Liu and Ors and Minister for Immigration, Multicultural and Indigenous Affairs
[2004] AATA 1397
•24 December 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 1397
ADMINISTRATIVE APPEALS TRIBUNAL )
)NoQ2004/66, 78-81
GENERAL ADMINISTRATIVE DIVISION ) Re WEN-YAO LIU & ORS Applicants
And
MINISTER FOR IMMIGRATION, MULTICULTURAL AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Senior Member McCabe Date24 December 2004
PlaceBrisbane
Decision The Tribunal sets aside the decisions under review. …................[Sgd]........................
Senior Member
CATCHWORDS
MIGRATION LAW – business skills visa – whether applicant has obtained a substantial ownership interest in an eligible business – whether applicant has actively participated at a senior level in the day-to-day management of the eligible business – decision set aside
Migration Act 1958
Re Lau and Minister for Immigration, Multicultural and Indigenous Affairs [2002] AATA 703
Re Huang v Minister for Immigration and Multicultural and Indigenous Affairs [2002] AATA 656
Re Tang and Minister for Immigration and Multicultural Affairs [2000] AATA 997
Re Widjaja and Minister for Immigration, Multicultural and Indigenous Affairs [2003] AATA 380
Reed and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 335
Re Wong and Minister for Immigration, Multicultural and Indigenous Affairs [2002] AATA 54
Commissioner for Superannuation v Scott (1987) 13 FCR 404
Re Dhanjal and Minister for Immigration, Multicultural and Indigenous Affairs [2003] AATA 1120
Re Ong and Minister for Immigration, Multicultural and Indigenous Affairs [2003] AATA 178
Re Yam and Minister for Immigration, Multicultural and Indigenous Affairs [2004] AATA 283
Hope v Bathurst City Council (1980) 144 CLR 1
Freeman v Department of Social Security (1988) 19 FCR 342
Nong v Minister for Immigration and Multicultural Affairs (2000) 106 FCR 257
REASONS FOR DECISION
24 December 2004 Senior Member McCabe Introduction
1. Mr Wen-Yao Liu (the applicant) arrived in Australia on a Business Skills (Migrant) (Class AD) visa on 14 August 2000. His family came with him on supplementary visas. On 13 July 2003 the respondent sent the applicant and his family notices of its intention to cancel the Business Skills visa and supplementary visas.
2. The applicant contested the proposed cancellation through his migration agent, who provided the respondent with information supporting the applicant’s case. The respondent decided to cancel all the visas after reviewing the material. Mr Liu and his family were notified of the decision in letters dated 19 December 2003 (T5 of the T-documents).
3. The applicants do not agree with the cancellation. They have approached this Tribunal for relief pursuant to s 136 Migration Act 1958.
4. The matter was heard over the course of three days: 16 June 2004, 7 September 2004 and 11 October 2004. Mr Ong (a migration agent) and Mr Chand represented the applicant. Mr Gallo and Mr Steele represented the respondent. The applicant gave evidence in person on one occasion and over the telephone (he was in China on business) through an interpreter. Mr Bill Chen also gave evidence in person on behalf of the applicant. The following documents were tendered in evidence:
• Exhibit 1: The documents compiled pursuant to s 37 Administrative Appeals Tribunal Act 1975 (two volumes: the “T-documents”)
• Exhibit 2: A business activity statement of the applicant’s business, “ATM Tours Pty Ltd” (“ATM Tours”);
• Exhibit 3: An ASIC historical extract concerning ATM Tours;
• Exhibit 4: A chart which sets out the organisational structure of ATM Tours;• Exhibit 5: A bundle of correspondence regarding a business delegation from Brisbane to Taiwan and China;
• Exhibit 6: The applicant’s 2003 diary;
• Exhibit 7: An English translation of the applicant’s 2003 diary.
The Law
5. The power to cancel Business Skills visas is found in s 134 Migration Act 1958. It is worth reproducing the relevant subsections here:
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.
6. Sub-section (3) details some factors the Minister may take into account when deciding whether a person has made genuine efforts for the purposes of sub-section (2). Sub-section (4) says the Minister must cancel the supplementary visas of family members if a primary visa holder’s visa is cancelled. The only exception to (4) is if the cancellation would result in extreme hardship to the person: sub-section (5).
The Facts
7. On 14 August 2000 the applicant entered Australia on a Business Skills visa.
8. ATM Tours was registered as a proprietary company limited by shares (exhibit 3) on 3 May 2001. At that time the applicant was a director along with Bill Chen, Mayer Hou, Ti-Chiu Chen and Su-Chen Huang. I understand the directors are now the applicant, Bill Chen and Mayer Hou.
