Leo v Minister for Immigration and Multicultural and Indigenous Affairs

[2006] AATA 309

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 309

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No W2005/16

GENERAL ADMINISTRATIVE DIVISION		)
Re		SALEH LEO

Applicant

And MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Associate Professor G A Barton, Member

Date4 April 2006

PlacePerth

Decision The Tribunal sets aside the decision of the respondent’s delegate of 3 December 2004 to cancel the business visa pursuant to s.134 of the Act.

..........(Sgd G Baron)......................

Member

CATCHWORDS

Migration to Australia - business skills visa - subclass 127 (business owner) - business - eligible business - ownership interest in relation to an eligible business - substantial ownership interest in relation to an eligible business - shareholder - put and call options - indemnity - no right to dividends - ordinary meaning of ‘substantial’ - nature of a share - matters to be considered in determining whether a business visa holder’s underlying ownership interest in an eligible business is substantial – genuine effort – operation of s.134(2) where it is found that the business visa holder has not obtained a substantial ownership interest in an eligible business.

Migration Act 1958

s.134 (1)(2)(3)(9)(10)
s. 135

Migration Regulations 1994

reg. 127.216

Evans v FC of T 89 ATC 4540

Re Rose, Rose v Inland Revenue Commissioners [1952] Ch 499

Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 77 CLR 143

REASONS FOR DECISION

4 April 2006 Associate Professor G A Barton, Member         

1. The applicant, Saleh Leo, applied for review of the decision of the respondent’s delegate of 3 December 2004 to cancel his Class AD subclass 127 (Business Owner) Business Skills Visa (“the business visa”). The respondent has a conditional discretionary power, under s. 134(1) of the Migration Act 1958 (‘the Act’), to cancel the business visa.

2.      The Tribunal had before it the “T documents” (T1 - T25) and supplementary T documents (S1 - S8) lodged by the respondent pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 and a statement of facts and contentions from both parties.

3.      The applicant was represented by Mr A Goldfinch of Solicitors Goldfinch & Co who lodged written submissions on 29 December 2005

4.      Mr D Blades of the Australian Government Solicitor appeared for the respondent. He lodged written submissions on 25 January 2006.

5.      The applicant was granted the business visa on 12 July 2001 on condition that he enter Australia on or before 5 September 2001(S8).

6.      The criteria the applicant had to satisfy to be granted the business visa, at the time of his application and at the time it was decided, are set out in Schedule 2 of the Migration Regulations 1994 at 127.21 and 127.22 respectively. Relevantly, at time of application, the respondent was satisfied that the applicant genuinely had a realistic commitment after entry to Australia as the holder of a subclass 127 visa, to establish an eligible business in Australia or participate in an existing one; to maintain a substantial ownership interest in that business and to maintain direct and continuous involvement in the day - to - day management of that business and in making decisions that affect the overall direction and performance of the business in a manner that benefits the Australian economy - reg.127.216.

7.      In support of his application for the business visa, the applicant signed a declaration which included an undertaking to make genuine efforts to actively participate, as an owner or part - owner, in the day - to - day management at a senior level of a new or existing business in Australia which will do one or more of the following: develop business links with international markets; create or maintain employment; export Australian goods or services; produce goods or services that would otherwise be imported; introduce new or improved technology; add to commercial activity and competitiveness within sectors of the Australian economy (S4). The applicant agreed, in the same document, to complete the survey forms in relation to the surveys of business skills migrants conducted by the respondent at 24 months (form 1010) and 36 months (form 1042) after first entry into Australia and he acknowledged that the respondent may cancel the business visa within 3 years of his first arrival in Australia if he did not fulfil the business undertaking. The applicant first entered Australia after he was granted the business visa on 26 August 2001 and on 4 August 2003, when his Australian address notified to the respondent was Unit 504 Clear Water Reflection, 32 Refinery Drive, Pyrmont - New South Wales, the respondent sent him form 1010 (Survey of Business Skills Migrant - 24 months) to be completed and returned to the respondent by 23 September 2003 (T12). The respondent explained in the covering letter that the information provided in form 1010 would be used to assess whether the applicant had obtained a substantial ownership interest in an eligible business in Australia in which he actively participated at a senior level in the day - to - day management of the business or, if he had not yet engaged in such a business, whether he had made genuine efforts to do so.

8.      The applicant was present in Australia for approximately 90 days in the 3 year period following his entry into Australia on 26 August 2001(T25).

9.      The applicant completed form 1010 on the basis that he was in business in Australia and his migration agent returned it and supporting documents to the respondent on 25 September 2003 and gave an undertaking that further documents would be provided at a later date including a business activity statement (T13).

