Leng v Minister for Immigration; Moha Sombat Pty Ltd v Minister for Immigration - [2007] FMCA 1961

FEDERAL MAGISTRATES COURT OF AUSTRALIA

LENG v MINISTER FOR IMMIGRATION & ANOR; MOHA SOMBAT PTY LTD v MINISTER FOR IMMIGRATION & ANOR

[2007] FMCA 1961

MIGRATION – Review of Migration Review Tribunal decision – failure to exercise jurisdiction – business sponsorship – viability of a business.

MIGRATION – Review of a Migration Review Tribunal decision – visa – link between sponsorship and visa.

Migration Regulations 1994, Regs.1.20D(2)(f), 457.223

Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559
Lee v Minister for Immigration and Citizenship [2007] FCAFC 62

Applicant:

SARAUN LENG

First Respondent:

MINISTER FOR IMMIGRATION & CITIZENSHIP

Second Respondent:

MIGRATION REVIEW TRIBUNAL

Applicant:

MOHA SOMBAT PTY LTD
(ACN 107 385 106)

First Respondent:

MINISTER FOR IMMIGRATION & CITIZENSHIP

Second Respondent:

MIGRATION REVIEW TRIBUNAL

File numbers:

MLM 229 & 230 of 2007

Judgment of:

Riethmuller FM

Hearing date:

6 August 2007

Date of last submission:

6 August 2007

Delivered at:

Melbourne

Delivered on:

23 November 2007

REPRESENTATION

Counsel for the Applicants:

Mr Gibson

Solicitors for the Applicant:

KPA Lawyers

Counsel for the First Respondent:

Ms S.A. Burchell

Solicitors for the First Respondent:

Clayton Utz

ORDERS

A writ of certiorari issue quashing the decision of the Migration Review Tribunal in the matter of V 060367571, decided on 31 January 2007 with respect to MOHA SOMBAT PTY LTD.
A writ of mandamus issue requiring the Migration Review Tribunal to determine the application of MOHA SOMBAT PTY LTD, being case file V 060367571, according to law.
The Respondent shall pay the costs of the Applicant fixed at $3,750 pursuant to Order 21.02(2)(a) of the Federal Magistrates Court Rules 2001 in respect to the application of MOHA SOMBAT PTY LTD.
A writ of certiorari issue quashing the decision of the Migration Review Tribunal in the matter 06/0367628, decided on 31 January 2007 with respect to SARAUN LENG.
A writ of mandamus issue requiring the Migration Review Tribunal to determine the application of SARAUN LENG, being case file 06/0367628, according to law.
The Respondent shall pay the costs of the Applicant fixed at $3,750 pursuant to Order 21.02(2)(a) of the Federal Magistrates Court Rules 2001 in respect to the application of SARAUN LENG.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLM 229 of 2007

SARAUN LENG

Applicant

And

MINISTER FOR IMMIGRATION AND CITIZENSHIP

First Respondent

And

MIGRATION REVIEW TRIBUNAL

Second Respondent

MLM 230 of 2007

MOHA SOMBAT PTY LTD (ACN 107 385 106)

