Li v Minister for Immigration and Citizenship

[2011] HCATrans 309

[2011] HCATrans 309

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S269 of 2011

B e t w e e n -

SHAN SHAN LI

Plaintiff

and

MINISTER FOR IMMIGRATION AND CITIZENSHIP

Defendant

Application for an order to show cause

HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 4 NOVEMBER 2011, AT 9.30 AM

Copyright in the High Court of Australia

MR N.C. POYNDER:   If it please, your Honour, I appear for the plaintiff.  (instructed by Peter Bollard & Associates)

MR J.B. KAY HOYLE:   May it please the Court, I appear for the defendant.  (instructed by Clayton Utz Lawyers)

HIS HONOUR:   Yes, thank you.  Now, Mr Kay Hoyle has objected to various paragraphs of your affidavit.  The bad news is that all those objections are well based and the good news is that it does not matter.

MR POYNDER:   Yes, we have discussed that.  The only slight query we had was paragraph 22 which related to the sponsor, but that does not seem to be in issue and so we would be content that that comes out as well.

HIS HONOUR:   Formally speaking, I will uphold the objections taken by the defendant to paragraph 15 from the words “suggesting that” to the end, in paragraph 16 from the words “which were to the effect” to the end of the sentence, paragraph 17 the words “and maintained” to the end of the sentence, paragraph 18 the words “I contended” to the end of the paragraph, paragraphs 20, 21 and 22, the whole paragraph.  It follows from what you just said, Mr Kay Hoyle, may I take it, that it is common ground that it is not possible to remit this matter to the Federal Magistrates Court?

MR KAY HOYLE:   It is, your Honour.

HIS HONOUR:   Very well, Mr Poynder, let us deal with jurisdictional fact, that part of the case separately from bias.

MR POYNDER:   Yes, I will deal with that first, your Honour.  Does your Honour have a bundle of documents in a folder, the plaintiff’s relevant material?  I will refer to that as we proceed.  The decision under review is actually annexed to the affidavit of Ms Cheng and the page numbers I will refer to, your Honour, will be the page numbers that we have put in our paginated version, so that is the ones in the bottom right-hand corner.  The decision under review is at pages 6 to 9 of exhibit 1, or of those documents.

HIS HONOUR:   Yes.

MR POYNDER: If I could take your Honour first perhaps to the legislation and then we will come back to the decision. I will be referring here to the plaintiff’s relevant material. The type of visa being sought by the applicant was a subclass 163 visa and your Honour will find the relevant part of Schedule 2 to the Regulations from page 16 of the relevant material. Your Honour will see from page 15 that this part of the Migration Regulations, as extracted, is that which existed as at the time of the application; that is 23 February 2010. The particular provision at issue in this case is subclause 163.212, which is on page 17, and that is the requirement that the applicant:

has, for at least 2 of the 4 fiscal years immediately before the application is made, had an ownership interest in a main business or businesses that had an annual turnover of at least AUD300,000.

The primary issue is the definition of “main business” in 163.212(a) and that definition is in regulation 1.11, which is at pages 13 and 14 of the plaintiff’s material.  Your Honour will see that it is a lengthy definition and for present purposes the only relevant part is on page 14 which is paragraph (1)(d), that is, that it must be a qualifying business.  “Qualifying business”, in turn, is defined in regulation 1.03 on page 12 and it is – and this is where the parties will be concentrating today – an enterprise that:

(a)is operated for the purpose of making profit through the provision of goods, services or goods and services (other than the provision of rental property) to the public; and

(b)is not operated primarily or substantially for the purpose of speculative or passive investment.

That particular definition of “qualifying business” was inserted into the regulations by Migration Regulations (Amendment) 1994 which your Honour will find from page 22 of the plaintiff’s material and, in particular, page 26, which is the same provision which currently exists.  I have also included – and, I am sorry, your Honour, I could not get the formal explanatory statement, I had to take the one from but from page 27 is the explanatory statement to those statutory rules.  The reference that I would seek to take your Honour to is, firstly, on page 28 of the bundle at about – if your Honour would just bear with me for a second.  I have highlighted one and not the other.

HIS HONOUR:   Is it about the fourth last dash point on page 28?

MR POYNDER:   Yes, it is, at about point 6.  It is generally referring to the purpose of subsection 31(3) which is the amending provision is to:

qualify the meaning of “main business” in relation to business skills visas to confine the meaning to “active” rather than “passive” businesses –

The other part which I would seek to take your Honour to is on page 30 of the plaintiff’s material which specifically refers to the provision at about point 8 on the page where – it is something which we rely on – it suggests that:

A qualifying business is an “active” as opposed to “passive” business and excludes those operating primarily or substantially for the purposes of speculative or passive investment.

We say that the purpose of the amending regulation and the definition was to define a qualifying business as an active business as opposed to a passive business.  If I can come back then to the affidavit of Ms Cheng and the facts of this case, the covering letter and the visa application form are at exhibit 3, which are pages 11 to 61 of exhibit 3.  Page 14 is confirmation of sponsorship from New South Wales Industry & Investment and there is a form which has to be filled in for that.  It is a form 949 at pages 15 to 17.  Then from page 19 is the application for the Business Skills visa which is a form 47BT.  I would seek to take your Honour there to page 21 of exhibit 3, question 7, where your Honour will see that the applicant was relying on her employment history as the owner ‑ ‑ ‑

HIS HONOUR:   It is actually 27, I think.

MR POYNDER:   I am sorry, 27, yes.  Thank you, your Honour.  As the owner/director of Chunlei Kindergarten and, secondly, the owner/director of Mingrizhixing Kindergarten.  They are about 25 kilometres apart in Guangzhou City, your Honour.  Page 37 and following is the applicant’s business skills profile, form 1136 and I would seek to take your Honour there to question 16 on page 38 where the applicant was asked to identify the net assets that she had in her qualifying businesses.  Once again, in question 16 on page 38 she identified the two kindergartens and gave details of their net assets for the years 2007 and 2008 which are the two of the four years preceding the application that she was relying on. 

