Loessi v Minister for Immigration and Multicultural and Indigenous Affairs
[2007] FCA 1891
•30 November 2007
FEDERAL COURT OF AUSTRALIA
Loessi v Minister for Immigration and Multicultural and Indigenous Affairs [2007] FCA 1891
MIGRATION – consideration of whether the Migration Review Tribunal fell into jurisdictional error in identifying and applying to the facts as found a test of whether an applicant for a visa had net assets of an amount less than $AUD250,000 adequate to conduct a particular business, for the purposes of subclause 457.223(7A)(c)(iv)(B) of Schedule 2 of the Migration Regulations made pursuant to the Migration Act 1958 (Cth)
Decision
Appeal dismissed with costs
Migration Act 1958 (Cth), s 31, s 65, s 359, s 359A, s 359(2), s 359C, s 360(1) and s 360(2)
Migration Regulations, Reg. 2.01, Schedule 1, clause 1223A, Schedule 2, clauses 457.21, 457.22, 457.223(7), 457.223(7A), 457.511(c)Loessi v Minister for Immigration & Anor [2006] FMCA 1697
Lukac v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 1641
Craig v South Australia (1995) 184 CLR 163
Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323
Lobo v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 132 FCR 93
R v Australian Stevedoring Industry Board Ex parte Melbourne Stevedoring Co. Pty Ltd (1953) 88 CLR 100
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611
Minister for Immigration and Multicultural and Indigenous Affairs v SGLB (2004) 207 ALR 12
Re Minister for Immigration and Multicultural Affairs Ex parte Applicant S20/2002 (2003) 198 ALR 59
Plaintiff 157/2002 v Commonwealth of Australia (2003) 211 CLR 476EDWARD JOHN LOESSI v MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS AND MIGRATION REVIEW TRIBUNAL
QUD483 OF 2006GREENWOOD J
30 NOVEMBER 2007
SYDNEY (VIA VIDEO-LINK TO BRISBANE)
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD483 OF 2006
BETWEEN:
EDWARD JOHN LOESSI
ApplicantAND:
MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
First RespondentMIGRATION REVIEW TRIBUNAL
Second Respondent
JUDGE:
GREENWOOD J
DATE OF ORDER:
30 NOVEMBER 2007
WHERE MADE:
SYDNEY (VIA VIDEO-LINK TO BRISBANE)
THE COURT ORDERS THAT:
1.The appeal is dismissed.
2.The appellant pay the respondents’ costs of the appeal to be taxed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD483 OF 2006
BETWEEN:
EDWARD JOHN LOESSI
ApplicantAND:
MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
First RespondentMIGRATION REVIEW TRIBUNAL
Second Respondent
JUDGE:
GREENWOOD J
DATE:
30 NOVEMBER 2007
PLACE:
SYDNEY (VIA VIDEO-LINK TO BRISBANE)
REASONS FOR JUDGMENT
By this appeal, the appellant, a United States national, seeks to set aside the Orders of Federal Magistate Baumann made on 16 November 2006 (Loessi v Minister for Immigration & Anor [2006] FMCA 1697) dismissing an Application to that Court pursuant to s 476(1) of the Migration Act 1958 (Cth) (‘the Act’) to review on the ground of jurisdictional error, a decision of the Migration Review Tribunal (‘the MRT’) affirming a decision of the Delegate of the Minister for Immigration and Multicultural and Indigenous Affairs to refuse the appellant a ‘Temporary Business Entry (Class UC)’ visa, under the Act.
The Act provides for prescribed classes of visas and the prescription of criteria, by regulations, for a visa or visas of a specified class (s 31 of the Act). By Regulation 2.01 of the Migration Regulations (‘the Regulations’) prescribed classes of visas are those set out in Schedule 1 to the Regulations. Schedule 2 to the Regulations is divided into ‘Parts’ which identify a number of ‘Subclasses’ of visa within a Schedule 1 class so set out. A ‘Part’ or ‘Subclass’ within Schedule 2 is ‘relevant to’ a particular class of visa set out in Schedule 1 if that Part of Schedule 2 referring to the particular Subclass is ‘listed’ under the item ‘Subclasses’ in Schedule 1 in connection with the primary ‘class’ of visa to which it relates.