10.     The applicant stated in form 1010 that he had become the owner of a new business of exporting wheat flour that was established on 27 August 2001 and conducted through two registered companies, Galaxy International Proprietary Ltd (‘Galaxy’) and Global Success Pty Ltd (‘Global’). The applicant is a director and shareholder of Galaxy and Global and has a 25% interest in each. The other shareholders and directors in Galaxy and Global are the applicant’s sister Ms Juliana Leo and Messrs Salim Kortono and Leo Zaher. Galaxy and Global were registered in New South Wales on 27 August 2001 and 30 July 2001 respectively. Galaxy was registered in the Australian Business Register as of 24 September 2001 and it was registered for goods and services tax as of 1 October 2001(T13).The applicant and his sister, Ms Juliana Leo, founded Galaxy  and they each transferred US$55 000 to Galaxy in September 2003. Messrs Salim Kartono and Leo Zaher established Global. The current ownership of Galaxy and Global arose from a business agreement including a transfer of shares at no consideration so that they ‘would operate to complement each other rather than to compete with each other (A1). 

11.     The applicant lodged an undated personal financial statement, a handwritten schedule for the period 13 July 2003 to 17 July 2003 and a typed activity report for the period 18 August 2003 to 28 August 2003 (T13).

12.     The applicant’s migration agent, who is a chartered accountant, also provided accounting and financial advice in Australia to the applicant and to the other directors and shareholders of Galaxy and Global. He wrote them on 15 July 2003 concerning a proposal to acquire, for approximately $180 000, Plateena Pty Ltd. (‘Plateena’), which conducts a franchise business trading as New Zealand Natural Ice Cream at premises in Pagewood New South Wales, advising that the acquisition be made by Galaxy or Global and that the buyer and vendor be registered for the goods and services tax (‘GST’) in order to access the relevant exemption in relation to the supply of a going concern. On 22 August 2003, when the applicant was not in Australia, the agent advised Mr Salim Kartono and Ms Juliana Leo, after a meeting with them that afternoon to discuss the financial statements of Plateena, that they negotiate  a purchase price up to $170 000. This correspondence together with Plateena’s financial statements from 2000 to 2002, weekly sales reports for 6 July 1999 to 12 August 2003, inventories list as of 17 July 2003 and quarterly business activity statements for July 2002 to December 2002 and April to June 2003, were lodged with form 1010(T13).

13.     It was not disputed, and the Tribunal finds, that neither Global nor Galaxy acquired Plateena. The applicant and Ms Juliana Leo also had a meeting with Unibic Australia Pty. Ltd. (‘Unibic’) at this time to explore becoming the sole distributor of Unibic products in Indonesia. This proposal did not go ahead because Unibic was unwilling to give them the sole distributorship (A1; A8).

14.     On 19 August 2003, when the applicant was not in Australia, his migration agent wrote two letters to Mr Salim Kartono and Ms Juliana Leo, following an earlier meeting and a meeting that day, concerning a proposed business joint venture with Charis International Pty. Ltd.(‘Charis’) trading as ‘Il Gianfornaio’ (T13). The proposal involved a corporate joint venture, between Global and Charis, to conduct the master franchise for a retail food business in Indonesia with a wholly owned company set up in Australia to export ‘Il Gianfornaio’ products from Australia to Indonesia. On the advice of the applicant’s migration agent Global employed Australian Franchise Marketing Pty. Ltd. to prepare a ‘due diligence’ report on Charis. Charis, in a letter of 29 August 2003 to the applicant and his co - directors in Galaxy and Global, withdrew from the negotiations. According to the applicant the investment did not go ahead because he had called for an audited financial report on Charis which it would not provide (A8). The applicant lodged all the correspondence and accompanying documentation in relation to the ‘Il Gianfornaio’ proposal with form 1010(T13).

15.     On 6 November 2003 the respondent’s delegate wrote the applicant through his migration agent informing him that although he had indicated in form 1010 that he was currently engaged in business in Australia, the respondent was unable, on the information provided, to assess whether he was meeting his visa requirements and requested that he provide further information and supporting documents by 30 December 2003 to verify the nature of his business and his involvement in it (T14).

16.     On 8 January 2004 the applicant’s migration agent sent further documents to the respondent ‘to confirm that the applicant has engaged in an eligible business in Australia and has utilised his skills in participating at a senior level in the day - to - day management of the business’(T15). The documents in question are the quarterly business activity statements for Global and Galaxy for the period July to December 2003; the 2003 company tax return and financial statements for Galaxy which show that its total equity at 30 June 2003 was $145; the applicant’s handwritten activity report for the days he was in Australia in July and August 2003 and the documents relating to the purchase of flour in Australia by Galaxy and Global and its sale in Indonesia.