Relevantly, at the bottom of the page she indicated in local currency, which is RMB or yuan, and Australian currency that the net assets had been in the region of AUD$10.5 million in 2007.  There is a typo there, your Honour.  Those figures actually add up to $10.455 million in Australian terms for 2008.  Then over to page 40, question 19, she was asked to identify the turnover of her two main businesses for the years 2007 and 2008 and at the top of page 40, question 19, it is AUD$651,262 and AUD$1.021 million for those years. 

Commencing on page 41 is the applicant’s business proposal, that is, the business she proposed to set up in Australia and it is best summarised at pages 46 and 47, that is, she proposed to set up a childcare centre in Hurstville.  Something I omitted to do a moment ago, your Honour, the parties have agreed that pages 4 and 5 of the business proposal were missing from the documents which were filed with the Court and I have prepared copies to hand up to your Honour.

HIS HONOUR:   Very well.

MR POYNDER:   I will call them pages 43A and 43B.

HIS HONOUR:   For the record, I will simply insert them into this exhibit.  I should perhaps also say that, formally speaking, I have read the affidavit and I receive into evidence the exhibits to that affidavit and they will be known by the exhibit numbers given to them by the deponent.

MR POYNDER:   Yes, if it please, your Honour.  Page 43A, which is where the applicant gave her background information, the applicant gave information about the two – in fact, there were three kindergartens that she had been involved in, but the two which were of relevance were the ones she has described at page 43A as MRZX Kindergarten and then CL Kindergarten.  Your Honour will see that she has given as the profit for MRZX Kindergarten as being various figures for 2005 to 2008 and similarly the profit for CL Kindergarten is given for the years 2006 to 2008.  There are two figures which are replicated later.  For MRZX Kindergarten the profit for 2008 of 452,421.20 yuan is subsequently relied on by the applicant and for CL Kindergarten the profit for 2007 of 790,461.50 yuan is also referred to subsequently.

HIS HONOUR:   Just going back, these pages, 43A and 43B, were actually before the delegate?

MR POYNDER:   Yes, your Honour.

HIS HONOUR:   Yes, good.

MR POYNDER:   The applicant, with her application form, included various documents in relation to each of her businesses.  Page 54 is described as an auditing report – this is a translation of a Chinese document.  It is described as an auditing report for balance for the Mingrizhixing Kindergarten for 2008 and your Honour will see that in the body of the document it says:

According to our auditing, the total of turnover for 2008 was 1,916,460.00 yuan –

Sales and investment of the organiser add up to a certain number for spending and then importantly in our case the next sentence says “The balance for 2008 was 452,421.20 yuan” which was that figure I just took your Honour to.  The respondent says that the phrase “balance for 2008” is not a reference to profit and we say that it is a reference to profit, but I will need to come back to that.

HIS HONOUR:   Just mathematically, how does one get to 452?  Is it the sum of 1.6 million plus 249 minus 1.464?

MR POYNDER:   Yes.  That figure 1,916,460 less 1,464,038.80.  So the two intervening figures, 1,667,460 minus 249,000 leaves you with 1,464,038.80.  Similarly for Chunlei Kindergarten, at page 58, was an identical document and in that case the balance for 2007, which we say was the profit for 2007, was given as 790,461.50 yuan and that was the figure which had been given as profit in the business proposal that we have just seen. 

Just in relation to the word “balance”, if I can just take your Honour quickly to page 71, which is a submission that had been made by the plaintiff’s representative on 8 June 2011, and your Honour will see on page 71, paragraph (e), those figures again.  The 790,461.50 figure is on the third line and the 843,105.20 figure is on the fourth line and in that paragraph, the applicant’s representative described those figures as the profit for each of those companies.

That was the application and the supporting documents, and then there is an exchange of correspondence which occurs following the submission of the application.  The first one I will take your Honour to is exhibit 5 to the Cheng affidavit, page 66, which is the first substantive letter from the delegate of the respondent to the applicant’s representative dated 18 May 2011. 

This is the letter that we say constitutes the bias issue and page 67 is the substantial part of that letter where the delegate firstly acknowledged the application based on two businesses.  The second paragraph referred to the registration certificates issued by the Chinese authority and that both were registered as civilian‑run, non‑enterprise units; referred to Mingrizhixing’s articles of association which allowed the company to have a reasonable return from the operation, and the phrase “reasonable return” will come up later.  We say that is a reference to its ability to return a profit.  Then for Chunlei there is a reference to it being run on a voluntary basis on a non‑profit making social services model.

The next two paragraphs are what we rely on insofar as bias is concerned where the delegate stated that:

A Civilian-run Non-enterprise unit is operated for the purpose of undertaking non‑profit social service activities . . . hence [the kindergartens] are regarded as non‑profit making organisations.

Stated in terms of finality.  Then the following paragraph which, in our submission, exhibits both the misconstruction and the bias issue, where the delegate relied on the legal definition of what those enterprises were as opposed to what was actually occurring.  The delegate said:

A qualifying business, by legal definition, is an enterprise that is operated for the purpose of making a profit.

Well, that is not in issue.  Then –

In view of the registration of [both of those enterprises] as Civilian‑run Non‑enterprise Unit, I am unable to come to a finding that they operate for the purpose of making a profit and therefore, they are not considered to be qualifying businesses as defined at regulation 1.03.  It follows that they are not main businesses as defined at regulation 1.11.  Accordingly, you have failed to demonstrate an ownership interest –

and so forth.  Then finally on the issue of bias, the words in bold in next paragraph:

Please consider carefully whether you still wish to proceed with the application.

If I can just note there, the passages on page 67 that I just took your Honour to were replicated precisely in the wording of the final decision.  It is essentially a cut and paste, and that can be seen on pages 7 and 8 of Ms Cheng’s affidavit beginning the last paragraph on page 7 of the affidavit and then over on to page 8 down to about point 5.