9. The company issued 10,000 shares: the applicant received 2000, Pen-Hui Liu 1000 and Bill Chen 7000 (via a company called Youngers Pty Ltd): exhibit 3. The applicant paid $2000 for these shares (T12 f175 of the T-documents). It seems that was not the applicant’s only contribution to the company. The company’s financial records for the year ended 30 June 2002 (ff110-115 T11) reveal the applicant loaned the company $48,000. Mr Chen says the applicant now holds 20% of the shares, which Mr Chen estimates to be worth around $50,000.
10. ATM Tours facilitates tours of Chinese and Taiwanese tourists to Australia. It deals with corporations, individuals, schools, community and religious groups and government organisations. It appears to specialise in educational tours and exchanges. The company also arranges tours of Australians travelling to China and Taiwan. The company recently arranged a tour of Taiwan and China for members of the Brisbane City Council and the Ipswich City Council (exhibit 5). Mr Chen said that Mr Liu was responsible for this initiative. Mr Chen added that Mr Liu has been instrumental in attracting the World Taiwan Chamber of Commerce conference to Brisbane next year. He says 1000 delegates are likely to attend. Mr Chen said in his evidence that Mr Liu was responsible for generating around 70% of the company’s business.
11. On the cancellation date the company had five employees: three travel consultants, a project manager and a technical officer.
12. ATM Tours appears to be a going concern that generates revenue. I have considered two Business Activity Statements relating to the quarters ending 30 September 2003 and 31 December 2003 (exhibit 2). (I note the visa was cancelled on 19 December 2003, and evidence after this date is not of relevance: Freeman v Department of Social Security (1988) 19 FCR 342, Nong v Minister for Immigration and Multicultural Affairs (2000) 106 FCR 257). The company had total sales of $128,890 and $212,087 in the respective periods. Mr Liu says the turnover would have been much higher but for the impact in the short term of SARS and the threat of international terrorism.
13. In the three years he held the Business Visa, the applicant was present in Australia for 15 days. He says this is because he is the overseas marketer/coordinator of the business, and it is necessary for him to spend most of his time in Taiwan and China. Mr Chen confirmed that was Mr Liu’s role. I note the applicant has other business interests in mainland China and Taiwan.
14. The applicant’s children have attended high school while in Australia.
Consideration
15. It is now necessary to measure the facts against the criteria in s 134.
A)Is ATM Tours a “Business”?
16. The expression “business” is not clearly defined. The indicia described in Hope v Bathurst City Council (1980) 144 CLR 1 are generally accepted as a good guide. These indicia were helpfully summarised by members of the Tribunal in ReYam and Minister for Immigration, Multicultural and Indigenous Affairs [2004] AATA 283. Generally speaking, the indicia are:
(i) Whether transactions are entered into on a continuous basis for the purpose making a profit;
(ii) Whether the activity has a permanent character, and how long it has been established;
(iii) Whether customers are sought and financial records are kept; and
(iv) Whether the activities are genuine and real.
17. I do not think there can be doubt ATM Tours is a “business” if one adopts the criteria identified above. The evidence before me – in particular that contained in the T-documents – illustrates the company has engaged in multiple transactions, for an extended period, with a view to a profit. Having been incorporated in 2001 ATM Tours has been operating for several years. It employs several fulltime staff members. Above all I accept its activities are genuine and real. I am satisfied ATM Tours is a “business”.
B)Is ATM Tours an “Eligible Business”?
18. This term is defined in s 134(10):
eligible business means a business that the Minister reasonably believes is resulting or will result in one or more of the following:
(a) the development of business 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.
19. I have already described the business of ATM Tours. I have examined the voluminous evidence before me, and I am satisfied ATM Tours meets the definition of “eligible business” on the basis that it exports Australian tourism “services” to China and Taiwan. The tourism transactions were sufficiently substantial in scale – that is, they were not isolated transactions – as evidenced by the numerous itineraries and letters from customers before me (see for example at T12 of the T-documents).
C)Does the Applicant have a “Substantial ownership interest” in ATM Tours?