17.     On 11 August 2003 Global exported wheat flour to a consignee in Medan Indonesia at US$280 per metric ton for a total price of US$56 210 which it had purchased from Manildra Flour Mills Pty. Ltd.(‘Manildra’) at US$270 per metric ton CNF Belawan(Medan) Indonesia. The export documents were signed by Salim Kartono on behalf of Global. On 21 August 2003 and 13 December 2003 Global made further exports of Manildra wheat flour to the same consignee on the same terms to the value of US$56 602 and US$56 224 respectively. The export documents for these transactions were signed by Zahar Leo and Salim Kartono respectively (T15). On 24 August 2003 and 14 October 2003 Galaxy made exports of Manildra wheat flour to the same consignee and on terms the same as those of the Global contracts to the value of US$57 022 and US$55 972 respectively. On these occasions the invoices to the consignee were authorised by Juliana Leo and by the applicant respectively (T15). Juliana Leo testified that Galaxy and Global have no employees.

18.     According to the applicant’s covering letter of 8 January 2004 Global exported the commodity ‘Skin Free’ on 10 October 2003 to the value of A$3 300.(T15).

19.     On 11 March 2004 the applicant’s migration agent wrote the respondent to correct the information provided on 8 January 2004 by reporting a further wheat flour export sale by Global on 15 December 2003 to the value of US$55 734 and by Galaxy on 24 December 2003 to the value of US$55 594(T16). Galaxy incurred a loss of $700 from ordinary activities for the year ended 30 June 2003 and made a gross trading profit of $16 107 for the year ended 30 June 2004 (A10). Global made a gross trading profit of $3 800 and $16 625 for the years ended 30 June 2003 and 30 June 2004 respectively (A11).

20.     On 21 April 2004 the applicant’s migration agent informed the respondent that the applicant and his sister Ms Juliana Leo had visited Australia to do research, negotiate and discuss the acquisition of the master franchise for the Forte School of Music in Indonesia (T17). He included an agreement dated 26 March 2003 between Galaxy and Australian Franchise Marketing Pty Ltd for a due diligence report on the Forte School of Music master franchise for Indonesia and a concurrent tax invoice to Galaxy for $11 275, dated 26 March 2004, for the cost of the report. As the applicant, who signed the agreement, was in Australia on 26 March 2004 and not on 26 March 2003, the Tribunal finds that the agreement for the study on the Forte School of Music franchise was concluded on 26 March 2004. The applicant and Ms Juliana Leo did not proceed with the agreement because of the cost and decided instead to observe the business themselves. After a meeting with the Forte franchisor they decided not to go ahead with the investment on account of the price and because they had received certain information from existing franchisees concerning support from the franchisor (A8).

21.     On 29 April 2004 the applicant’s migration agent sent the respondent the business activity statements for Global and Galaxy for the March 2004 quarter, current bank statements for both companies and company extracts for Global and Galaxy from the Australian Securities and Investment Commission database reflecting the applicant’s interests in Global and Galaxy (T18).

22.     On 8 June 2004 the applicant’s migration agent sent the respondent a copy of a letter of 28 April 2004 to Galaxy from Manildra informing the applicant and his sister that Manildra had been unable to fulfil Galaxy’s flour orders owing to a failure in its software system that it was hoped would be corrected by July 2004, and correspondence to Ms Juliana Leo from the Forte School of Music including the agenda for a meeting scheduled for 23 February 2004 between representatives of the school and the applicant and Ms Leo(T19).On 7 September 2004 Galaxy exported approximately 176 metric tons of Manildra wheat flour to Indonesia to the value of US$48 846(A12). The flour was purchased on 11 February 2004 and the delay in exporting it was attributable to the software problem at Manildra referred to in its letter to the applicant of 28 April 2004. This was the last shipment of flour that Galaxy made to Indonesia.

23.     On 9 August 2004 the respondent’s delegate notified the applicant’s migration agent of his intention to cancel the business visa for reasons set out in the notice, and set a deadline of 6 September 2004 for making representations as to why the business visa should not be cancelled (T20).

24.     On 6 September 2004 Mr Allan Hodder of Australian Visa and Migration Services Pty Ltd (‘AVMS’) wrote the respondent advising that the applicant had appointed AVMS, on 1 September 2004, to make representations that the business visa not be cancelled and requesting that a decision whether to cancel the business visa not be made before the close of business on 20 September 2004(T21).