In this case, Schedule 1 and Part 2 of that Schedule sets out, by class, a number of ‘Temporary visas (other than bridging visas)’ and one class of such a visa, set out at clause 1223A of Schedule 1, is a ‘Temporary Business Entry (Class UC)’ visa. Under Item 4 of clause 1223A of Schedule 1, two ‘Subclasses’ are ‘listed’ and the relevant one for present purposes is a Subclass described as ‘Business (Long Stay)’, being Subclass 457.
Schedule 2, at clause 457.21, sets out the criteria to be satisfied by an applicant for such a visa at the time of application. Clause 457.22 sets out the criteria to be satisfied at the time a decision is made on the Application. Subclause 7 of clause 457.223 addresses criteria applicable to an applicant who is an ‘independent executive’ and who proposes to develop in Australia a business activity that will be conducted by the applicant as a principal and will be of benefit to Australia. Subclause 7 sets out a number of criteria (a) to (f) and those criteria include criterion (d) that the applicant has net assets of not less than $AUD250,000 to conduct or establish the business or alternatively a lesser amount that the Minister considers to be adequate to conduct or establish the business. Subclause (7A) of clause 457.223, the subclause relevant in this appeal, is concerned with a person who holds a subclass 457(7) visa under the Act and who has been conducting a business as principal in Australia for at least 15 months and the Minister is satisfied of a number of things including that the applicant has net assets of not less than $AUD250,000 to conduct the business or alternatively, a lesser amount that is adequate to conduct the business.
In this case, the applicant as the holder of a subclass 457 visa granted on the basis that the applicant met the requirements of subclause (7) applied for a further or extension visa under subclause (7A). Clause 457.511(c) provides that a visa granted under clause 457.223(7A) entitles the holder to remain in Australia for a period of two years from the date of the grant.
The Minister’s Delegate refused the appellant’s application under clause 457.223(7A) on a number of grounds including a ground that the Delegate was not satisfied that the visa applicant had net assets of $AUD250,000 and therefore did not satisfy clause 457.223(7A)(c)(iv)(A). In the Application for Review before the Tribunal, the appellant simply asserted that the Delegate’s decision was wrong. The Tribunal considered both limbs of subclause (7A)(c)(iv), namely, whether the appellant had net assets of not less than $AUD250,000 to conduct the business or, alternatively, net assets of a lesser amount adequate to conduct the business.
Subclause 457.223(7A) is in these terms:
(7A) The applicant meets the requirements of this subclause if:
(a) either:
(i)the applicant holds a Subclass 457 visa granted on the basis that the applicant met the requirements of subclause (7) or Subdivision 457.32; or
(ii)the applicant does not hold a substantive visa, and the last substantive visa held by the applicant was of a kind mentioned in subparagraph (i); and
(b)on the day on which the application is made:
(i)the applicant had been conducting the business in Australia as a principal for at least 15 months; or
(ii)if the applicant had been conducting the business in Australia as a principal for less than 15 months – a government of a State or Territory had endorsed the business as beneficial to the State or Territory; and
(c)the Minister is satisfied that:
(i)the business is of benefit to Australia; and
(ii)the applicant has a genuine and realistic commitment:
(A)to maintain an ownership interest in the business; and
(B)to maintain a direct and continuous involvement in the management of the business; and
(C)to make decisions that affect the overall direction and performance of the business from day to day; and
(iii)nothing adverse is known to Immigration about the applicant’s business background; and
(iv)the applicant has net assets of:
(A)not less than AUD250,000; or
(B)a lesser amount that is adequate;
to conduct the business; and
(v)the applicant has demonstrated that there is need for the applicant to be temporarily resident in Australia to conduct the business.
In conducting a review of the Delegate’s decision, the Tribunal on 6 July 2005 invited the appellant, in accordance with s 359A of the Act, to comment upon information drawn from the balance sheet of a company, Faulkner Technologies Pty Ltd, being the vehicle used for the conduct of the business, in these terms:
Your business is Faulkner Technologies Pty Ltd and a balance sheet as at October 2004 shows that the business liabilities exceed assets to the sum of $92,410.14.
In accordance with s 359(2), the Tribunal by its letter of 6 July 2005 invited the appellant to provide additional information to the Tribunal directed to these topics.
1.A statement that clearly lists the net personal assets of you and your wife. The statement should show:
·Cash and where the cash is held (ie Bank savings accounts).
·The value of that portion of your (unencumbered) non‑monetary assets (if any) that are in Australia.
·The value of that portion of your (unencumbered) non‑monetary assets (if any) that are outside Australia, and how you plan to make the assets available to the business.
