KEUNG Flat 2B, G/F., Merry Court, Fessenden Road, Kowloon Tong, Kowloon 150,000
-Merchant- CHING CHAN KWOK HING Unit 2, 1 Ellington Street, Caulfield South, VIC 3162, Australia 50,000
TOTAL SHARES 999,998
It will be noted that the allottee in respect of 50,000 shares was Ms Ching Chan Kwok Hing, a resident of Australia, and who gave oral evidence (by telephone link) under her anglicised name, Lilian Ching.
(c) The Applicant said that he was the registered and beneficial proprietor of 40% of the issued share capital of City and that he was also the beneficial, but not the registered owner, of 200,000 shares (20% of the issued capital) registered in the name of Ms Mak Kit Yee. ST page 90 refers to an allotment to her of 199,999 shares. It seems reasonable to infer that each of Ms Yee and Mr Luk Kin Keung subscribed for one share thus making up the total issued share capital of HK$1 million. The Applicant said that Ms Yee was his secretary and friend, and that she did not have the financial capacity to take up any shares, and that accordingly she took up the whole of her shareholding in City, as his nominee. He said also that there is a written declaration of trust which evidences the trust. While the Tribunal has no reason to doubt the Applicant's statement to this effect, it does find it surprising that amongst the wealth of documentation before it, the declaration of trust is not one of the documents in it. The Tribunal is however prepared to accept that the Applicant was indeed the controlling shareholder in City. He was also its managing director, the other directors being (as appears from ST page 91) the other persons who received share allotments as set out in sub-clause (b) above.
(d) Excepting only that the issued capital in each of Global and Trading was $HK10,000 rather than $HK1,000,000, the shareholding split and also the board of directors, in relation to each of these companies was constituted in precisely the same way. The Applicant said that all of the other shareholders in all three companies are his friends, and in the case of Ms Yee, also his secretary.
(e) The three Hong Kong companies operated, although no one of them was the subsidiary of any other of them, as a group (referred to in these Reasons the "Group"). Trading imported goods from Australia and then on-sold those goods, in the case of goods to be sold in China, to Global, and in the case of goods to be on sold in Hong Kong, to City. The Group's activities were by no means confined to the importation of goods from Australia; on the contrary, it also purchased cosmetics and household products, according to the Applicant, in both Hong Kong and China. It was contemplated moreover that Trading might export goods to other parts of the world. Trading having imported goods from Australia, resold them at a mark-up of 5% to each of City and Global; taking into account its administration and other expenses, Trading operated at a loss.
(f) Having purchased goods from Trading, Global, in relation to China, operated through agents or a wholesaler, at a margin of 20% on its cost. In relation to City, and in respect of goods to be on-sold in Hong Kong, the mark up was much higher, but that high profit margin was minimised by heavy sales commissions and marketing costs. In fact, all three companies in the Group did not derive profits and in mid-1999 they became dormant, having lost their share capital, plus in addition loan capital lent by the shareholders, in proportion to their shareholdings, of another HK$2.5M; the aggregate loss overall was thus approximately HK$3.5m.
(g) In his closing submissions, (but not in his evidence) the Applicant referred to ST page 34 and ST page 35, which relate to a consignment of goods from Australia to a company called R. D & S Trading Co. Limited ("RDS") in 1997 in an amount of A$16,504.80. RDS (which was also incorporated in Hong Kong) was hardly referred to during evidence, which, in broad terms, was confined to the activities of the Group in 1998 and 1999. The Applicant in his closing submissions, (although not in evidence), described the consignment detailed in ST page 34 and ST page 35 as a "trial run", apparently preparatory to the setting up of the Group for the purpose of the trading activities referred to these Reasons.
(h) The Group operated in 1998 and part of 1999. The Applicant said that Trading purchased goods from Australia to the value of A$100,000 in each of those years. The goods purchased from Australia consisted initially of a range of health-care products purchased from Collage International Health Pty Ltd. ("Collage") of which Mr Fehlberg was the sales manager, and described in ST page 33 as follows:
CODE PRODUCT DESCRIPTION
RJ1000 Mother Nature Royal Jelly 1000MG 31 Capsules
RJ60 Mother Nature Royal Jelly 1000MG 60 Capsules
RJ365 Mother Nature Royal Jelly 1000MG 356 Capsules
RJ50060 Mother Nature Royal Jelly 500MG 60 Capsules
RJ1KG Mother Nature Fresh Royal Jelly 1KG
RJ500G Mother Nature Fresh Royal Jelly 500G
RJC100 Mother Nature Royal Jelly & Vitamin E Night Cream 100G
RJC200 Mother Nature Royal Jelly & Vitamin E Night Cream 200G
RJP 125 Mother Nature Royal Jelly Freeze Dried Powder 125G
RP650 Mother Nature Royal Pollen 650MG 60 Capsules
PRT25 Mother Nature Propolis Tincture 25ML
PRT50 Mother Nature Propolis Tincture 50ML
PR60 Mother Nature Propolis 1000MG 60 Capsules
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EP060 Evening Primrose Oil 1000MG 60 Capsules
EP0260 Evening Primrose Oil 1000MG 260 Capsules
In late 1998 Mr Fehlberg left Collage and set up his own company, RU, in which he owned all the issued shares, and of which he and his wife, Loanne Jewelle Fehlberg (the owner of a beauty salon) were the directors.