25.     On 28 October 2004 Mark D’Rozario of AVMS lodged documents in relation to the applicant’s involvement in Addstyle Contructions Pty Ltd. trading as Addstyle Master Builders (‘Addstyle’) to support his contention that the applicant had met his obligations as the holder of the business visa (T22).

26.     Addstyle is a design and construction company specialising in home improvements and extensions. It is registered in Western Australia from 16 February 1994. It was decided at some time before July 2004, after consultation with the Gilete Group, that Addstyle raise capital to finance the up front costs of constructing new homes and to increase the indemnity insurance limit imposed on the company. An information memorandum under the Gilete Group letterhead offered investors an opportunity to acquire an “A” class shareholding in Addstyle for $250 000 offering returns and conditions according to the Gilete model. It advised potential investors to contact Mr Ken Sharp at Gilete Consulting for further information. In 2003 Robert Travers, the managing director of Addstyle, launched a new company named Travers Gilete that specialises in individually designed new homes (T22).

27.     On 27 September 2004 Addstyle accepted the applicant’s offer to purchase 34 “A” class shares in Addstyle for $250 000 to be paid on 27 September 2004. “A” class shares in Addstyle do not include a right to any dividend. On the same day the applicant was issued with a share certificate for 34 “A” class shares. An inward overseas transfer of $250 000 to Addstyle’s bank account occurred on 6 October 2004. Addstyle informed the applicant in its letter of acceptance that he had a 12.6% shareholding in Addstyle and that he would have a senior management role in the day - to - day operations of the company (T22). Mr Robert Travers testified that the funds subscribed by the applicant have been placed with a bank on term deposit to enable Addstyle to acquire housing indemnity insurance. 

28.     On 13 October 2004 Mr Robert Travers made a written announcement that the applicant would join the management team of Addstyle as Strategic Manager and that his responsibilities include: assisting the managing director in the preparation of strategic plans and business planning; updating the strategic plan and business plan, review of its progress and modification in accordance with the company’s present and planned resources; examining state economic and market trends as they affect the company; co - coordinating policy formulation and review, including evaluation of policy options; reviewing and advising the implementation of organizational directives and policies; identifying potential customers in the Indonesian market and in consultation with the Managing Director, develop a plan to create market awareness and complete sales; special assignments. In particular the applicant’s involvement in Addstyle would put him in a position of influence and authority which allows him to make decisions that affect the overall direction and performance of the business (T22).

29.     On 6 December 2004, shortly after the respondent’s delegate cancelled the business visa, there were 68 issued “A” class shares in Addstyle fully paid to $500 000 held equally by the applicant and another shareholder, and 200 issued ordinary shares fully paid to $200 held by 5 shareholders: Peter Robert Thomas (10 shares); Geoffrey Paul Cook (43 shares); John Arthur Turner (20 shares); Charles Anderson Livie (59 shares) and Travers Holdings Pty Ltd. (68 shares). Mr Kenneth James Sharp was a current director but not a shareholder (T22). Mr Sharp, who is also a director of AVMS, testified that his membership of the board of Addstyle was to ensure that he had an ongoing role in Addstyle which included attending monthly directors’ meetings. The memorandum of association, and article 100 of the articles of association, of Addstyle provide that its authorised capital is $1 000 000 divided into 998 500 shares classified, as to the first 700 000, as ordinary shares and the remainder, in various numbers, as A B C D E F G H I or J shares with a  power to divide shares in the capital into one or more classes with any preferential, deferred, qualified or special rights, privileges, conditions or stipulations and to issue shares with or without any preference priority or special privileges and subject to any postponement of rights or to any conditions or restrictions or without any right of voting(A7). By article 101 of the articles of association the holders of “A” class shares have voting rights, no right to dividends or a distribution of capitalised profits and, on a reduction of capital or winding up, “A” class shares rank in priority to all other shares to the value of $1.00 and do not carry the right to any further participation in the surplus profits or assets of Addstyle (A7).

30.     After the applicant was notified of the respondent’s intention to cancel the business visa, he and Ms Juliana Leo met with the representative of Gilete Management Consultants and AVMS in Jakarta to discuss business investment opportunities in Perth. They then travelled to Perth for a meeting with Mr Allan Hodder of AVMS who advised them that without additional investment in an Australian business the business visa might well be cancelled (A8). They visited five businesses including Addstyle and after meeting with the various business owners and taking advice from Allan Hodder, the applicant decided to invest in Addstyle (A8).

31.     When Addstyle accepted the applicant’s offer to acquire 34 “A” class shares in Addstyle (‘the shares’) for $250 000 on 27 September 2004, he contemporaneously executed put and call option agreements in respect of the shares and a deed of understanding and indemnity with Gilete CSI Pty. Ltd.(‘Gilete CSI’) (A7).