Applicant

And

MINISTER FOR IMMIGRATION AND CITIZENSHIP

First Respondent

And

MIGRATION REVIEW TRIBUNAL

Second Respondent

REASONS FOR JUDGMENT

In this matter, the applicants Moha Sombat Pty Ltd and Mr Leng, seek judicial review of decisions of the Migration Review Tribunal as to whether or not Moha Sombat Pty Ltd should be approved as a business sponsor for the purpose of sponsoring Mr Leng, the applicant in the associated proceedings. The applications before the Migration Review Tribunal were heard at the same time by the same presiding member, with decisions being signed on the same date (31 January 2007).
The decision with regard to Moha Sombat Pty Ltd turned upon whether or not the company was able to meet the undertakings it had offered in accordance with reg.1.20D(2)(f) of the Migration Regulations 1994. The relevant part of the criteria was as follows:
1.20D(2) The minister must approve the application if:
...
(f) the minister is satisfied that while there is in effect a subclass 457 visa granted on the basis that:
(i) the applicant for approval is the employer referred to in subclause 457.223(4) of schedule 2 in relation to a visa application; and
(ii) the visa holder satisfies the requirements of that subclass; the applicant for approval is able, in relation to each visa holder, to comply with the undertakings given by the applicant in accordance with form 1196 or 1196(Internet); ...
The relevant part of the undertakings that were offered by the sponsor in the form (dated 2 November 2005) were that:
The business undertakes to do the following in relation to sponsored persons:
...
· comply with laws relating to workplace relations that are applicable to the business and any workplace agreement that the business may enter into with a sponsored person;
…
· ensure that, if there is gazetted minimum salary in force in relation to the nominated position occupied by the sponsored person, the person will be paid at least that salary.
There is nothing in the decision addressing whether or not there is a ‘gazetted minimum salary’ in force in relation to the nominated person. The Tribunal proceeded on the basis that the company ‘proposed to employ Mr Saraun LENG (the nominee) as a General Manager, ASCO Code 1121-11, on a salary of $80,000 per annum’: see para [11]. Whether this amounted to a ‘workplace agreement’ is not considered.
It would usually be appropriate for the Tribunal, when considering the ability of a sponsor to fulfil undertakings, to specifically identify the terms of the undertaking. This case involves a business that is improving its profitability and employing a ‘General Manager’ on a salary to develop the business. The Tribunal simply proceeded on the basis that the test was whether or not the business could presently afford to pay the salary as agreed. Whether it would be in breach of the actual undertakings referred to above if it were not sufficiently profitable to pay the amount agreed is unclear, in the absence of any award rates, evidence that there was a ‘workplace agreement’ contemplated, or identification of the provisions of the laws relating to workplace relations that may be breached.
The relevant findings with regard to the case of the company are set out by the Tribunal at paragraphs [34] to [40] as follows:
34.    At the time of the primary application on 21 November 2005 the most recent financial information was the financial statements up to FYE June 2005. The operating position in that year was a loss of $51,896. The previous year (to FYE June 2004) also recorded an operating loss.
35.    The Tribunal subsequently received a set of financial statements for he business applicant Moha Sombat Pty Ltd, ACN 107 385 106, now said to be trading as CPK Camberwell, showing that show that the business applicant for approval made an operating profit of $66,872.
36.    The Tribunal notes that the financial statements for the FYE 2006 contain an income item which does not appear in any previous set of financial statements. The item is “Other Income – Management Fees” $50,000. The effect of recording this unique transaction is to boost the apparent level of operating profit in the business from what would otherwise have been a pre-tax operating profit of $16,872. However, for the purpose of this review the Tribunal accepts the financial statements for FYE 2006 at face value and proceeds on that basis.
37.    The business claims to employ two Australian in the FYE ended 2005 and 2006 who, the review applicant said at the hearing, were paid salaries of $48,000 and $36,000 each in FYE 2005. This is consistent with the line item for wages & salaries totalling $79,427in that year. In FYE 2006 the line item for wages & salaries is $83,891, also consistent with employing two persons.
38.    At the hearing Mr Leng said he is currently being paid $80,000 per annum from the duty free shop. The agent said he thought this was a misunderstanding and Mr Leng was referring to a future arrangement. Mr Leng’s claim is not consistent with the line item for wages & salaries in any of the sets of accounts for any of the years and the Tribunal does not accept that he is currently in receipt of wages of salary from the business applicant for approval.
39.    When the business applied for approval as a business sponsor it proposed to employ Mr Saraun LENG (the nominee) as a General Manager, ASCO Code 1121-11, on a salary of $80,000 per annum.
40.    It follows that the undertakings by the business applicant for approval, including the agreed upon level of wags to be paid to the successful nominated employee, are not covered by the recorded operating profit of $66,872.