If I can then turn back to the correspondence between the parties.  From page 69 was a response from the applicant’s representative dated 8 June 2011 and in that response generally on pages 69 to 70 the representative contrasted the formal classification of bodies in China as enterprise and non‑enterprise public organisations and described how these definitions are no longer relevant because of many of the so‑called non‑enterprise organisations are in fact operated for profit.  That really comes out on page 70, paragraph 10 and then from point 6 on page 70 emphasised what the actual situation is and the actual situation is as stated in B on page 70 that the articles of association allow for reasonable financial returns and then over to the page to the paragraph that we previously went to on page 71 and E sets out the actual profits for the kindergartens during the relevant years.  Then also 73 and 74 was a statement from the applicant which also referred to the similar situation. For example, paragraph 7 on page 73, the plaintiff said that:

Returns are in fact profits as returns are from operational profits.  It is just a different way to say profits.

So her case was that the reasonable returns are profits.  From page 76 there was an email from the delegate to the plaintiff’s representative which stated the relevant law in China.  It is our submission that this illustrates the difficulties the plaintiff was having with the delegate, or the delegate was having with the plaintiff, in that the delegate kept on going back to this is the law, this is how the enterprises are registered under the various regulations, but not looking, in our submission, to the actual circumstances of the case.

HIS HONOUR:   I will just ask you this question, I do not think it is fatal to your case at all, but there is a sense in which, if the question is factually is this a business for the purpose of making profit, the issue of whether it is against the law to make a profit is not determinative, is not decisive or crucial as to whether it is in fact having the purpose of making a profit. 

It has a sort of background relevance to it because you can say ordinarily, I suppose, that many people will try and avoid doing something that is in breach of the law, although other people will not, but your point is that the delegate’s decision seems to have taken as a number of factors as together crucial, namely, what the law said, the way the Chinese government organised and referred to these businesses and so on and this distracted her and perhaps your client too has distracted the delegate away from the actual factual issue, was there a purpose of making a profit.  Do you agree with what I have been saying?

MR POYNDER:   Yes, I do, your Honour.  The plaintiff did not suggest she was breaking the law ‑ ‑ ‑

HIS HONOUR:   It would not have been wrong for the delegate to have said, “Well, I have to take into account” – let me put it in exaggerated and over simple terms, which may not have been an appropriate thing for the delegate to say, but if the delegate said, “Look, I take into it is just a fact of human nature that the existence of these legal prohibitions weighs against the possible conclusion that it had the purpose of making a profit, but on the other hand there are audited accounts which on one construction of them indicate that there actually was a profit and as a matter of ordinary reasoning, if something happens as a result of human conduct, you can often draw an inference that it happened because it was the purpose of the human conduct or the purpose of the human act as to achieve that conduct”, because if you win, the matter will go back to the delegate and the delegate will have to consider these things she is saying in her letter of 15 June, but perhaps in a rather more diluted and weak way.  Same wavelength ‑ ‑ ‑

MR POYNDER:   Yes.  One of the plaintiff’s submissions was that, “I am not being arrested for this sort of thing, that these are outdated laws and it is now recognised by the authorities that people are entitled to make a reasonable return and the fact that I am not being arrested suggests that it is not illegal.  So I do not think the question of legality in black and white terms came up such as that.

HIS HONOUR:   All right.  We were on page 76.

MR POYNDER:   Yes.  I was then going to take your Honour across to the reply from the plaintiff’s agent, which is on page 82, which was really pushing the same submissions that had previously been made where there was a more detailed reference to Chinese law.  In fact, a copy of some of the regulations was annexed at pages 85 and 86.  Essentially, the plaintiff began to rely more solidly on the issue of reasonable return, for example, at page 82 on paragraph 2 the plaintiff referred to the clauses in the regulations which enabled:

the investor can obtain reasonable return from the profit of the school operation after deduction –

and so forth.  Then at the top of page 83 suggesting:

The Department may think that surplus is not profit -.

but then on paragraph 4 suggests it is profit.  It is really how the surplus is used.  Paragraph 6, an inarguable fact that there is profit involved and then over the page on page 84, paragraph 14, the representative suggested:

The key issue is the nature of the so‑called surplus.  If it is returned to the investors, it is profit in nature.

Then there are the Chinese regulations on pages 85 and 86.  The only matter I would take your Honour to in the regulations is a reference on page 86 under Article 44, second paragraph, second line where there is a reference to that word “balance” there.  It says:

The surplus from educational services provided by non‑state‑run schools referred to in [the law] and this Order refers to the balance of the annual net earnings after deducting operational costs minus donations from the public -

It might be inferred from that that that is where the word “balance” came in the accountant’s report.  If I can then come back to the decision which is on page 6 of the affidavit and the operative parts really begin at the bottom of page 7 where from the bottom of page 7 to halfway down page 8 is that cut and pasted extract from the letter of 18 May that I took your Honour to earlier.  Then over the page are the critical parts of the decision and we say that here is where the delegate unlawfully limited herself to the nature of the registration of the enterprises under Chinese law as opposed to what was actually occurring.  I will not read through that.  Your Honour will have seen it.

There is an important phrase at about point 5 in the middle paragraph on line 3 where the delegate essentially says because of the registration of the kindergartens and so forth, “I am unable to make a finding that”.  It is stated in firm terms that she cannot go beyond the registration, in my submission.  So if I can just briefly then touch on – shall I just address your Honour on this ground for the moment?

HIS HONOUR:   Just on this ground, and then we will hear from the defendant.

MR POYNDER:   All right.  My submission is that the construction of the term “qualifying business” in regulation 1.03 requires one to look at the whole of that definition and it is plain from the history of the provision and the wording of the definition that it posits two opposing forms of enterprise, that is, on the one hand enterprises that are actively operated for the purposes of making a profit as opposed to enterprises that are merely passive, such as investment or as in (a) in the brackets the “rental property”.