20. The applicant submitted he had a total ownership interest valued at $50,000 in ATM Tours. He arrived at that figure by adding the $2000 he paid for the shares to the loan of $48,000 he made to the company. The applicant is incorrect. A loan of money cannot be characterised as an ownership interest. The creditor of a company does not have an ownership interest in that company: he or she merely has a right to repayment of the loan, and any other rights conferred by the contract creating the loan. In any event “ownership interest” is defined in s 134(10):
ownership interest, in relation to a business, means an interest in the business as:
(a) a shareholder in a company that carries on the business; or
(b) a partner in a partnership that carries on the business; or
(c) the sole proprietor of the business.
21. This is an exhaustive definition that does not cover loans made to the business. I must instead focus on the size and value of his shareholding.
22. Whether or not an applicant holds a “substantial ownership interest” is a “question of fact and degree, having regard to the business entity involved, and not simply mathematics”: Re Ong and Minister for Immigration, Multicultural and Indigenous Affairs [2003] AATA 178. In ReDhanjal and Minister for Immigration, Multicultural and Indigenous Affairs [2003] AATA 1120, an ownership interest of 20% - corresponding to one share purchased for one dollar – was considered sufficient. In Commissioner for Superannuation v Scott (1987) 13 FCR 404, the Federal Court found a 12.25% holding in a company with share capital of $10,000 was not substantial. It appears the problem in that case was not so much the size of the shareholding as the size of the company. In Re Wong and Minister for Immigration, Multicultural and Indigenous Affairs [2002] AATA 54 an ownership interest of 25% (purchased for $150,000) was substantial. In Reed and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 335, I concluded “even a relatively small number of shares in a large company might represent a sizeable investment that should be taken into consideration.”
23. We cannot be sure of the real value of ATM Tours at the date of cancellation (and therefore the value of a 20% ownership interest). I have already noted that Mr Chen estimated the value of the applicant’s shareholding at around $50,000. I cannot be sure of the basis on which he arrived at the figure. I accept the business may have started in a small way but it appears to be increasing its turnover, and will presumably increase in value. I do know the company earned over $200,000 in the quarter ending 31 December 2003: exhibit 2. I am satisfied this is more substantial than the interest in Scott. I accept that a 20% ownership interest of this company is a “substantial ownership interest” as required under s 134.
Is the Applicant utilising his skills in actively participating at a senior level in the day-to-day management of ATM Tours?
24. The respondent says there is no evidence of the applicant’s active participation at a senior level in the day-to-day management of ATM Tours. The respondent emphasises the applicant has spent very little time in Australia since his arrival on 14 August 2000. I will deal with the second point first.
25. The short duration of the applicant’s stay in Australia since he received his business visa is not necessarily fatal, but it does weigh heavily against him. The applicant relied on the decisions in ReDhanjal and Minister for Immigration, Multicultural and Indigenous Affairs [2003] AATA 1120 and Re Widjaja and Minister for Immigration, Multicultural and Indigenous Affairs [2003] AATA 380. In Dhanjal the visa holder spent most of his time building his Australian business in East Africa where he had experience and contacts. Once the business was developed there he intended to return to Australia to continue it. He only spent 3 ½ months in Australia during the relevant period. Member Isenber said:
I accept that the very nature of an export business requires a significant part of the business, especially marketing, to take place overseas. The requirement to be overseas is inherent in the nature of such a business. There is no bar in the legislation to a visa holder being overseas as long as they are managing the business in Australia.
26. In Widjaja the visa holder was a music industry executive. He started a business which would sign artists and market music in Asia. He therefore spent most of his time outside Australia marketing the product – in fact he only spent 48 days in Australia during the relevant period. Nevertheless the Tribunal held that was not fatal because the nature of his business required him to be overseas so much. He managed the Asian side of the business, while his partner managed the Australian side. Member McLean said:
For the…arrangement to be achievable, it is necessary for the [visa holder] to reside in Asia and maintain a significant ongoing commercial relationship with the Asian record making industry and music retail distribution outlets. The applicant satisfies this important aspect of the joint venture arrangement. On the other hand, it is necessary for the other joint venturer…to have a close relationship to the… Australian music industry and also have the technical skills to record local performing artists and bands that can be adapted to suit Asian consumer tastes and requirements [emphasis added].
27. On the other hand, cases such as Re Tang and Minister for Immigration and Multicultural Affairs [2000] AATA 997 and Re Huang v Minister for Immigration and Multicultural and Indigenous Affairs [2002] AATA 656 indicate that a visa holder who spends very little time in Australia should (at least) be examined very closely.