As a result, the Tribunal found that the applicant was not able to meet the undertakings required of it pursuant to reg.1.20D(2)(f).
It is important to clearly analyse the nature of the undertakings offered by the business sponsor in the context of this case. The undertaking was to pay Mr Leng $80,000 per annum during the period of sponsorship. The undertaking would not commence to operate until such time as a visa was granted. The undertaking is therefore with respect to conduct that is to occur in the future.
The Tribunal, in its decision, has considered only the past operation of the company in the 2004-2005 financial year and 2005-2006 financial year. The Tribunal concluded that in the 2005-2006 financial year, the company did not have the financial capacity to pay the employee (Mr Leng) the salary of $80,000 per annum.
The Tribunal does not appear to have turned its considerations to the forthcoming period during which the sponsor was offering undertakings. Those undertakings were offered with regard to a period of up to four years into the future.
The case for the sponsor was that in the 2004-2005 financial year, the business had made a loss of $51,896, although this must be seen in the context of gross sales of $1,242,868.45 for a relatively new business. In the 2005-2006 financial year, the performance of the business appears to have improved dramatically. Firstly, the gross sales increased to $1,669,981.61, resulting in an increase in gross profit from trading from $102,000 to $231,000. In the second of the two years, the business also received management fees of $52,000, although it is not entirely clear on what basis those fees were received and whether or not they would be expected again in the future. The Tribunal has not addressed the question of whether or not those fees would be received in future years.
Even ignoring those fees, the business has moved from a position in 2004-2005 of generating a loss of over $51,000 per annum to generating a profit in the following year of nearly $17,000 per annum. It is apparent that if the business continued to improve at the rate that it had in the previous year, it would be well able to pay Mr Leng the sum sought. The Tribunal, however, has not made any findings as to whether the Tribunal member was satisfied that the business would be likely to generate sufficient income to make the payments required in the 2006/07 financial year or into the future.
It appears clear on the face of the decision that the Tribunal approached the matter not on the basis of determining the likelihood of the sponsor being able to comply with the undertakings from the date of the grant of the visa into the future, but rather whether or not the sponsor would have been able to comply with the undertakings in past years. Whilst this approach may have little or no impact upon major publicly listed companies with significant asset bases, it will inevitably impact upon small businesses who are seeking to hire overseas workers to assist them to boost their profitability or develop their businesses. The development of profitable businesses in Australia is one of the underlying purposes of the visa category. Once one accepts that the sponsor need not have sufficient unencumbered assets to cover the potential costs of the undertakings for the whole period, an assessment must be made as to whether the Tribunal is satisfied that the circumstances of the sponsor will allow it to meet those undertakings as and when they are likely to fall due.
On 31 January 2007, the Tribunal received further submissions by facsimile. The Tribunal has referred to receipt of the facsimile at para.28 of their decision. The Tribunal member notes that:
28. By fax dated 31 January 2007 the Tribunal also received:
A submission from the review applicant’s agent drawing attention to certain aspects of the financial statements;
A contract of sale of land by Sombat Properties Pty Ltd (ACN 116 036 349) as trustee for N & M Li Family Trust and Leng Properties Pty Ltd (CAN 092 852 072);
ASIC search results for Leng Properties Pty Ltd dated 31 January 2007, showing Mr Saraun LENG and Mr Kuy Huor LIM as directors and the latter as Company Secretary. All shares were owned by Mr Saraun LENG.
Copies of passports for two person said to be employees of the review applicant.
Within the further submissions, the applicant's adviser makes the point that:
A comparison of 30 June 2006 and 30 June 2005 returns shows a turnaround in net profit before income tax of the sponsor company of $118,769.27.
We submit this is consistent with the projected improved performance of a significant business enterprise which first commenced trading in March 2004.
The Tribunal was referred to the BAS statement previously filed with the Tribunal for the period 1 July 2006 to 30 September 2006. That BAS statement shows total sales for the period as $970,878.
The oral evidence of Mr Papathomas, accountant, was that this would reflect an increase of profitability for the sponsor company where fixed expenses remain constant.
We are instructed that Papathomas and Co Pty Ltd has been instructed to: (1) finalise BAS statement for a period ending 31 December 2006; (2) prepare interim financial statements for the period ending 31 December 2006.
Unfortunately, this material is not presently available.
We submit however that the information provided is sufficient for the Tribunal to find that the company is in a position to meet its financial obligations.