We say the phrase “operated for the purpose of making profit” requires the construction of more than just the nature of the plaintiff’s business which is the defendant’s submission at paragraph 18.  It is more than just the nature of the plaintiff’s business as defined or designated under some law, rather, it looks to the operator of the enterprise as to his or her purpose in operating the business.  We suggest that when the delegate, at page 9, said that because under the relevant law the two kindergartens were:

not allowed to undertake profit-making activities, I am unable to make a finding that [they] meet the definition –

she improperly excluded from her consideration what was actually occurring, that is, that the kindergartens were being operated for quite a substantial profit regardless of the laws and that these laws are outdated and no longer wholly applicable. 

We contend that the phrase “reasonable return” which the respondent accepts was allowed under the Chinese law, was on the facts no different to profit and we suggest that the words “return”, “balance” and “profit” in this context mean the same thing.  Your Honour, I have extracted the definitions from the Macquarie Dictionary and the Oxford Dictionary and I seek to hand those up.

HIS HONOUR:   Yes.

MR POYNDER:   Turning first to the Oxford Dictionary, your Honour, the definition of “balance” we rely on is on the third page, left-hand corner, item 9 where your Honour might see:

verb trans.  Add up and compare the debit and credit sides of (an account or set of accounts)

HIS HONOUR:   Yes.

MR POYNDER:   For the word “profit” we rely on the next page, bottom right‑hand corner, item 2(b):

The financial gain in a transaction or enterprise; the excess of returns over outlay; the surplus of a company or business after deducting wages, costs of raw materials, interest and other expenses.

For the definition of “return” we rely on two pages further, right‑hand column, item 2:

Profit or income from investment of money or the expenditure of effort or skill; a profit made; in pl. proceeds, profits, results –

and so forth.  In the Macquarie Dictionary they are very similar, your Honour, but for completeness, for “balance” on page 104, which is the third page, left‑hand column at about point 5, 10(b) - does your Honour have that?

HIS HONOUR:   Yes, I do.

MR POYNDER:  

the difference between the debit total and the credit total of an account.

The next page for “profit”, left‑hand column halfway down, item 1:

pecuniary gain resulting from the employment of capital in any transaction -

For “return”, the next page over, middle column at about point 4, item 11 where the word “profit” is used:

to yield (a profit, revenue, etc), as in return for labour, expenditure, or investment.

May it please your Honour.

HIS HONOUR:   Yes, Mr Kay Hoyle.

MR KAY HOYLE:   In simple terms, your Honour, the defendant’s submission is that the delegate weighed all of the relevant material before her and, in so weighing that material, concluded that the material going to the treatment of these kindergartens under Chinese law was as a matter of law and as a matter of fact something that weighed more heavily in favour of the answer than the material that I can loosely describe as the accounting material.

My learned friend has sought to persuade your Honour that the relevant meaning of “operating for the purpose of making a profit” is that one should take into account the subjective intention or the professed intention of the applicant in making a profit and that the material that was before the delegate in relation to those matters, namely, the accounting material, was evidence of that, what I would seek to persuade your Honour of is that when the decision is considered in its proper context, what the delegate did was, albeit not at times explicitly, I acknowledge that, sought to take that material and weigh it against the clear evidence that there was that the balance or return was not properly to be characterised as a profit.

In that regard, your Honour, just on the issue of meanings, the defendant has relied on some dictionary definitions of the relevant terms but, in my submission, that is the very point at issue, namely, the delegate took material in relation to the Chinese legislation and interpreted that material as meaning that whatever else may be occurring in relation to the plaintiff’s businesses, it could not properly be characterised as profit.  Clearly, there was material before the delegate that purported to support the position that what had been made was a surplus, that is to say, a difference between the amount of money that was coming into the business and the amount of money that was being expended by the business, but it would not necessarily follow that that was a profit in the relevant sense.

Perhaps I can illustrate that by giving a very, if I may say so, somewhat simplistic example.  In the ordinary context in Australia a “not for profit” company may well as a matter of fact operate with something that would be described as a surplus, that is to say, when the accounts were considered from a particular perspective, there may be, to put it loosely, more money coming in than going out.  It would not necessarily follow that that was properly characterised as a profit. 

Now, in my submission, what the delegate did in this case was to take a number of matters in relation to the relevant law under which these kindergartens operated and to draw certain inferences possibly of law but certainly of fact, that such a business was not classified, permitted or allowed to operate on the basis that a profit had been made and as a result, the delegate then weighed the evidence before her as to the balance and concluded that she placed more weight on that characterisation and therefore it would follow that that material was, as I have noted in my written submissions, whatever else it may be characterised as, it is not properly characterised as profit.

It may be the case that in seeking to weigh those matters which ultimately were matters of fact, that is to say, matters of Chinese legislation, against the other matters that the delegate may or may not, I make no submission on the point, may or may not have made an error of fact, may have placed undue emphasis on one set of facts over another.  I make no submission on that point other than to this extent.  If that is what has occurred, that is no more than a factual error.  It is not an error going to jurisdiction.  That is why the characterisation of what has occurred here is relatively important.

The plaintiff seeks to characterise what has occurred as a failure by the delegate to take into account this material.  In my submission, what has occurred is that the delegate has merely weighed the matters going to the meaning of “profit” as a matter of Chinese law as a relevant factual matter and taken those matters into consideration in assessing the totality of the evidence. 

If I might just take your Honour to a couple of matters in that regard.  They are matters that my learned friend has taken to your Honour, but I just would like to emphasise a couple of points.  Starting first with the – I will come back to the letter of 18 May in a moment, your Honour.  I appreciate that I am taking things out of turn slightly.  Just starting with exhibit 6, which is the 8 June matter, which is at pages 69 and following.

HIS HONOUR:   Yes.

MR KAY HOYLE:   It would appear to be common ground between the parties that the plaintiff’s position was that she accepted that as a matter of characterisation these kindergartens were not for profit kindergartens and that the critical issue was, did the, as it were, actual evidence of profit indicate that the real purpose or the actual purpose was one of making profit.