32.     By the put option agreement, Gilete CSI granted the applicant or his personal representative an option to require Gilete CSI or its nominee to acquire the shares unencumbered for $250 000 payable by bank cheque. The put option expires at 5pm (Perth time) on 19 October 2007(A7).

33.     By the call option agreement, the applicant granted Robert Arthur Travers, Charles Anderson Livie and John Arthur Turner, or their nominees, an option to acquire the shares unencumbered for $250 000 payable by bank cheque. The call option expires at 5.00pm (Perth time) on 5 October 2007(A7).

34.     The deed of understanding and indemnity between Gilete CSI and the applicant recites that the applicant elected to purchase the shares and to hold them for a three year investment period. Recital B records that Gilete Consulting undertook a due diligence investigation of Addstyle and will be providing management services to Addstyle pursuant to Mandate Agreement 200132 until 19 October 2007 for a consultancy fee. At the hearing the applicant tendered a copy of Mandate Agreement 200128 between Addstyle and Gilete Consulting Pty Ltd effective from 30 August 2004 to 21 September 2007 the fee structure being $200 per hour plus disbursements for a director and $150 per hour plus disbursements for a management practitioner (A7). Recital C records that in addition to the consultancy fee, Addstyle will pay Gilete CSI a facilitator’s fee which equates to 13% per annum of the applicant’s investment in Addstyle (i.e. $32 500 per annum) over three years and recital D records that all the parties have agreed that the fees referred to in B and C are for the benefit of Gilete Consulting and Gilete CSI only (A7). In consideration of the applicant’s investment in Addstyle and subject to the applicant retaining the shares, Gilete CSI agreed to pay the applicant a monthly return of $1 041 .66 less any withholding tax should the applicant be classified as a non - resident of Australia for income tax purposes. The monthly returns equate to an annual return of 5%.

35.     Gilete CSI indemnified the applicant against any shortfall between the $250 000 he originally invested in Addstyle and the amount that is received for the shares at the conclusion of the three year investment period or on the applicant’s death (A7).

36.     Gilete CSI had sixty days within which to return $250 000 to the applicant in the event that he received notification from the respondent of cancellation of the business visa within six months of the date of the deed. This undertaking was conditional on the applicant giving written proof from the respondent to Mr Kenneth Sharp of Gilete CSI (A7).

37.     The above indemnities are conditional upon the applicant selling the shares to the highest bidder even if the purchaser is not an independent third party but Gilete Consulting, Gilete CSI, an existing Addstyle shareholder or a new shareholder introduced by Gilete Consulting (A7).

38.     Clause 1.4 of the Deed of Understanding and Indemnity provides as follows: -

“1.4In the event Addstyle goes into administration receivership and or compulsory or voluntary liquidation or shall enter into any composition arrangement with or assignment for the benefit of the Addstyle’s creditors or shall have appointed under any Act or instrument or by order of any Court a manager or an administrator or a trustee or a receiver or a manager or liquidator in relation to any part of the Addstyle’s undertakings or assets or property or if any execution be issued against Addstyle (whether being a corporation or person) and not be satisfied or withdrawn within 30 days thereof or the Mandate Agreement is terminated by either of the parties to it for any reason, or Gilete Consulting determines in its absolute discretion that Leo’s investment in Addstyle is at risk, Gilete CSI shall give notice in writing immediately to Leo that it has elected to either: and or

1.4.1pay the amount of Leo’s AUD$250,000.00 in Addstyle not otherwise recovered by Leo to Leo within 60 days of the date of the notice given by Gilete CSI; or

1.4.2purchase, or arrange for the purchase of, shares in another investment company nominated by Gilete Consulting or Gilete CSI Pty Ltd (“Substitute Company”) for an amount equivalent to the amount of Leo’s AUD$250,000.00 in Addstyle, which has not been recovered by Leo.  The shares in the Substitute Company (“Substitute Shares”) shall be the property of and be held in the name of Leo, and the parties shall enter into agreements in relation to the Substitute Shares which contain substantially the same terms, conditions and indemnities as those between the parties in relation to the Shares including but not limited to this Deed and the Put Option Agreement dated 27 September 2004, except that the investment period for the Substitute Shares shall only be for the unexpired portion of the Investment Period.  If Gilete CSI fails to comply with this clause 1.4.2 within sixty (60) days of the date of the notice given by Gilete CSI, Gilete CSI shall then be obliged to pay Leo in terms of clause 1.4.1above within seven (7) days after the sixty (60) days of the date of the notice.”  