(j) A Mr K. Savage entered the scene at about this time. Mr Savage had developed a health-care product called "Rejuva" and for which the witnesses made a variety of claims. The Applicant said that it was rejuvenating and energising. Mrs Lai said that it made her feel better in the morning, gave her more energy and also made her skin shiny; (the Tribunal found this last claim rather odd, being under the impression that a shiny skin is not cosmetically desirable, at least not facially). Mr Fehlberg said that Rejuva could clear skin and cure colds, (in particular because it contained Echinacea. The witnesses, thought that Rejuva was made from a number of herbs (although there was some variance as to the precise number), some of which at least would have been obtained in Australia.
(k) It is important to recognize that the manufacture of Rejuva was essentially a very small operation. Rejuva was made by Mr Savage in his kitchen in his unit in Neutral Bay, and then packaged by RU, using for this purpose labels supplied by the Group, from Hong Kong, mainly in English but partially in Chinese.
(l) Rejuva failed as a product, according to the evidence, for a number of reasons. Both the Applicant and his wife thought that, as a tonic, it was not marketable precisely because it came in liquid and not in capsule form, and was thus inconvenient to carry around, and where it was to be taken at different times during the day. Mrs Lai thought that the Group failed also because it did not have the capacity to spend sufficient money on marketing and promotion, although the Applicant, in his evidence, spoke of television advertising in both Hong Kong and China, advertising in the media, and even the marketing assistance of a former Miss Hong Kong. What is certain, in a maze of contradictory evidence, is that Rejuva did not catch on in China, Hong Kong, or for that matter in Australia where it was marketed through Mrs Fehlberg's beauty salon. On the contrary, it seems to have resulted in losses to most of the persons and companies concerned, excluding RU, which made very little from the product (according to Mr Fehlberg), and Mr Savage, who also made very little from it.
(m) The evidence of the Applicant indicated a person of considerable energy and entrepreneurial capacity who was also, until 1997 a professional accountant, practising as such in Hong Kong. His accounting firm was associated with an Australian accounting firm called Sothertons. In his application for citizenship made in May 1999, the Applicant said that he retained an interest in the Hong Kong accounting firm. This was true, but only up to a point, in that he had retained a 1% nominal interest in it.
(n) The Applicant gave evidence of numerous trips to and from Australia apart from many trips to China and elsewhere. He is plainly a man of boundless optimism. He had hoped that Mr Fehlberg and Mr Savage would develop a hair loss remedy and also a weight reduction pill for export to Hong Kong and China. T page 10 refers to purchases by him and his wife of real property, at different times in Doncaster East, Mansfield and Castle Cove; although the property in Doncaster East was sold when Mrs Lai found Melbourne too cold and moved to Sydney, while the unit in Mansfield was sold because it was found to be too small. Ms Lai is presently resident in Castle Cove, Sydney.
(o) Exhibit R1 indicates that the Applicant is a director of numerous companies. The Applicant said that they are in the main companies, which bought and resold real property and then became dormant. He said that this was so, also in relation to a company listed in Exhibit R1 which bought or established a seafood restaurant in China and then resold it. For some time now, the Applicant has been engaged as a consultant in relation to the preparation of two Hong Kong companies for flotation on the Hong Kong Stock Exchange.
(p)In his closing submissions the Applicant referred to ST page 150; in paragraph 4 (page 6) the value of chemicals purchased in Australia for export was reflected as follows:
Value of chemicals purchased in Australia for export;
Year A$
94/95 102,469
95/96 107,805
96/97 39,744
97/98 Nil
The Applicant's attention was drawn to the fact that the Tribunal is concerned with the relevant period, and thus the Applicant's export activities through the Group, which was established only in early 1998. The Applicant submitted that the Tribunal should be concerned with the whole spectrum of activity dating back to his original taking-up of residence in Australia in 1991; as he put it, he had been constantly engaged from that time onwards in preparations which resulted in the eventual setting up of the Group. The difficulty in respect of these submissions (apart from the fact that it is the relevant period only which is covered by the statutory test) is that there was no evidence of commercial activity by the Applicant prior to the setting up of the Group, leaving aside only the "trial run" shipment to RDS, referred to previously in these Reasons. In any event, the Applicant spent, as the Respondent's Facts and Contentions indicate, very little time in Australia; it is difficult, in relation to his fleeting visits to Australia, to conceive of his having been able to do very much marketing or preparation for marketing. The Tribunal emphasises that it is concerned in essence with the relevant period, and in particular the activities of the Applicant during the relevant period in Hong Kong.