What the delegate had to do was consider whether the plaintiff’s businesses were operating for the purpose of making a profit taking into account all matters both factual and legal.  The relevant legal considerations in China were a relevant factual consideration.  I will not take your Honour specifically to exhibit 7, which is the email from the delegate dated 15 June.  This does inform that approach. 

Your Honour will see there that the matters referred to in that email comprise, in broad terms, three separate matters.  Starting with the first point at the top of the page, it is apparent that the delegate considered that the relevant law was very clear in not allowing profit making activities and, indeed, that there were appropriate sanctions in the event that profits were made in contravention of that law, and that is consistent with the findings that the delegate made in the first half of the decision to which my learned friend has already taken your Honour.

My learned friend seeks to characterise that as over‑reliance at the expense of ignoring the factual matters of balance or profit.  In my submission, the characterisation of that step, along with the others to which I will come, is that the delegate weighed the very clear evidence of the fact that these types of companies were not permitted to make a profit as a relevant factual consideration that outweighed any characterisation of the plaintiff’s as to what was actually occurring. 

When you take the next step in that email, it is clear that the delegate had considered the financial reports which had been provided as part of the evidence to the delegate.  You will see there that it says in reference to the financial reports:

it is our understanding that civilian-run non‑enterprise units operators are required to provide financial reports to the registration management authority to allow an assessment be made –

and critically later on in that paragraph –

The passing of an annual inspection by a civilian-run non‑enterprise unit does not imply that the registration management authority has “acknowledged” that civilian-run non‑enterprise units are operated for the purpose of making a profit.

Again, the relevant consideration here in the mind of the delegate, I would submit, is that the delegate took the material before her of the accounting of the relevant companies and concluded, again taking into account the relevant application of Chinese law, that that financial information was provided pursuant to the relevant legal regime and on her analysis that legal regime did not permit or did not allow of a conclusion that that material was in the relevant sense a profit.

I accept that the delegate did not form, at least explicitly, any conclusion as to what the return or balance may or may not be in the plaintiff’s material, but, in my submission, she did not need to do so so long as she was satisfied that on weighing the totality of the evidence, those considerations going to characterisation, if I can use that term broadly, outweighed the factual matters in relation to the accounting material.

Then finally, at the bottom of that page, or just before the bottom of that page, your Honour will see that the delegate addressed the concept of “reasonable rate of return”.  It is apparent, in my submission, that the delegate accepted the plaintiff’s submission that there was a concept of reasonable rate of return and weighed that concept in coming to her conclusion.  Your Honour will see there that she says:

as appeared on the articles of association of civilian‑run schools refer to a return deriving from surplus.

I accept that those words are not entirely clear but, in my submission, read in context, particularly where the delegate then goes on to say:

The rate of return is determined by various factors –

that the delegate had consideration of the various matters going to what made up the concept of reasonable rate of return and that material informed her analysis of the relevant factual material in relation to the balance or return as set out in the accounts, to use that term in relation to the matters that were attached to the plaintiff’s application. 

In my submission, that is an important context.  So that when one comes to the decision – I will just take your Honour back to the decision, which is at pages 7 and following – the decision should be read as a whole.  It is true that my learned friend has sought to place emphasis for understandable reasons on the first half of the decision, but the first half of that decision only goes so far in informing the observer or the reader of this decision as to the basis upon which the delegate ultimately came to her conclusion.

I accept that some of the wording in the decision could be slightly better expressed, but it does not follow from that that the effect of the decision is not the one for which the defendant contends.  Specifically, and I do not propose to take your Honour to this in too much detail, but in the second half of the letter containing the decision, your Honour will see that the delegate builds upon the reasoning which she has adopted in the 15 June email and, in my submission, it becomes apparent there that what the delegate has done is consider a number of factors:  first, the characterisation of the companies bearing in mind their registration certificates, which is at the top of the page, and the companies’ articles of association.  That is two elements.

Next the delegate has indicated that, and indeed she repeats the matters referred to in the 15 June email.  She says, “I advise it is our understanding that operators provide financial reports when filing annual inspections” and it is clear that she relies upon that as a countervailing factor, as another factual matter.  She then addresses directly the plaintiff’s contention that the reasonable return meant that the plaintiff was allowed.

The delegate rejected that and she rejected it having weighed all the matters to which I have referred your Honour.  But critically, she then goes on to say, in addition, that in relation to the matters which the plaintiff put before the delegate in the letter of 21 June, which is exhibit 9, your Honour, that there was further emphasis on the fact that, again as a factual matter, this set of kindergartens was treated as a non‑profit enterprise and that “reasonable return” considered in its proper context could not mean profit.

In my submission, what the delegate was essentially doing was saying, “I have this material on one side which is the material that has been provided to me outlining the accounts of this company.  They show a balance or return.  On the other side I have a significant amount of material which says to me that this company in the place where it operates is treated as not making a profit.”  She took that legal framework as a factual indicator weighed against the other factual material and therefore, in my submission, what the delegate did properly characterised is to weigh competing factual elements going towards satisfaction of the relevant criterion.

As I foreshadowed earlier, it might be the case that the delegate could be criticised for getting that balance wrong.  I make no submission on that, but, in my submission, what is apparent is that all that the delegate did was weigh those matters and come to a conclusion and therefore properly had in mind all of the material before her and as such, whilst at its highest the matter may be one of error, it could not be one going to jurisdictional error and on that basis, in my submission, the plaintiff’s case is not made out on the jurisdictional question.

HIS HONOUR:   Thank you, Mr Kay Hoyle.

MR KAY HOYLE:   Unless your Honour has anything ‑ ‑ ‑

HIS HONOUR:   No, thank you.  I do not think I need hear you on reply on this jurisdictional question.  On the bias question, I am not convinced by your written submissions on that point.  Of course, it is not necessary to decide it in view of your success on the other point, but I think I should say something about it.  Is there anything you want briefly to add to your written submissions?