2.A statement that clearly lists the net assts of your business and your share of those net assets.
3.Balance sheet and profit and loss statement [prepared by chartered accountant or Certified Practising Accountant (CPA)] for the financial year 2004‑05 for your business.
4.A list of current directors for your business.
5.Copies of your income tax statements provided to the ATO and subsequent ATO assessments since your arrival in Australia. If you have not paid income tax, please explain why no income tax was paid.
6.An explanation of what businesses you have been involved with in Australia since your business visa was granted on 30 March 2000.
The Tribunal requested the appellant to provide that information within 28 days. An extension of time was sought by the appellant’s lawyers on 12 August 2005 of 30 days on the footing that those lawyers were consulting with the appellant’s accountant and were obtaining further forensic accounting evidence and the process would take time ‘as it was highly technical’. On 15 August 2005, the Tribunal agreed to the requested extension. However, no further material was submitted by the appellant to the Tribunal and on 18 October 2005 the Tribunal advised the appellant’s lawyers that a decision would be handed down on 4 November 2005. In so doing, the Tribunal proceeded, consistent with s 359C of the Act, to make a decision on the review without taking any further action to obtain the additional information. Since the appellant had failed to provide the foreshadowed additional information requested under s 359 with the result that the Tribunal was entitled to act under s 359C(1) of the Act, no obligation arose in the Tribunal to invite the appellant to appear before the Tribunal to give evidence and present arguments concerning the issues relating to the decision under review (s 360(1) and s 360(2) of the Act).
Accordingly, the Tribunal proceeded to conduct a review of the Delegate’s decision on the information before it. The Tribunal noted that the appellant had not provided the Tribunal with any additional financial information since lodging the review application in April 2005 and the Tribunal further observed that there was no current financial information before it demonstrating the appellant’s net assets.
The Tribunal reviewed the available evidence in these terms:
20.The visa applicant initially conducted the business of Faulkner Technologies as a sole trader and in July 2004 incorporated the business to become Faulkner Technologies Pty Ltd. Faulkner Technologies Pty Ltd is wholly owned by Faulkner Technology Holdings Pty Ltd and the visa applicant indicated he had a 42.5% ownership in Faulkner Technology Holdings Pty Ltd. Faulkner Technology Holdings Pty Ltd does not trade.
21.Also in June 2004, Faulkner Technology Holdings Pty Ltd issued $200,000 of convertible notes and then on‑lent this sum to Faulkner Technologies Pty Ltd. Documents show that the $200,000 was raised through two investors which each put in $100,000.
22.… In a submission dated 20 December 2004 [to the Department] the visa applicant indicated that [his] interest in Faulkner Technology Holdings Pty Ltd was conservatively valued at $1,637,000. The visa applicant obtained this figure from a ‘Forensic Accountant’s Report’ dated 22 December 2004, which he provided to the Department.
23.The accountant indicated in the report that the ‘limitation of scope’ of the report was as follows:
‘In preparing my report, I have relied upon four (4) months actual trading results, the financial forecasts prepared by Faulkner Technologies Pty Ltd and discussion with Mr Loessi. It was not in the scope of my engagement to audit, verify or provide my opinion as to the reasonableness of the financial information provided. However, I have noted various points regarding the reasonableness of the forecasts as detailed at section 7 below. Should the assumptions underline the financial forecasts, eg. sales, prove to be incorrect, then the financial forecasts are also likely to be incorrect. This would have a direct impact on my valuation.
The Tribunal considered the report and did not accept the valuation and did not accept that the report demonstrated the visa applicant’s ‘actual net assets’. The Tribunal set out its reasoning in these terms:
25.… Faulkner Technology Holdings Pty Ltd does not trade and merely holds the investment in Faulkner Technologies Pty Ltd.
26.The evidence concerning the actual financial circumstances of Faulkner Technologies Pty Ltd is limited. The most recent outline of the financial circumstances of Faulkner Technologies Pty Ltd is a profit and loss statement for 1 July to 31 October 2004 and a balance sheet as of October 2004. It is unclear who prepared the profit and loss statement and the balance sheet. The accountant appears to indicate that the financial information supplied to the accountant had not been audited, verified or a reasonableness assessment performed by an external accountant.
27.The profit and loss statement shows that in four months the business made a net profit before tax of $14,904.96. The balance sheet shows that the net assets of the business were $180,727.49 (of which $160,388.50 was indicated to be ‘trade debtors’). The total liabilities were $273,137.14. The net assets were indicated to be negative ($92,410.14).