Mrs Lai's evidence was to the effect that she handled administration and marketing in Australia. Her evidence did not advance matters to any significant extent. The same is so, also, in respect of Mrs Lillian Ching's evidence; she too was apparently involved in marketing. In his closing submissions, the Applicant referred to the payment by the Group of a salary to Mrs Ching; however she did not, in her evidence, speak of the receipt of a salary. (Mrs Lai said that she did not receive a salary from the Group.) Mrs Ching in her evidence said that she had sold her shares in the Group companies back to them, a statement contradicted by the Applicant (while she was giving evidence), who said that she in fact retains those shares to this day.
Mr Fehlberg's evidence was rather more down to earth. Leaving aside that his recollection of relevant time frames was altogether inaccurate, he did recollect that purchases by Trading were far less than the amounts specified by the Applicant. He thought that Collage would have sold at most goods to the value of A$20,000 in aggregate to Trading, while the figure for RU (in aggregate) was between A$80,000 and $100,000. He said, as set out previously, that Rejuva was supplied by Mr Savage having been made by him in his kitchen in Neutral Bay; again, as set out previously, Rejuva was marketed in Australia through his wife's beauty salon. However, it is no longer marketed in Australia because there is no money available for marketing costs. RU still has a small supply of the product. He estimated that RU might have made A$10,000 altogether out of the sales to the Group, while Mr Savage (who retained the intellectual property rights in Rejuva) might have made somewhat more.
(a) There was some brief evidence of activities (and other companies) dating back in time prior to the relevant period, but that evidence was not relevant to this decision. Nor is the fact that the Applicant and his wife, living apart most of the time, corresponded with each other constantly, to the point.
(b) The ACI are relevant in relation to a matter of this nature. I refer in this context to the decision of Brennan J in Re Drake v Minister for Immigration & Ethnic Affairs(No 2) (1979) 2 ALD 634, as to the role of ministerial policy as guidance for decision-makers.
(c) A good starting point in a matter such as this is the judgment of Einfeld J in Minister for Immigration, Local Government & Ethnic Affairs v Roberts (1993) 113 ALR 151 as to the meaning of the term "activities beneficial to the interests of Australia". In that judgment Einfeld J said (at 156):
It seems to me that the term "activities beneficial to the interests of Australia" means something in the nature of activities which provide some advantage to Australia, whether commercial or otherwise. The concept necessarily connotes some public interest of Australia, even if of a general or non-specific character, and means more than the private interests of the [person applying for citizenship]. The section requires some objective benefit to Australia.
(d) In Re McCarthy and Minister for Immigration, Local Government & Ethnic Affairs (1993) 30 ALD 447, Deputy President McMahon said (at 448):
. . . having regard to the observations of Einfeld J in Roberts, the claim that the Applicant's employer has enhanced the reputation of its Australian parent company and Australian companies in general, must be regarded as falling short of demonstrating activities in which the Applicant was engaged that were beneficial to the interests of Australia. Furthermore, having regard to the observations of Senior Member Gibbs in Re Tsui (1991) 245 ALD 236, it might also be said that such activities are so remote, indirect or speculative in relation to the beneficial interests of Australia that they could not be taken into account.
Further in Re McCarthy, Deputy President McMahon, in outlining the intent of the legislation, said (at 448):
The legislation requires an applicant to be engaged in activities beneficial to Australia. In (Mr McCarthy's) case, his activities may provide a future benefit which is intangible.
(e) In Re Ho and Minister for Immigration & Ethnic Affairs (1994) 34 ALD 664, Deputy President McMahon said at 671 (paragraph 27):
. . . The discretion contained in s 13(4) is not intended to offer an alternative method of complying with s 13(1)(d) and (e). It is intended to allow some flexibility, in exceptional circumstances, when specific activities, which are the applicant's substantial activities during specific periods, can be demonstrated. The presence of the applicant in Australia for specific periods is one of the prerequisites to a grant of citizenship. It is not an optional requirement interchangeable with certain activities outside Australia.
