Luo and Minister for Immigration and Citizenship

[2008] AATA 976

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 976

ADMINISTRATIVE APPEALS TRIBUNAL      )         No.  2007/1596

)

GENERAL ADMINISTRATIVE DIVISION		)
Re		HAIMIN LUO

Applicant

And MINISTER FOR IMMIGRATION AND CITIZENSHIP

Respondent

DECISION

Tribunal: G.D. Friedman, Senior Member

Date:3 November 2008

Place:Melbourne

Decision: The Tribunal affirms the decision under review.

(sgd) G.D. Friedman

Senior Member

MIGRATION – business skills visa – cancellation – elevator manufacturer – whether eligible business – whether genuine effort to obtain substantial ownership of eligible business and participate in senior management – exercise of residual discretion

Migration Act 1958 s 134(1), (2), (3), (9) and (10), 135(4), 499

Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577

Hope v Bathurst City Council (1980) 144 CLR 1

Kim v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 31

Puzey v Commissioner of Taxation [2003] FCAFC 197

Re Ah Kow Phoon and Minister for Immigration and Multicultural Affairs [2006] AATA 527

Rokobatini v Minister for Immigration Multicultural Affairs (1999) 57 ALD 257

Shi v Migration Agents’ Registration Authority [2008] HCA 31

REASONS FOR DECISION

3 November 2008           G.D. Friedman, Senior Member

1.        Haimin Luo is a citizen of the People’s Republic of China who was granted a business skills visa on 5 November 2003.  He and his family first arrived in Australia on 21 November 2003.  On 3 April 2007 the respondent’s delegate cancelled the visa on the grounds that Mr Luo had not complied with the terms of the visa.

ISSUES

2.        The issues before the Tribunal are:

·Has Mr Luo obtained a substantial ownership interest in an eligible business in Australia? If not:

·Has Mr Luo made a genuine effort to do so and to utilise his skills in actively participating at a senior level in the day-to-day management of the business and intends to continue to make such efforts? If not:

·Should the general discretion not to cancel the visa be exercised?

LEGISLATIVE AND POLICY FRAMEWORK

3. Section 134 of the Act Migration Act 1958 relevantly provides:

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

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

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

(c)       does not intend to continue to:

(i)        hold a substantial ownership interest in; and

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

an eligible business in Australia.

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

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

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

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

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

(a)business proposals that the person has developed;

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

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

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

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

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

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

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

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

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

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

…

(10)In this section:

…

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.

…

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;

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

4.The respondent’s Procedures Advice Manual 3 (PAM3) sets out the procedures to be followed in the making of decisions under s 134 of the Act. PAM3 was issued pursuant to s 499 of the Act which authorises the Minister to give written directions to decision-makers. The Tribunal accepts that PAM3 is a relevant consideration in its decision-making process (Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577) and is the correct policy to be applied at the time of the Tribunal’s decision (Rokobatini v Minister for Immigration Multicultural Affairs (1999) 57 ALD 257).

5.        In paragraph 9.2 of PAM3, genuine effort refers to evidence that the visa holder has exerted himself or herself to get into business in Australia or be involved in the management of the business at a senior level on a day-to-day basis. It also refers to an expectation that the visa holder will continue to make sustained and continued efforts to meet visa requirements throughout the three-year period. PAM3 provides the following factors which aim to assist decision‑makers in determining whether a genuine effort has been made under s 134(3) of the Act:

·business proposals/plans which are genuine, realistic and achievable;

·the existence of partners or joint venturers by formal contract or written agreement;

·continuous and genuine business research such as written evidence of detailed consultations with business advisors (accountant, lawyer, bank/financial institution, business/trade association);

·physical presence in Australia for a significant time;

·transfer or investment of sufficient funds (other than for personal use) to ensure that the business meets the requirements of an eligible business;

·failure to comply with a notice for information under s 137, including notification of address and return of relevant survey forms.

6.        In conducting its review of the decision to cancel Mr Luo’s visa the Tribunal is required to consider all relevant material as at the date of cancellation.In Shi v Migration Agents’ Registration Authority [2008] HCA 31 the High Court held that there is nothing in the Tribunal‘s enabling legislation that confines it to the facts and circumstances before the primary-decision maker, and that any restriction on the Tribunal to consider only conduct and events up to a certain point in time would have to arise from the intention of the legislation relevant to the decision. Such a statutory intention arises from s 134 and 135 of the Act, which confines the cancellation power to a 3-year period (s 135(4) and 134(9)). Accordingly the primary decision-maker did not have the power to consider conduct and events outside this period, so the Tribunal’s powers are limited in a similar manner.

HAS MR LUO OBTAINED A SUBSTANTIAL OWNERSHIP INTEREST IN AN ELIGIBLE BUSINESS IN AUSTRALIA?

7.        Mr Luo told the Tribunal that he lives in Beijing, China and works full-time as the president and general manager of Beijing Sheng Hua Elevator Co. Ltd (Beijing Sunwa), which manufactures elevators and elevator components.  He said that he applied for a business skills visa with the intention of relocating his family to Australia and investing in the elevator industry.  Mr Luo stated that he registered Holberg Industries Australia Pty Ltd (HIA) on 8 August 2000 and holds 25 per cent of the 1000 shares.  There are four other directors.  The proposal was that HIA export specialist services, technology, elevators and their components direct from Australia to China.  He said that he planned to invest $A1 million in the business.