MR POYNDER:   Not beyond the – the species advice we were alleging was the prejudgment which is referred to in Jia, but it is all covered in my submissions.

HIS HONOUR: The Federal Magistrates Court has no jurisdiction to deal with this matter by reason of ss 337, 338(5)(b)(ii), 347(2)(b) and 476 of the Migration Act 1958 (Cth) (“the Act”). Accordingly, as the plaintiff submitted and the defendant did not deny, it is not possible to remit the matter to that court.

On 18 August 2011, the plaintiff filed an application to show cause why writs of certiorari and mandamus should not be issued.  The proceedings have two aspects. 

One concerns a decision made on 14 July 2011 by a delegate of the defendant, the Minister for Immigration and Citizenship, to refuse the plaintiff’s application for a 163 State/Territory Sponsored Business Owner (Provisional) visa.  That type of visa will be referred to below as a subclass 163 visa.  The plaintiff contends that the delegate failed to consider the actual circumstances of the plaintiff’s businesses on which she relied in her application. 

The other aspect concerns a letter which the delegate wrote before the decision – a letter of 18 May 2011.  The plaintiff contends that in that letter the delegate showed actual bias in that she made statements indicating that she had formed a view adverse to the plaintiff which was incapable of alteration and also showed apprehended bias in that a fair minded lay observer would consider that the delegate formed a view which was incapable of alteration.

The plaintiff is a citizen of the People’s Republic of China. On 23 February 2010, she applied for a subclass 163 visa. A subclass 163 visa is a four‑year provisional visa entitling the visa holder to establish a business in Australia. Clause 163.222 of Sched 2 of the Migration Regulations 1994 (Cth) (“the Regulations”), read with reg 1202A(3)(d)(i) of Sched 1, requires applicants for a subclass 163 visa to be “sponsored by an appropriate regional authority” of a State or Territory government. The plaintiff was sponsored by NSW Government Industry & Investment.

Section 65 of the Act obliges the defendant to grant a valid application for a visa if satisfied of various things. One of them is that the “criteria for it prescribed by this Act or the regulations have been satisfied”: s 65(1)(a)(ii). If the Minister is “not so satisfied”, he or she “is to refuse to grant the visa”. Clause 163.212 of Schedule 2 of the Regulations provides that one of the criteria to be satisfied at the time of the application for a subclass 163 visa is that the applicant:

has, for at least 2 of the 4 fiscal years immediately before the application is made, had an ownership interest in a main business or businesses that had an annual turnover of at least AUD300,000.

Regulation 1.11(1)(d) of Sched 1 of the Regulations provides that a business cannot be a “main business” unless it is a “qualifying business”. Limb (a) of the definition of “qualifying business” in reg 1.03 provides that one requirement for a business to be a qualifying business is that it:

is operated for the purpose of making profit through the provision of goods, services or goods and services … (other than the provision of rental property) to the public.

The plaintiff in her application nominated two main businesses for the years 2007 and 2008.  They are referred to below as “the kindergartens”. 

On 18 May 2011, the delegate wrote to the plaintiff’s migration agent, Southern Hemisphere Consulting Pty Limited (“Southern Hemisphere”).  The letter said:

According to the registration certificates issued by the Department of Civil Affairs [of the Chinese government both the kindergartens] were registered as Civilian-run Non‑enterprise Unit.

It went on:

A Civilian-run Non-enterprise unit is operated for the purpose of undertaking non‑profit social service activities.  In this present case, the submitted registration certificates issued by the Civil Affairs Department clearly identify both [the kindergartens] as Civilian‑run Non-enterprise Unit and hence they are regarded as non‑profit making organisations.

A qualifying business, by legal definition, is an enterprise that is operated for the purpose of making a profit. In view of the registration of both [the kindergartens] as Civilian-run Non‑enterprise Unit, I am unable to come to a finding that they operate for the purpose of making a profit and therefore, they are not considered to be qualifying businesses as defined at regulation 1.03. It follows that they are not main businesses as defined at regulation 1.11. Accordingly, you have failed to demonstrate an ownership interest in a main business or businesses and the requirement of clause 163.212(a) has not been met.  (emphasis added)

The letter concluded:

Please consider carefully whether you still wish to proceed with the application.  If you would like to comment on the above, you should do so within 28 days from today.  (emphasis in original)

On 8 June 2001, Southern Hemisphere replied.  The letter stated that from 1949 in China “all enterprises, units, institutions and organizations were state-owned.”  In practice all productive bodies were classified as “enterprise” and non‑productive bodies as “public organization/unit”.  The latter came to be called non‑enterprise.  In the late 1990s:

some of those traditionally known as cores of public organizations/units, such as hospitals and schools, began to transform and became privately owned and run.  And at the same time came forth some privately funded hospitals and schools.

The letter then said that the Australian distinction between State schools and private schools is matched in China:

private schools are an alternative to government education and are operated for the purpose of making profit through the provision of services to the public.

The letter said that the Chinese Government maintained the nomenclature of “enterprise and non‑enterprise, public organization/unit” even though they no longer corresponded with reality.  The letter went on to say that while the kindergartens were regarded as “private non‑enterprise”, the constitution for each kindergarten contained an article to the effect that “The founder requested for reasonable financial returns.”  The letter said that each kindergarten was required to have a tax registration classified as income tax free and financial reports were required annually for each renewal of registration.  According to the financial reports, each kindergarten had made a profit in the preceding four years.  For one kindergarten the profit was between RMB286,875 and RMB452,421.  For the other the profit was between RMB535,729 and RMB843,105.

The letter concluded by claiming that, as in Australia, private schools in China are operated for the purpose of making a profit even though they are classified as non‑enterprise units.  The letter said that the kindergartens are not charitable organisations but privately funded schools operating for reasonable returns.  This is permitted under Chinese law and acknowledged by the relevant authorities.  The letter enclosed, inter alia, a statement from the plaintiff supporting many of the points made in the letter. 