28.The financial information appears to show that the visa applicant advanced a loan of $12,500.00 to Faulkner Technologies Pty Ltd. Nonetheless, the available financial information does not show that the visa applicant has net business assets.
29.The ‘Forensic Accountant’s Report’ dated 22 December 2004 has largely been based upon limited financial information and in particular four months of trading in 2004, and projections. There is no evidence that those projections have been realised. The Tribunal invited the visa applicant to provide a balance sheet and profit and loss statement, prepared by a chartered accountant or (CPA), for the financial year 2004‑05 for the business. However, this evidence was not provided. The financial information provided to the Department shows that the relevant business has negative assets. The financial information provided to the Department does not show that the visa applicant has net business assets.
The Tribunal then observed that it had no current evidence before it of the appellant’s personal assets or the personal assets of the appellant’s wife.
The Tribunal concluded that it could not be satisfied that the visa applicant had net assets of not less than $250,000 to conduct the business. That conclusion was dispositive of the Tribunal’s consideration of whether it could be satisfied that the first limb of clause 457.233(7A)(c)(iv) was made out. It was not so satisfied.
The Tribunal then considered the second limb of the clause, namely (7A)(c)(iv)(B), whether it could be satisfied that the applicant had net assets of a lesser amount [than $AUD250,000] adequate to conduct the business. The Tribunal gave emphasis to these considerations. First, the evidence put to the Department demonstrated that the business had made a net profit before tax for the trading period July to October 2004 although it was not clear to the Tribunal who had prepared the financial information for that period. Secondly, the appellant had provided the report of 22 December 2004 which contained projections for the business to 2009. However, the Tribunal, although requests were made of the appellant, was not provided with any evidence to show whether the projections were being realised. The Tribunal noted that ‘the current circumstances of the visa applicant’s business assets are unclear’. Thirdly, the Tribunal again noted that although requests had been made of the appellant to produce income tax statements, ATO assessments and details of businesses the appellant had been involved in within Australia since the initial granting of his visa, no such information was provided. On the basis of the information available to the Tribunal, it could not be satisfied that the appellant had net assets of a lesser amount than $250,000 adequate to conduct the business.
The appellant says Federal Magistrate Baumann erred by failing to find jurisdictional error on the part of the Tribunal in the discharge of the review function on grounds that the Tribunal failed to appreciate and apply the proper test established in Lukac v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 1641 of whether the appellant had net assets adequate to conduct the business and instead applied a test of whether the net assets of the business demonstrated adequacy to conduct the business. Secondly, the Tribunal failed to identify the nature of the business; was distracted by the negative balance sheet of Faulkner Technologies Pty Ltd (‘Technologies’); and failed to appreciate that the appellant’s shareholding Technologies and Faulkner Technology Holdings Pty Ltd (‘Holdings’) was an asset of the appellant and ought to have been considered in applying the test of whether the appellant had net assets adequate to conduct the business. Thirdly, the Tribunal failed to consider the relevant material going to the appellant’s 42.5% interest in the business of Technologies through Holdings and the relationship between the balance sheet asset values of $180,727.49 and the dominant liability of the business (Technologies) in the form of a director’s loan of $212,500.00. Fourthly, as a subset of the earlier grounds, the Tribunal failed to take into account the nature of the business as a technology software business in which the intellectual property is an essential component thus suggesting that the level of net assets of the appellant adequate to conduct the business would not be high.
The first question is whether the Tribunal appreciated and then applied the correct legal test in both assessing the facts and reaching a decision on the facts as an applied expression of the formulated test. If the wrong test has been applied, a federal court such as the Federal Magistrates Court in the exercise of original supervisory jurisdiction conferred upon it by statutory provisions like s 476(1) of the Act, in terms of the High Court’s jurisdiction under s 75(v) of the Constitution, might quash the decision as an error going to the discharge of the review jurisdiction. The exercise of the supervisory jurisdiction might result in remedial intervention if the Tribunal has exhibited failures of the kind identified in Craig v South Australia (1995) 184 CLR 163 at 179 per Brennan, Deane, Toohey, Gaudron and McHugh JJ; Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at 351 [82], per McHugh, Gummow and Hayne JJ; Lobo v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 132 FCR 93 at 106, [42] and [43] per French, Sackville and Hely JJ; R v Australian Stevedoring Industry Board Ex parte Melbourne Stevedoring Co. Pty Ltd (1953) 88 CLR 100 at 120 per Dixon CJ, Williams, Webb and Fullagar JJ; Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 356‑357 per Mason CJ; Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611 at [130], [137] and [145] per Gummow J and [40] per Gleeson CJ; Minister for Immigration and Multicultural and Indigenous Affairs v SGLB (2004) 207 ALR 12 at 20 [37] and [38] per Gummow and Hayne JJ; Re Minister for Immigration and Multicultural Affairs Ex parte Applicant S20/2002 (2003) 198 ALR 59 at 61 [5] and [9] per Gleeson CJ and Plaintiff 157/2002 v Commonwealth of Australia (2003) 211 CLR 476 at 506 [76] per Gaudron, McHugh, Gummow, Kirby and Hayne JJ.