If the Tribunal however does require the interim financial statements for the period ended 31 January 2006, we would request the Tribunal advise this in writing and indicate by which date the material can be provided.
The submission enclosed a BAS statement supporting the terms of the submission. The BAS statements for previous periods appear in the court book. In the last quarter of the 2005-2006 financial year, the total sales were $426,888. In the first quarter of the 2005-2006 financial year, the total sales were $392,540. In the first quarter of 2006-2007, they were 970,878.
The failure of the Tribunal to refer to this material or the submissions further supports the conclusion that the Tribunal was not considering whether or not the company would be able to meet the undertakings from the date that a visa was granted into the future as and when the obligations fell due, but rather considering only the past capacity of the company at a period that was not directly relevant to the undertakings.
Whilst, as the High Court has pointed out in Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559, that the past is a useful guide as to the future, it is but an evidentiary basis for considering what the future may hold. In this case, the past was clearly in a state of flux, as the business’s sales and profitability appeared to be steadily increasing. It is in this context that the Tribunal needed to make findings as to what the Tribunal accepted was the likely future profitability of the business (at least to the extent necessary to cover the salary), not simply as to the business's past.
In the circumstances, I am satisfied that the Tribunal has failed to ask itself the correct question under reg.1.20D(2)(f), in that it has failed to consider precisely what the undertakings were and if they related to making the agreed (as opposed to award) salary, whether or not the sponsor is now able to fulfil its undertakings from the date of the grant of the visa until the end of the sponsorship undertaking's period. Rather, it has considered whether or not at some time in the past the sponsor may have been able to fulfil those undertakings.
As the Tribunal has failed to consider the issue required under the regulations, it has therefore failed to exercise jurisdiction. I, therefore, find that a writ of certiorari and mandamus ought to issue with respect to the Tribunal decision in this case.
I turn next to the question of the decision on the application of Mr Leng. The relevant findings in Mr Leng's case are at para.24, which states:
24. The decision to refuse the business sponsorship was affirmed by the Tribunal. As the visa applicant's employer has not been approved as a business sponsor, the Tribunal finds that the visa application is unable to satisfy subclause 457.223(4).
Condition 457.223 requires the applicant to meet one of the requirements in clauses 2 through 10 of condition 457.223.
The relevant clause in this case being cl.457.223(4):
(4)     The applicant meets the requirements of this subclause if:
(a)     the activity in which the applicant proposes to be employed in Australia by a person (the employer) is the subject of an approved business nomination by the employer; and
(b)     the employer is:
(i) either:
(A)     a pre qualified business sponsor; or
(B)     a standard business sponsor approved under regulation 1.20D as in force before, on or after 1 July 2003; and
(ii)     the employer mentioned in subparagraph 1223A (3) (d) (i); and
(ba)   if:
(i) the employer is a standard business sponsor; and
(ii)     the employer’s business activities include activities relating to either or both of:
(A)     the recruitment of labour for supply to other unrelated businesses; and
(B)     the hiring of labour to other unrelated businesses;
the activity in which the applicant proposes to be employed in Australia must be an activity in the sponsor’s business, and must not be an activity that involves a position that would be supplied to another unrelated business, unless the nomination that was approved in relation to the activity was made before 1 October 2007; and
(c) the applicant is nominated, in accordance with approved form 1068, 1196 or 1196 (Internet), in relation to the activity by the employer; and
…
Clearly the tribunal proceeded on the basis of taking an irrelevant consideration into account in Mr Leng’s case. That is, that there had been a refusal of the sponsorship application by the employer. This is because the decision to refuse to approve the sponsor that the Tribunal relied upon was affected by jurisdictional error.
It is argued that even if writs of certiorari issue, with respect to the decision of the Tribunal with respect to the sponsor, quashing that decision, Mr Leng would nonetheless be left in a position where there was not in fact a sponsorship approval and therefore the application would be futile. This argument ignores the clear statement by the Full Court in Lee v Minister for Immigration and Citizenship [2007] FCAFC 62 that a ‘forward-looking test’ is appropriate in the context of this type of visa case.
On a ‘forward-looking test’ the application is not futile as the application for sponsorship approval could be accepted, which would then potentially allow the application to succeed.
I therefore find that writs of certiorari and mandamus should issue with respect to the decision of the Tribunal on Mr Leng’s application.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Riethmuller FM

Deputy Associate: Robin Smith

Date: 23 November 2007