On 15 June 2011, the delegate sent an email to Southern Hemisphere which stated:

While you submitted that “... its law and those law enforcing authorities have permitted profit making activities through operation of private schools, ...”, it is clearly stated in the relevant law and regulation that civilian-run non‑enterprise units are not allowed to undertake profit-making activities/would be subject to warning, demand for rectify, suspension of activities, cancellation of registration, conviction, ... should it undertake profit-making activities.

The delegate also said:

With respect to the submission of financial reports to the relevant authority for renewal of licence, it is our understanding that civilian‑run non‑enterprise units operators are required to provide financial reports to the registration management authority to allow an assessment be made regarding its compliance to national law and regulations as well as relevant policies, its compliance to its articles of association, financial situation, etc.  The passing of an annual inspection by a civilian-run non‑enterprise unit does not imply that the registration management authority has “acknowledged” that civilian-run non‑enterprise units are operated for the purpose of making a profit. 

The letter then said:

Please also find below the relevant regulation governing the operation of civilian-run schools which clearly indicated that “reasonable rate of return” as appeared on the articles of association of civilian-run schools refers to a return deriving from surplus.  The rate of return is determined by various factors (item 45 refers) and there are procedures for the operators to follow when making a request for the return.

On 21 June 2011, Southern Hemisphere sent a letter to the delegate enclosing extracts from various enactments.  It submitted that these showed that:

The investor can obtain reasonable return from the profit of the school operation after deduction of the cost of school operation, money reserved for school development and other expenses deducted according to the relevant stipulations of the country.

In her decision of 14 July 2011 refusing the plaintiff’s visa application, the delegate observed that each of the plaintiff’s main businesses was a civilian‑run non‑enterprise unit.  The delegate then said:

A Civilian-run Non-enterprise unit is operated for the purpose of undertaking non‑profit social service activities.  In this present case, the submitted registration certificates issued by the Civil Affairs Department clearly identified [the kindergartens] as Civilian‑run Non-enterprise Unit and hence they are regarded as non‑profit making organisations.

A qualifying business, by legal definition, is an enterprise that is operated for the purpose of making a profit. In view of the registration of [each kindergarten] as Civilian-run Non‑enterprise Unit, I am unable to come to a finding that they operate for the purpose of making a profit and therefore, they are not considered to be qualifying businesses as defined at regulation 1.03. It follows that they are not main businesses as defined at regulation 1.11. Accordingly, you have failed to demonstrate an ownership interest in a main business or businesses and the requirement of clause 163.212(a) has not been met.

The delegate then summarised the correspondence between herself and Southern Hemisphere referred to above and continued:

While it is true that “reasonable return” is discussed in the relevant legislations, this does not imply that civilian-run schools are “allowed” to operate for the purpose of making a profit.

In the relevant legislation, education institutes that operate for the purpose of making a profit are distinguished from those that are not.  While the former needs to be registered with the Administrative Bureau of Industry and Commerce (ICAB), the latter is registered with the Civil Affairs Bureau.  [The kindergartens] are registered with the Civil Affairs Bureau, not ICAB.  In addition, it is worth nothing that “reasonable return” is interpreted in the relevant legislation as a type of “assistance and reward”.  As “reasonable return” is not equivalent to “profits”, civilian-run school operators, while requesting reasonable return, are not undertaking profit‑making activities through their civilian-run non‑enterprise units which would otherwise have caused relevant action(s) to be taken against them by the registration management authority.

To summarise, while you claimed that [the kindergartens] are operated for the purpose of making a profit, the prevailing regulations governing the registration of the civilian-run non‑enterprise units suggests the contrary.

As both [the kindergartens] were registered as Civilian-run Non‑enterprise Unit, and it is clearly stated in the relevant law and regulations that civilian-run non‑enterprise units are not allowed to undertake profit‑making activities, I am unable to make a finding that [the kindergartens] meet the definition of a qualifying business. It follows that they are not main businesses as defined at regulation 1.11. Hence, I am not satisfied that you have had an ownership interest in a main business or businesses and the requirement of clause 163.212(a) has been met.

The detailed and thoughtful submissions advanced on behalf of the defendant may be summarised, perhaps too succinctly, as follows. 

The defendant submitted that while the plaintiff claimed to achieve a balance or surplus of turnover over spending, there was no evidence about its exact nature.  It is true that in this respect the evidentiary material was skimpy, although it did include accounts which purported to have been audited.  But the delegate did not reject the plaintiff’s claim on that basis.

The defendant submitted that the issue was not whether the plaintiff was actively engaged in making a profit.  Rather, the issue is whether the nature of the plaintiff’s businesses could be said to show that their purposes were to make profits.  That is true, but it is very common to infer the purpose of conduct from the conduct itself. 

The defendant submitted that the delegate did consider the evidence as to whether the balance or surplus which the businesses achieved was a profit.  So far as that is true, her inquiry was vitiated by concentrating on the legal and administrative position in China.  That could have only partial relevance to the actual purposes of the businesses. 

The defendant submitted that the delegate weighed all the material.  She considered that material going to the treatment of the kindergartens in Chinese law weighed more heavily than the accounting material.  It was also submitted that in weighing the matters of fact against Chinese legislation, the delegate may have made an error of fact by placing undue emphasis on one set of facts.  If that were an error, which was not admitted, it was only a factual error within jurisdiction.

The submission was made that in the decision, the delegate had, in effect, built on the reasoning in her letter of 15 June.  She had pointed out that the registration certificates issued by the Department of Civil Affairs had registered the kindergartens as civilian‑run non‑enterprise units.  She had pointed out that the articles of association had referred to the funding of the operation of one of the kindergartens for a reasonable return from the operation.  She indicated that she had been advised that the requirement for providing financial reports was to allow an assessment to be made regarding compliance with national law.  She referred to the submission put on behalf of the plaintiff that civilian‑run school operators could achieve a reasonable return and that it followed that the kindergartens were allowed to operate for the purpose of making a profit.