In this case, the Tribunal asked itself whether it could be satisfied that the visa applicant had net assets not less than $250,000 to conduct the business or, secondly, whether the visa applicant has a lesser amount adequate to conduct the business [17]. There is therefore no failure on the part of the Tribunal to isolate the test required by clause 457.223(7A)(c)(iv)(A) and (B) to be applied by the Tribunal in conducting the review.
The next step however is to determine whether in the analysis of the facts and an assessment of the process of reasoning adopted by the Tribunal, it, in fact, applied a different test or misconceived the elements of the test. The appellant says the Tribunal’s discussion under the heading ‘Net business assets’ of the financial circumstances of Technologies; the profit and loss statement for 1 July 2004 to 31 October 2004 and the October 2004 balance sheet for Technologies led to two conclusions at [28] and [29] of the Tribunal’s reasons that betray error in the test actually applied by the Tribunal. At [28], the Tribunal said, after taking account of the director’s loan of $212,500 to Technologies referred to in the balance sheet:
Nonetheless, the available financial information does not show that the visa applicant has net business assets.
At [29], the Tribunal said:
The financial information provided to the Department does not show that the visa applicant has net business assets.
The appellant says the statutory question is not whether the visa applicant has ‘net business assets’ but whether the visa applicant has net assets (at or lesser than the statutory threshold) adequate to conduct the business. In this appeal, the only question is the application of limb (B) of subclause (7A)(c)(iv).
However, the following things should be noted. First, the Tribunal’s discussion at [25] – [31] of its reasons under the heading ‘Net business assets’ addresses, in terms, the first limb (A) and the question of whether the Tribunal could be satisfied that the appellant had net assets of not less than $250,000 to conduct the business (7A)(c)(iv)(A)). Secondly, the only information before the Tribunal going to either limb of subclause (7A)(c)(iv) as a result of the appellant either electing or failing to respond to the Tribunal’s invitation to submit further information (notwithstanding an extension of time to enable accounting information said to be highly technical, to be submitted) was earlier submitted information going to the business assets as no current information was put to the Tribunal concerning the personal assets of the appellant or his wife. Thirdly, since the appellant had, through Holdings, a significant relevant interest in Technologies, an assessment of the net business assets of Technologies represented the only available proxy for an assessment of the visa applicant’s net assets to conduct the business, there being no evidence of other assets to consider. Fourthly, however, in conducting that assessment the Tribunal considered the Accountant’s Report (Mr John Thynne) dated 22 December 2004 which contained a valuation of the business of Technologies; a valuation of Technologies as a company; a valuation of Holdings and a valuation of the appellant’s 42.5% shareholding interest in Holdings assuming both no conversion of the convertible notes to equity and a dilution of the appellant’s interest in Holdings to 35.06% on the assumption of a conversion of those notes to ordinary shares. The Tribunal also considered the financial information contained in the report including the loan by the appellant to Technologies and the arrangements between Holdings and Technologies arising out of the convertible note issue. It is clear therefore that the Tribunal took into account the shares held by the appellant and the implications of the loan transactions, in reaching its conclusion in relation to the first limb of subclause (7A)(c)(iv)(A)).
It is clear from the reasons of the Tribunal [32] to [38] that the Tribunal also had regard to these considerations and particularly Mr Thynne’s report in reaching its conclusion on the second limb that it could not be satisfied that the appellant had net assets of an amount less than $250,000 to conduct the business.
Mr Thynne’s report dealt with these matters.