39.     By clause 1.5, an election made pursuant to clause 1.4 shall be made in the absolute and unfettered discretion of Gilete CSI (A7).

40.     The deed includes an acknowledgement by the parties (in clause 4) that the undertakings and indemnities are valid for the three year investment period and that should the applicant elect to retain the shares at the conclusion of the investment period, the parties will undertake negotiations in relation to the continuation or otherwise of the indemnities and undertakings contained in the deed (A7).

41.     On 27 September 2004 Addstyle and Gilete CSI concluded a funding arrangement that related to the investment of $250,000 in Addstyle by the applicant. It was agreed that the investment will be by way of equity funding into Addstyle; that the required facilitator fee on the investment is $32 500 per annum to be paid by Addstyle to Gilete CSI in monthly instalments of $2 708.33 plus GST and that the provision of the investment is conditional upon Gilete Consulting Pty Ltd providing management consulting services to Addstyle as agreed in the Gilete Consulting Pty Ltd mandate of 27 September 2004 - see para. 34 of these reasons above (A7).

42.     Mr Kenneth James Sharp, a director of the Gilete Group of companies and of AVMS, testified that the applicant’s investment in Addstyle had been made pursuant to a model developed by Gilete CSI and AVMS to provide safe investment opportunities in Australia for business migrants in circumstances that enabled them to satisfy their visa requirements. He said that the model had been verbally endorsed in discussions with officers of the respondent. The model involving “A” class shares was designed to put the business migrant in as risk free a position as possible, at least in the initial years of their involvement in Australian business, and the put and call option arrangement was an exit strategy for either party in the event the relationship turned sour. He explained that the facilitator’s fee to be paid to Gilete CSI was the cost to Addstyle of the time use of the applicant’s funds while he held “A” class shares with no entitlement to dividend. He regarded the margin between the facilitator’s fee and the return payable to the applicant as a ‘sinking fund’ in the event that the applicant should exercise the put option.

43.     The applicant first came to Australia about 11 years ago and has since been back a number of times on holiday and to investigate business opportunities (S1). He is married to Lilis Djingga and he has twin sons Hubert Leo and Hugo Leo. His wife and children were included in the business visa application (S6; S7).

44.     The applicant tendered copies of his electronic correspondence with Mr Robert Travers, managing director of Addstyle, for the period October 2004 to October 2005; a job flow sheet of 29 March 2005 and the minutes of a management meeting of 13 April 2005(A9). He testified that job flow sheets and management meeting minutes from Addstyle were transmitted to him almost monthly. He said in cross - examination that he did not normally attend the management meetings and only received the minutes by ‘email’.  He was shown a print out of the home page from the Addstyle website which included the photos and names of 20 persons on the Addstyle team and he was asked whether he had met any of them (T24). He had met Robert Travers, the managing director, but could not specifically recall any of the others. He stated that he had assisted in two Addstyle exhibitions in Indonesia. He testified further that Addstyle’s business was new to him although he did have an interest in property prior to investing in Addstyle.  He sometimes bought books on the subject and was always attracted to relevant magazine articles. He said that after investing in Addstyle he would gain practical experience in the area. At the time of the hearing it was fair to say that he was still at the learning stage although it was a two way experience as he had brought his business experience to bear on Addstyle operations. He has been in business for approximately 33 years after graduating from high school. He assisted his brother in an electronic home appliances business where he served in the services, sales and financial departments and for the last 24 years he has been in business with his sister, Ms Juliana Leo, supplying musical instruments, including repairs; sound systems and music education. Their business is one of the largest of its kind in Indonesia.

45.     The applicant is neither a director nor an employee of Addstyle. He said that he had obtained some independent legal advice on his investment in Addstyle from a lawyer who had since died. The advice related to information about the Gilete group of companies.

46.     Mr Robert Travers testified that the applicant wanted to be involved in the running of Addstyle which he was not ”100% happy with as he was going to be making management decisions without my say - so”. So he was given the title ‘Strategic Manager’ “whereby he could give me his opinion and advice on various aspects of the company.” He said that the applicant had come up with the idea that Addstyle do business in Indonesia. Mr Travers thought that Addstyle might at some stage join up with a building company in Indonesia and provide it with design and procedure advice to price the jobs and carry out the work correctly. Mr Travers did not have daily or weekly contact with the applicant but he has been to Indonesia twice at the invitation of the applicant. Mr Travers was hoping to catch up with the applicant on his current visit to Perth but had been too busy to do so. He had met the applicant in person at least 12 times. He said that the applicant “was quite interested in actually making a more positive contribution into the company, actually buying some shares and therefore becoming a shareholder with part of a dividend.” Mr Travers was prepared to consider the applicant becoming an ordinary shareholder provided the price was right. He stated that the applicant did not appear on the Addstyle website because he did not meet clients. It was Mr Travers’ view that the applicant was not involved in the day - to - day management of Addstyle.