It was submitted on behalf of the defendant that overall it could be seen that, contrary to the plaintiff’s submissions, the factual position in relation to the profitability of the kindergartens was taken into account. 

The plaintiff’s position on this point appears to be sound.  Read as a whole, the decision does reveal that in substance the delegate did not consider whether there was in fact profit making, and, if there was, did not take account of the fact of profit making considered as a bare fact as distinct from how the authorities regarded that fact.  The question for the delegate involved applying Australian law, to be found in the regulations, to the facts.  The question was whether the businesses relied on by the plaintiff were “main businesses”.  That turned on whether they were “qualifying businesses” and that depended on whether they were operated for the purpose of making a profit.  That question is a question of fact. It is not directly illuminated by inquiries, some of which the plaintiff triggered and in some of which the plaintiff participated as much as the delegate, into questions about what the Chinese government called the businesses or which part of the Chinese government the businesses were registered with or even whether the Chinese government allowed the businesses to operate for the purpose of making a profit.  All that mattered was whether they actually operated for the purpose of making a profit.  That they so operated is supported by the circumstance that in truth they appeared to have made substantial profits in the sense of the surplus of turnover over expenses. 

Thus the delegate may be said to have taken into account the following considerations:  the characterisation of the businesses in Chinese law, their regulation by the Chinese government, their legality and the extent to which the Chinese government condoned profit making.  If those considerations are viewed as being primary and determinative aspect, as the delegate viewed them, so that illegality, for example, tended to conclude the application against the plaintiff, they were irrelevant. 

To view those considerations in that way was to identify wrong issues, ask wrong questions and rely on irrelevant material.  The only possible relevance of those considerations was in a secondary circumstantial sense of relevance.  Thus if profit making is illegal, members of the public are less likely to seek to make profits.  In that sense any illegality may have made it less likely that the businesses were operated for the purpose of making a profit.  The delegate also failed to take into account the relevant consideration, namely, whether as a matter of fact the businesses operated for the purpose of making a profit. 

The relief which the plaintiff seeks can be granted if the defendant fell into jurisdictional error.  The power to grant certiorari and mandamus is more extensive in the case of an administrative tribunal or an administrative decision‑maker than it is in the case of an inferior court.  In Craig v South Australia (1995) 184 CLR 163 at 179 Brennan, Deane, Toohey, Gaudron and McHugh JJ said:

If such an administrative tribunal falls into an error of law which causes it to identify a wrong issue, to ask itself a wrong question, to ignore relevant material, to rely on irrelevant material or, at least in some circumstances, to make an erroneous finding or to reach a mistaken conclusion, and the tribunal’s exercise or purported exercise of power is thereby affected, it exceeds its authority or powers.  Such an error of law is jurisdictional error which will invalidate any order or decision of the tribunal which reflects it.

The delegate, with respect, fell into an error of law.  The error concerned the interpretation of the expression “is operated for the purpose of making profit”.  That, in turn, caused her to identify wrong issues, ask wrong questions, ignore relevant material and rely on irrelevant material.  Wrong issues, wrong questions and irrelevant material related to the administrative and legal position in China.  The relevant material which was ignored was the fact of the surplus of income over expenditure.  In consequence, the questions whether that surplus established profits, and whether from it could be inferred the necessary purpose were ignored. 

For the reasons just given, the relief sought should be granted. 

It is therefore not necessary to deal with the bias allegations in detail.  However, in view of their gravity and in fairness to the delegate, it is desirable to say that they are not made out.  To support them, the plaintiff relied on the passages in the delegate’s 18 May 2011 letter set out above which are italicised and in bold.  The plaintiff argued that:

the final and conclusive terms in which the delegate expressed herself in the letter of 18 May 2011 showed that she had already formed the view that the plaintiff was unable to meet the requirement that her businesses were “qualifying businesses” and that the plaintiff could not therefore meet the criteria for a subclass 163 visa.  It is also contended that fair minded lay observer would consider from the wording in the letter that there was nothing the plaintiff could do to change the delegate’s view.

The plaintiff relied on the replication of the offending passages in the letter in the delegate’s decision.  From that point of view, she described the decision as a cut and paste job.  Taken by themselves, the passages on which the plaintiff relies may afford some arguable support for an apprehended bias argument, but they must be read in context and not in isolation.  The delegate went on to invite comment.  On 8 June 2011, she received comment.  On 15 June 2011, she engaged in debate in relation to the issues raised by the 8 June letter.  Her 15 June 2011 email concluded:

As the prescribed timeframe for comment expires today, a decision on Ms Li’s application will be made with the information on hand shortly.

But on the same day the delegate granted a seven-day extension to the plaintiff which led to the 21 June 2011 letter from Southern Hemisphere in which further comment was provided to the delegate.  The conduct of the delegate reveals a receptiveness to further argument.  It is thus inconsistent with the idea that the delegate either had, or appeared to have, a closed mind.  The words of which the plaintiff complains no more indicate actual or apparent bias than a judge’s words pointing to a difficulty in the argument of the party indicating the seriousness with which the judge views it and asking for any further submissions which the party has.  If that were ordinarily to result in a conclusion that there was apparent or actual bias, the frankness and value of forensic debate would be sadly hampered.  The same conclusion should be avoided in relation to debates between those seeking favourable administrative decisions and those with a power and duty to make them.

The Court orders that:

1.The decision of the defendant’s delegate made on 14 July 2011 to refuse the plaintiff’s application for a subclass 163 State/Territory Sponsored Business Owner (Provisional) visa be quashed.

2.The matter be remitted to the defendant to be determined according to law.

3.The defendant pay the plaintiff’s costs.

Those orders differ slightly from the orders you proposed.  Are they satisfactory orders from your point of view?

MR POYNDER:   Yes, indeed they are, your Honour.

HIS HONOUR:   Is there any other matter that needs to be heard?  I am grateful, gentlemen, for your assistance.  The Court will now adjourn.

AT 10.53 AM THE MATTER WAS CONCLUDED