Mr Thynne was requested to prepare a report valuing the appellant’s interest in Holdings and sought to strike a market value as between a notional willing but not anxious buyer and a notional willing but not anxious seller acting at arms‑length. Mr Thynne relied upon four months of actual trading results for Technologies, financial forecasts for the years ending 30 June 2005 to 30 June 2009, a breakdown of sales to 31 October 2004 and nominated new customers of Technologies as at 30 November 2004. The report arising out of that task was prepared solely in reliance upon those documents and discussions with the appellant. Mr Thynne identified the limitations upon the scope of his work (para 3) and particular disclaimers (para 8). Mr Thynne noted that Technologies is an online knowledge management and distribution entity using software described as ‘knowledge engines’ which are ‘web based, knowledge capture, presentation, assessment and reporting platform[s]’ (Appendix 1, para 2.2). The knowledge engine is modelled to assess business processes and is programmed to interact with existing client databases. The report notes the incorporation of Technologies and Holdings in April 2004; the transfer of the business to Technologies as a wholly owned entity of Holdings in June 2004; the issue by Holdings of convertible notes to two investors, Timani Holdings Pty Ltd and Coppabella Investments Pty Ltd of $200,000 in June 2004; the conversion terms for the convertible notes to ordinary shares; and the loan by Holdings to Technologies of $200,000. The report also analyses the forecast of sales and at Appendix 2, Mr Thynne sets out the valuation methodology adopted to determine the value of the appellant’s interest in Holdings. Mr Thynne elected to value the business of Technologies by applying an orthodox discounted cash flow methodology applying a discount factor recognising the type or nature of the business, the business environment, the management structure and the level of risk associated with the investment in the business. In addition, Mr Thynne elected to apply a premium in the discount rate due to reliance upon ‘unproven financial forecasts’ (Appendix 2, para 3.6). The application of that valuation methodology resulted in a value of $4,460,000 for the business of Technologies; a value of $4,427,500 for the company, Faulkner Technologies Pty Ltd, taking account of the loan liabilities to Holdings of $200,000 and to the appellant of $12,500; a value of $4,427,500 for Holdings and a net value for the appellant’s 42.5% interest in Holdings (taking account of a further discount by reason of the appellant’s minority interest) of $1,624,500; and a value of the appellant’s 35.06% interest in Holdings assuming conversion of the convertible notes to ordinary shares, of $1,403,000. Having regard to the loan of $12,500 repayable to the appellant, the appellant’s total interest was either $1,637,000 or, assuming conversion, $1,415,500.
It is clear from the Tribunal’s reasoning that the Tribunal had regard to the report. It is not correct to say therefore that the Tribunal did not consider the type and nature of the business, the essential intellectual property character of the software assets or ‘knowledge engines’, the shareholding of the appellant in Holdings and postulated values of that interest as an asset of the appellant. The Tribunal concluded that having regard to the limitations on the scope of the report and the limited sources of information recited at Part 4 of the report, the Tribunal could not accept the valuation of $1,637,000.
It was open to the Tribunal to reach that conclusion.
In considering whether the appellant had net assets of a lesser amount than $250,000 adequate to conduct the business as described by Mr Thynne, the Tribunal necessarily had regard to the information contained in Mr Thynne’s report addressing the actual trading results for the period 1 July 2004 to 31 October 2004, the postulated financial forecasts prepared by the appellant and broader projections for the period 30 June 2005 to 30 June 2009. The Tribunal noted that the appellant had failed to provide information in response to the Tribunal’s invitation and therefore the ‘current circumstances’ of the appellant’s business assets was unclear and there was ‘no current evidence before the Tribunal which shows the current circumstances of the visa applicant’s personal assets, if any, and whether he has any financial and logistical support from his family’ [34]. The Tribunal noted that the business is conducted from the appellant’s residence and that the appellant had indicated the business would employ two employees. The Tribunal noted the appellant’s failure to provide copies of his income tax statements, subsequent ATO assessments and other information that the Tribunal thought would reasonably show the appellant’s earnings and whether the appellant had been active in a successful business or businesses since residing in Australia. The Tribunal further noted that the appellant had provided some Business Activity Statements for Technologies which demonstrated that the company was active in 2002 and 2003. However, the Tribunal noted that those statements did not inform the Tribunal as to whether the business conducted by Technologies had been successful.