47. The respondent exercised the discretionary power conferred by s. 134(1) of the Act to cancel the business visa. This course of action was subject to the preliminary conditions, relating to the time of cancellation and the right of the applicant to be heard, set out in ss. 134(9) and 135 of the Act. It was not disputed, and the Tribunal finds, that these conditions were satisfied in relation to the cancellation of the business visa and that written notice of the cancellation was given to the applicant pursuant to s.134(1) of the Act.

48. The relevant provisions of the Act governing the respondent’s power to cancel the business visa are set out in s. 134 as follows:

Cancellation of business visas

(1) Subject to subsection (2) and to section 135, the Minister may cancel a business visa (other than an established business in Australia visa, an investment-linked visa or a family member's visa), by written notice given to its holder, if the Minister is satisfied that its holder:

(a)has not obtained a substantial ownership interest in an eligible business in Australia; or

(b) is not utilising his or her skills in actively participating at a senior level in the day-to-day management of that business; or

(c)       does not intend to continue to:

(i) hold a substantial ownership interest in; and

(ii) utilise his or her skills in actively participating at a senior level in the day-to-day management of;

an eligible business in Australia.

(2) The Minister must not cancel a business visa under subsection (1) if the Minister is satisfied that its holder:

(a) has made a genuine effort to obtain a substantial ownership interest in an eligible business in Australia; and

(b)has made a genuine effort to utilise his or her skills in actively participating at a senior level in the day-to-day management of that business; and

(c)        intends to continue to make such genuine efforts.

(3) Without limiting the generality of matters that the Minister may take into account in determining whether a person has made the genuine effort referred to in subsection (2), the Minister may take into account any or all of the following matters:

(a)       business proposals that the person has developed;

(b)       the existence of partners or joint venturers for the business proposals;

(c) research that the person has undertaken into the conduct of an eligible business in Australia;

(d) the period or periods during which the person has been present in Australia;

(e) the value of assets transferred to Australia by the person for use in obtaining an interest in an eligible business;

(f) the value of ownership interest in eligible businesses in Australia that are, or have been, held by the person

(g) business activity that is, or has been, undertaken by the person ;

(h)whether the person has failed to comply with a notice under section 137;

(i)      if the person no longer holds a substantial ownership interest in a particular business or no longer utilises his or her skills in actively participating at a senior level of a day-to-day management of a business:

(i)      the length of time that the person held the ownership interest or participated in the management (as the case requires); and

(ii)     the reasons why the person no longer holds the interest or participates in the management (as the case requires).”

49.     ’Eligible business’ is defined in s.134(10) to mean a business that the respondent “reasonably believes is resulting or will result in one or more of the following:

(a)       the development of international  links with the international market;

(b)       the creation or maintenance of employment in Australia;

(c)       the export of Australian goods or services;

(d) the production of goods or the provision of services that would otherwise be imported into Australia;

(e)        the introduction of new or improved technology to Australia;

(f) an increase in commercial activity and competitiveness within sectors of the  Australian economy.”

50. ‘Ownership interest’ in relation to a business, is defined in s. 134(10) to mean “an interest in the business as:

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

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

(c) the sole proprietor of the business;

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

51. ‘Business’ is not defined in the Act. Whether a particular activity or course of activities constitutes a business is a question of fact and degree that is to be determined by considering matters such as the scale of the activity and whether it is conducted continuously and on a commercial basis to derive a profit; Evans v F C of T 89 ATC 4540 at 4554 - 4555 and the authorities cited.

52. By s. 134(1) of the Act the respondent had a discretionary power to cancel the business visa if she was satisfied, at the time of cancellation, as to one of the mutually exclusive matters in sub - paras. (a),(b) or (c) and she was not satisfied at that time that the applicant had made, and intended to continue to make, a genuine effort in relation to the matters in s. 134(2)(a),(b) and (c).

53. S.134 (1) (a) of the Act relates to whether the applicant has obtained a substantial ownership interest in an eligible business in Australia. When the business visa was cancelled the applicant was the registered holder of 25% of the issued ordinary shares in, and a director of, Galaxy and Global and the holder of 12.6% of the issued shares in Addstyle. At that time the wheat flour activities of Galaxy and Global had ceased and it was not disputed, and the Tribunal finds, that Addstyle was conducting an eligible business as defined in s 134(10) of the Act. As the applicant is a shareholder in Addstyle the Tribunal finds that he has an ownership interest in its business as defined in s. 134(10). So the issue to be determined in relation to s.134 (1) (a) is whether the applicant had obtained a substantial ownership interest in Addstyle’s business when the business visa was cancelled.