28. In Re Tang, the visa holder was a successful managing director of 4 companies in Hong Kong. He incorporated a company in Australia, which made several isolated export transactions. He spent very little time in Australia during the relevant period - a mere 32 days. Deputy President McMahon made several observations that are of current relevance. Regarding the need for the applicant’s physical presence in Australia he said:
From its language and from the visa conditions, it is apparent that the Act is intended to benefit business owners who settle here and actively manage that business.
29. I also understand the learned Deputy President examined the evidence of the visa holder’s affairs, and concluded he was spending the majority of his time running his Hong Kong companies that were not “eligible” businesses. The Deputy President said (in relation to the question of ‘genuine efforts’):
Notwithstanding the fact that the power of cancellation has therefore arisen, the Minister may not proceed further if he is satisfied that the visa holder has made a genuine effort to utilise his skills in actively participating at a senior level in the day-to-day management of the business.
[The visa holder] has made very little effort to this end…The fact is that he is a busy and successful Hong Kong managing director of a group of companies with some 6,000 employees. His energies are primarily directed towards the maintenance and running of the businesses of this group. His evidence was that, even if the cancellation were set aside, he would not sell his Hong Kong interests. It is clear that the vast majority of his time will continue to be dedicated to those interests, whatever the result of this application.
30. In conclusion, the Deputy President said:
Most importantly, however, the time during which the Applicant has been present in Australia (32 days in more than four years) indicates that there has not been a genuine effort to participate in day-to-day management of the business, nor is there likely to be any such participation in the future.
31. In Re Huang, Senior Member Muller (as he then was) also emphasised the need for an applicant to spend time in Australia:
Not only must the eligible business operate in Australia to comply with the Act, the visa holder must participate at a senior level in the day-to-day management of the Australian business in Australia, albeit with trips overseas from time to time.
32. Re Ong views the absence of time spent in Australia more strictly still. Referring to the second reading speech of the Migration Amendment Bill (No 2) 1992 which introduced s 134 into the Migration Act 1958, Senior Member Allan said:
It is clear from that speech (Hansard, House of Representatives, 7 May 1992 at p2678) that it was understood that migrants who arrived in Australia on a business skills visa would remain resident in Australia. That such a purposive interpretation of the legislation can be adopted cannot be doubted…
I am therefore satisfied that Senior Member Muller in Re Huang was correct and it is the business activities of the Applicant in Australia that must be examined, not his business activities whilst he is residing overseas.
33. In this case the applicant spent 15 days in Australia during the relevant period. The relevant dates were (T51 f733):
(a)14-17 August 2000;
(b)20-24 June 2002; and
(c)31 July – 5 August 2003.
34. The question of whether spending too little time in Australia is indicative of a failure to actively engage at a senior level in the day-to-day management of the business (and if so, to what extent) is a vexed one. Visa holders will often maintain profitable overseas businesses that are not “eligible” under s 134, which they are unwilling to wind up or sell. That is natural. The only problem in doing so is illustrated in Re Huang: a visa holder may devote so much time to an established, profitable ineligible business that he or she neglects (or is prevented from) spending the necessary time and effort on a smaller eligible business in Australia.
35. To my mind, at least the following factors must be examined:
(a)What is the amount of time the visa holder was absent from Australia?
(b)Having regard to the nature of the eligible business, is the amount of time spent overseas reasonably necessary for its success? (i.e. the Re Dhanjal and Re Widjaja situation)?
(c)To what extent did the visa holder maintain communication with the eligible business that indicates he/she was actively participating at a senior level in its day-to-day management?
(d)Finally it is proper to examine whether the visa holder had any significant business or other interests in the country in which he/she resided, that would prevent him/her from actively participating at a senior level in the day-to-day management of the eligible business (i.e. the Re Tang and Re Huang situation).
36. Here the applicant was present in Australia for only 15 days. The nature of the eligible business is covered at par 10 (supra): it is a tour agency that facilitates exchanges of various kinds between Australia and China/Taiwan. I accept a business of this kind would require significant overseas travel. Mr Chen says (and Mr Liu agrees) that there is a great deal to be done on the ground in China and Taiwan in the early stages of the business. However it is surprising to be told it was necessary for the business’s success for the applicant to spend all of his time, bar 15 days, in Taiwan and China.
37. We know the applicant retained interests in several Chinese and Taiwanese businesses. As at the visa application date, the T-documents suggest the applicant was a director of and had a significant ownership interest in Yu-Feng Co. Ltd, a Taiwanese manufacturing company. The documents suggest he was also involved in Kuo-Ying Metal Sculpture Co. Ltd, a manufacturing/import/export company: ff506-511. In his oral evidence he suggested these businesses were not actively trading. (He added in his oral evidence that he had an interest in another metal moulding business, but he did not mention it because it was not actively trading either.)