The Tribunal concluded that having regard to its analysis of the business assets and the financial information in relation to the activity of Technologies, Holdings and the appellant’s interest in Holdings and through it, beneficially, the activities of Technologies, the Tribunal could not be satisfied that ‘the visa applicant has a lesser amount that is adequate to conduct the business’ and thus the Tribunal found that it could not be satisfied of the requirements of clause 457.223(7A)(c)(iv)(B).
In reaching that conclusion, the Tribunal had regard to not only the report of Mr Thynne generally but gave specific attention to the information contained in the balance sheet of Technologies as at October 2004 forming part of Appendix 3 to Mr Thynne’s report. The balance sheet shows total current assets of $179,389.36 and taking account of fixed assets, total assets of $180,727.49. Current liabilities (including loan repayment obligations to Holdings and the appellant of $212,500), constituted $273,137.63 resulting in a deficiency in net assets of $92,410.14.
The appellant contends that a deficiency in net assets is not decisive of criterion (7A)(c)(iv)(B). A corporation such as Technologies may well be capable of conducting a business notwithstanding that the value of the net assets deployed in that business have a negative value. In circumstances where a visa applicant has a substantial interest (although a minority interest) in an entity owning all of the shares in the company conducting the business in question, the deficiency in the value of the assets deployed in the business is undoubtedly a necessary part of the analysis of whether the visa applicant has net assets adequate to conduct the business. In the absence of any evidence as to personal assets or net assets of the appellant and having regard to the Tribunal’s rejection of Mr Thynne’s valuation of the appellant’s shareholding interest in Holdings, it was open to the Tribunal to conclude that the appellant did not have net assets in an amount less than $250,000 adequate to conduct the business.
As Spender J observed at [15] in Lukac v MIMIA (supra), ‘the test is not whether, in fact, the asset position is positive or negative; the test that is relevant in the present case is whether the applicant had “net assets … adequate to conduct the business”.’ In Lukac, the applicant had provided the Tribunal with a body of financial information including tax returns for the years ending 30 June 2002 and 2003, profit and loss statements, statistics on trading performance and information concerning income receipts upon which it was open to conclude that the applicant had net assets adequate to conduct the cleaning business. In Lukac, the Tribunal purported to require the applicant to satisfy the Tribunal of ‘special circumstances’ that formed no part of the statutory test and thus error arose in the conduct of the review resulting in jurisdictional error. In this case, the Tribunal has examined the balance sheet asset values ‘in context’ in the sense that the Tribunal has considered Mr Thynne’s report which analyses all of the matters previously discussed in these reasons and the Tribunal was not provided with any response from the appellant to the invitation to submit material on the six topics identified at [9] of these reasons in the Tribunal’s letter of 6 July 2005. The decision in Lukac simply restates the statutory test and recognises that whether the asset values are positive or negative, the Tribunal must be satisfied (s 65 of the Act) on the information or evidence before it that the visa applicant has net assets adequate to conduct the business. In this case, the Tribunal identified the correct legal test derived from the Act, applied it to the facts as found or accepted and reached a conclusion open to it on the material.
The appellant says that the Tribunal failed to have regard to the loan by Holdings to Technologies of $200,000 and the loan by the appellant of $12,500 to Technologies as a significant component of the liabilities of Technologies. The appellant says that since the loans are provided by related parties and not simply obligations to external parties, the true cash position of Technologies is $200,000 more favourable than the balance sheet statistics reveal. The appellant says the true assets available to conduct the business ‘would be in excess of $100,000’. The difficulty with this submission is that the Tribunal did consider the loans to Technologies and the impact of those loans in the liabilities of the company and had before it and considered the relevant information submitted by the appellant going to that factual question. The conclusions the Tribunal reached were open to it. It is not part of the function of a federal court such as the Federal Magistrates Court exercising conferred supervisory jurisdiction of review, to substitute its own view for that of the Tribunal.
It is clear that the Tribunal identified and applied the correct test and took into account all of the matters reflected in the report from Mr Thynne in the context of applying the identified test to the facts found or determined. Accordingly, the Tribunal has not fallen into error in the manner contended for by the appellant and Federal Magistrate Baumann has not fallen into error by failing to find error on the part of the Tribunal. In the result, the appeal must be dismissed with costs.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate:
Dated: 30 November 2007
Counsel for the Applicant: Mr L Boccabella Solicitor for the Applicant: Redchip Lawyers Counsel for the Respondent: Ms A L Wheatley Solicitor for the Respondent: Clayton Utz Lawyers Date of Hearing: 9 May 2007 Date of Judgment: 30 November 2007
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