It is unnecessary for me to go into detail as regards the relevant provisions (4.5.10 – 4.5.13 inclusive) of ACI. The evidence before me indicated in the clearest possible terms that the activities of the Applicant in Hong Kong during the relevant period, and in particular through the medium of the Group, did not, by any stretch of the imagination, confer any benefit on Australia. I am mindful in this regard of the fact that in accordance with the judgement of Einfield J in Roberts it is necessary to look for a public interest rather than the private interest of the Applicant. The activities of the Group resulted in some comparatively insignificant benefits for RU and Mr Savage and nothing at all (other than substantial losses) for the Group. The Applicant in his closing submissions spoke of the fact that there was a benefit to Mrs Ching in that she received a salary from the Group; there was however no evidence by her that she received any moneys whatever from the Group. The shareholders in the Group were, apart from Ms Ching, all persons who were not Australian citizens; the employees in Hong Kong were all residents of Hong Kong, and there was certainly no employment benefit so far as Australia was concerned.
Of course the most salient feature of the evidence before me is that the Group failed. It lost altogether approximately HK$3.5 million. Nor can it be said that it paid for the product purchased and imported from Australia out of income; rather these purchases were paid for out of capital contributions made by the shareholders. To say that the products in question and in particular, Rejuva reflected positively on Australia is simply not tenable. Rejuva failed, and if anything, the reverse is likely to be the case.
The Applicant prepared some of the documents contained in the T documents and the Supplementary T documents. I note in particular, his application (T page 6 and the accompanying Schedule (T page 7 to T page 13)), and in which he attempted to distinguish some of the relevant case law. For example at T page 8, he said in relation to the decision in Roberts:
"I understand that it has been Australia's national policy for many years to enhance its presence and importance (whether political, diplomatic or economic) in the Asia Pacific and in particular, China which is well recognised as the world's upgrowing power. My business activities conducted during the relevant period:
1. Must have generated some monetary benefits to Australia which were commercial;
2. Had public interests of Australia because the exports to Hong Kong and China corresponded with the country's national policy; and
3. Met the requirements of applicants under the business migration plan to generate revenue, job opportunities and potential advantages to the country.
The Applicant's comments in relation to Roberts are largely inapposite; for example the reference to a "business migration plan" appears to be irrelevant, and as the documents before the Tribunal indicated, there were no employment benefits for Australia.
(a) That said, the Applicant appears to be unable to distinguish the two most significant features of the activities of the Group. In the first place, it was a private enterprise designed and set up to benefit shareholders, who were not Australian taxpayers, excluding only Mrs Ching who had only a 5% interest in the Group. In the second place, and even more to the point is the fact that the Group failed. It is simply not possible to treat that failure, on any basis, as a benefit for Australia.
It is unnecessary for me to come to any conclusion as to what the position might have been if Rejuva (and the other health-care products) had been successful. The Group as a whole, was essentially a private enterprise formed purely in order to benefit the Applicant and his co-shareholders. This being so, the enterprise appears to be essentially of a private nature. A benefit of a public nature for Australia might arise from the establishment in a foreign country of an enterprise of a public nature (such as a chamber of commerce, or similar body) designed to promote Australian goods. It is conceivable (although perhaps doubtful) that there could be a degree of overlap, such that a purely private enterprise, which is very successful in a foreign country, might confer a benefit on Australia where it results in substantial exports of Australian goods, and notwithstanding that the decided cases appear to focus on the necessity for a public, rather than a private benefit. As I have said this is not a matter which requires a decision by me because in this case, nothing of the sort occurred.
The Applicant appears to consider, that so long as there were some exports (whether or not substantial) it does not matter whether the enterprise is public or private, or whether it is successful. This view is altogether mistaken. As Deputy President McMahon emphasized in Re Ho, the discretion in question is not intended to offer an alternative method of compliance with the residency requirements. This case is indeed, in many respects reminiscent of Re Ho. As in Re Ho, the Applicant does not indicate any present intention of becoming ordinarily resident in Australia, even though he undoubtedly has strong ties here. I note also that the second and third sentences of paragraph 25 of Deputy President McMahon's decision in Re Ho read (at 670), as follows:It can not be said that commercial activities designed to promote the sales of one or two companies are activities of a kind intended to be covered by the ameliorative provisions of [section 13(4)(b)(i)]. Something more is necessary and that something must be of a public character.
(b) The Applicant spoke also of commissions paid to Australian distributors; apart from the fact that there was no evidence whatsoever of any such commissions, the evidence of Mr Fehlberg was that Rejuva was sold in Australia through his wife's beauty salon. There was no evidence as to what happened to the "trial run" product described in ST page 34 and ST page 35.
(c) As Deputy President McMahon said in clause 30 of his decision in Re Ho, I have no doubt that the Applicant, were he to satisfy the residency requirements, would be welcome as a citizen of this country.
It follows then that the discretion in question cannot be exercised in favour of the Applicant, and the decision under review must be affirmed.
I certify that the 12 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President Block
Signed: (signed M Ryan)
AssociateDates of Hearing 21 and 22 May 2001
Date of Decision 28 May 2001
Applicant self-represented
Solicitor for the Respondent Nathan Cureton
C/- Blake Dawson Waldron
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