54. ‘Substantial ownership interest’ is not defined in the Act. ‘Substantial’ means “1.of considerable importance, size, or worth. 3. real and tangible rather than imaginary;” Oxford Dictionary of English, second edition, 2003.

55.     A share in a registered company has been described as an indivisible bundle of rights and the obligations that attach to it, as burdens or incidents of the shareholding. It is a species of transferable personal property which does not include a legal or equitable interest in the assets of the company; Re Rose, Rose v Inland Revenue Commissioners [1952] Ch 499, 513, 514; Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 77 CLR 143, 154, 157. The nature of a share is variable from corporation to corporation, from share to share and from time to time. So where, as in this application, the business visa holder’s ownership interest in an eligible business is an interest in the business as a shareholder in a company that carries on the business, the issue as to whether that interest is substantial, for the purposes of the Act, is to be determined not only by considering the number or percentage of issued shares held and their cost but also by reference to the rights that constitute the shares and the circumstances in which they are held.

56.     The circumstances in which the applicant became a member of Addstyle, the nature of his shares in Addstyle, including the manner in which he is excluded from participating  in its profits, and the terms of the contractual arrangements by which he acquired and holds his shares, are set out fully above. These matters, when considered as a whole, lead irresistibly to the conclusion that his underlying ownership interest in the business of Addstyle is severely attenuated, especially in light of the rights that ordinarily accrue to the proprietors of a private company.

57. For the reasons in paras. 51 to 56 above, the Tribunal is satisfied that the applicant at the time that the business visa was cancelled by the respondent, had not obtained a substantial ownership interest in an eligible business in Australia within the ordinary meaning of ‘substantial’ as it is used in s.134(1)(a) of the Act.

58. By s.134 (2) of the Act the respondent must not cancel the business visa if she is satisfied that the applicant has made a genuine effort to obtain a substantial ownership interest in an eligible business in Australia and to utilise his skills in actively participating at a senior level in the day - to - day management of that business, and intends to continue to make such genuine efforts. ‘Genuine effort’ is not defined in the Act and so must be given its ordinary meaning within the context of the Act. ‘Genuine’ means “truly what something is said to be; authentic” and ‘effort’ means “a vigorous or determined attempt;” Oxford Dictionary of English, second edition, 2003. An inclusive list of the matters that the respondent may take into account in determining whether the applicant has made the genuine effort referred to in s 134(2) is in s.134(3) of the Act.

59.     The applicant’s endeavours to meet the business visa requirements after his first entry into Australia and up to the hearing of this application are set out above. The Tribunal finds that there is nothing in the evidence to suggest that they were not genuine and so the issues to be resolved are whether they were, on balance, vigorous and determined and, if so, whether the applicant intends to continue to make them.

60. Although s.134 (2) of the Act requires the respondent to be successively satisfied in relation to the matters in (a), (b) and (c), where, as in this matter, it is found that the business visa holder has not obtained a substantial ownership interest in an eligible business in Australia, s.134 (2) (b) has no practical application and the respondent must not cancel the business visa if satisfied in relation to the matters in s.134 (2) (a) and (c).

61. Although the applicant was only present in Australia for short periods prior to the cancellation of the business visa, the Tribunal finds that this fact does not detract from his endeavours to satisfy the business visa requirements. After considering all the relevant transactions he concluded, the proposals he made and the professional advice he sought, as a whole and in light of the matters listed in s.134 (3), the Tribunal is satisfied that the applicant has made and intends to continue to make, a genuine effort to obtain a substantial ownership interest in an eligible business in Australia and that should he succeed, he intends to make a genuine effort to utilise his skills in actively participating at a senior level in the day-to-day management of that business. So by s.134 (2) of the Act the business visa must not be cancelled.

62. The Tribunal sets aside the decision of the respondent’s delegate of 3 December 2004 to cancel the business visa pursuant to s.134 of the Act.

I certify that the 62 preceding paragraphs are a true copy of the reasons for the decision herein of Associate Professor G A Barton, Member

Signed:         (sgd D Brodie)           .....................................................................................

Associate

Date/s of Hearing  28 and 29 November 2005
Date of Decision  4 April 2006
Counsel for the Applicant         Mr Goldfinch
Solicitor for the Applicant          Goldfinch & Co
Counsel for the Respondent     Mr D Blades
Solicitor for the Respondent     Australian Government Solicitor