38. The applicant said his major interest outside Australia was an interest in the Xie Yi Shoe Company. The company is located in Guangzhou, where the applicant is based. That company manufactures soles for shoes. He is a deputy general manager and owns 20% of the shares. The evidence given about that business was confusing. It appears his interest in the business is worth at least $1 million. Mr Liu says he spends up to 3 hours a day on this company’s business. He receives a salary and a share of the profits. While he is involved in various aspects of the company’s operations, he suggested there were other managers that attend to the day-to-day operations of the business. I understand from the evidence that it is a mature business which places limited demands on his time. He says he is left free to spend 7 – 8 hours a day on the business of ATM Tours.
39. The evidence (in particular exhibit 6-7) indicates the applicant was in contact with Mr Chen (co-director of ATM Tours) throughout the relevant period. In cross examination Mr Liu says he spoke to Mr Chen about “major decisions” and also about the business he was doing. Mr Chen said he spoke to the applicant about company business in a teleconference at least once a week, and during some periods at least once a day. Mr Chen insisted he consulted Mr Liu and the other director in relation to all important decisions. Mr Chen confirmed they made virtually all the important business decisions together. He made it clear that Mr Liu was not just consulted about sales issues, but in relation to all aspects of the business.
40. There are some inconsistencies in the evidence. Mr Liu could not tell me the names of the company’s staff members or when they were appointed. That is troubling, considering the company’s small size. I have also examined the English translation of his 2003 diary (exhibit 7). There are many scattered references to phone calls to Mr Chen. Most of them relate to getting quotations for tours for people he met. While sourcing tours does not immediately seem to be that of “day-to-day management at a senior level”, I note that similar activity in Re Dhanjal and Re Widjaja satisfied the definition because the marketing-type activity was necessary for the business to succeed.
41. The applicant said he worked about 30 hours per week on ATM Tours. Mr Chen said the applicant spent 35 hours a week on the business, but conceded in cross examination that the only basis for this estimate was that the applicant had told him so. Given his other business commitments which he described in his evidence and which are reflected in his diary entries, I think that figure is inflated. But that is not necessarily fatal. The legislation does not require that the visa holder devote all of his time to the management of the eligible business. Inputs at a senior level can be intangible: see ReLau and Minister for Immigration, Multicultural and Indigenous Affairs [2002] AATA 703.
42. I think the applicant can draw some comfort from the “Minutes of the Board of Directors” meetings. They were not tendered in evidence but were annexed to the applicant’s application for review. Those documents are consistent with his claim that he was involved in the management of the company’s business – he was not just an overseas salesman. It seems a meeting was held every month between the applicant, Bill Chen and Mayer Hou. The applicant actively participated at the meetings, suggesting ideas and proposals. His participation seems to represent a contribution at a senior management level.
43. This case is a difficult one. The evidence raises some doubts as to whether the applicant has actively participated at a senior level in the day-to-day management of ATM Tours. That he spent a mere 15 days in Australia is certainly a major problem for him. In most cases, that factor alone would probably be fatal – but not here. Having closely examined the nature and operation of ATM Tours, I do not believe it could succeed were the applicant not overseas. The case is in that way similar to Re Dhanjal. It appears his absence was more extensive than it otherwise might have been because of the effects of SARS and concerns about terrorism. The evidence of Mr Chen in particular persuades me that the applicant was not merely acting as an overseas representative or salesman who dealt with the company only in relation to the matters which directly concerned him. I am satisfied the applicant did participate at a senior level in the day-to-day management of ATM Tours even though he was not physically present in the company’s offices for very long.
Conclusion
44. The evidence before me is vague and occasionally conflicting. Both applicant and respondent put forward convincing cases. The respondent is certainly right to view a visa holder who is absent from the country for long periods with some scepticism. However after considering all the evidence I am not satisfied the applicant has failed to actively participate at a senior level in the day-to-day management of ATM Tours. That means none of the s 134 criteria are met, and the discretion to cancel the Business Skills visa is not enlivened.
45. I therefore set aside the decisions under review. The applicants are entitled to retain their visas.
I certify that the 45 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member McCabe
Signed: .....................................................................................
Associate: Thomas RitchieDates of Hearing: 16 June 2004, 7 September 2004 and 11 October 2004
Date of Decision: 24 December 2004
The applicant was represented by Mr Chand.
The respondent was represented by Mr Steele and Mr Gallo.
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