8.        Despite the emphasis on elevator manufacture, Mr Luo stated that when he arrived in Australia he was not in a position to proceed with his plans for that industry, and acted on an opportunity to become a supplier of photoluminescence and safety products.  He said that on 1 November 2005 HIA signed a contract to supply one shipment (500 kg) of photoluminescent (Glow in the dark) paint pigment to Barloworld Coatings Australia Limited for $A50,000.  He agreed that he invested $A250,000 in the business, and hoped to sell the product in China and to take advantage of increased demand due to the 2008 Beijing Olympic Games.  However he acknowledged that the venture proved unsuccessful because the Chinese Government was unwilling to purchase the product as it was more expensive than existing pigments.  There were no further sales, and at September 2006 the business had incurred a loss of $A98,665.

9.        Mr Luo said that he decided to re-focus on the elevator industry, and from 2004 conducted market research involving discussions with Australian companies with a view to co-operative ventures, but these were unsuccessful.  He said that further research into the needs of the Australian residential and commercial markets revealed good prospects, and in December 2006 he had decided on a new business plan to establish HIA as an elevator business in Australia.  On 2 January 2007 Mr Luo provided a written statement to the Department of Immigration and Citizenship in which he said that the plan envisaged the establishment of Sunwa Lifts Australia Group Pty Ltd (Sunwa Australia) by the end of January 2007.  Under cross-examination Mr Luo agreed that his proposals took longer than planned, and could not be implemented because his visa was cancelled on 3 April 2007.  He said that Sunwa Australia was registered on 18 April 2007.

10.      In Hope v Bathurst City Council (1980) 144 CLR 1 the High Court held that carrying on a business denotes pursuing activities for the purpose of profit, undertaken on a continuous and repetitive basis. In Puzey v Commissioner of Taxation [2003] FCAFC 197 the Full Federal Court stated that a business requires some repetition of acts and something of a permanent character.

11. The Tribunal takes into account that Mr Luo has a 25 per cent interest in HIA. However the business has conducted only one transaction since the grant of the visa, and has made a loss. Mr Luo admitted that the business was a failure. In respect of Sunwa Australia, the Tribunal takes into account Mr Luo’s evidence about the plans to construct a factory and commence manufacture of elevators and components in 2007. However the Tribunal is satisfied that as at the date of cancellation of the visa the business was not registered, no agreement for the purchase or lease of a factory had been signed or staff employed. The Tribunal finds that at the date of cancellation neither business had been engaged in continuous and repetitive activity for the purpose of making a profit. Consequently the businesses have not demonstrated that they have satisfied any of the criteria in s 134(10) of the Act. For these reasons the Tribunal finds that neither HIA nor Sunwa Australia is an eligible business for the purposes of the Act.

12.      Consequently Mr Luo has not obtained a substantial ownership interest in an eligible business in Australia (s 134(1)(a) of the Act), and the grounds exist for the cancellation of the visa.

HAS MR LUO MADE A GENUINE EFFORT TO DO SO AND TO ULTILISE HIS SKILLS IN ACTIVELY PARTICIPATING AT A SENIOR LEVEL IN THE DAY-TO-DAY MANAGEMENT OF THE BUSINESS; AND DOES HE INTEND TO CONTINUE TO MAKE SUCH EFFORTS?

13.      Mr Luo told the Tribunal that he has made a genuine effort to meet his visa requirements during the three-year period since he first entered Australia.  He noted that the business plan for HIA dated 18 December 2006 had referred to the agreement with Barloworld and had described the market for photoluminescence as very promising, even though that proved to be incorrect.  The plan also concluded that, after more than 12 months of market research into the elevator industry in Australia, HIA was ready to expand into sales of elevators produced by Beijing Sunwa, the assembly and design of elevators, and upgrading existing elevators in the Australian market through the establishment of Sunwa Australia.  The plan envisaged investment by HIA and Beijing Sunwa and included drawings of a warehouse and associated offices at a site in Campbellfield, Victoria, which would be  leased by Sunwa Australia and would be the base for an Australian elevator manufacturer.  An initial investment of $A500,000 would be in place by March 2007.  Staff would be employed gradually from that date, and the workshop and equipment plus samples for exhibition would be ready for business by the end of June 2007.  In a statement dated 2 January 2007 Mr Luo acknowledged that accomplishing all the goals of the business would take a long time, in view of the complex requirements of establishing such a major project.

14.      Mr Luo conceded that he had not spent a significant period in Australia, but stated that the period of the visa coincided with a busy period in China as a result of an expansion of his business interests with Beijing Sunwa. 

15.      Mr Z Ovuka, general manager of HIA between 2006 and 2007, told the Tribunal that he had been working in the photoluminescence market and had introduced Mr Luo to the Glow in the dark paint that was supplied to Barloworld.  He said that because of the failure to capture the Chinese market for this product HIA had developed plans by 2006 and 2007 to focus on the elevator market in Australia and to use Australian and Chinese technology with the aim of exporting to the Middle East and Europe.  Mr Ovuka explained that Sunwa Australia would not be a subsidiary of Beijing Sunwa, but would work closely with that company to maximise opportunities.  He said that the cancellation of Mr Luo’s visa resulted in the cessation of the project, and he resigned to pursue other interests.

16. In assessing Mr Luo’s claims against the factors in s 134(3) of the Act and the guidelines in PAM3, the Tribunal considers that the business plan for HIA is not realistic in view of the single transaction for the supply of luminescence and the concession by Mr Luo that there is no market for this product. The business plan for HIA involving elevators is essentially a plan for Sunwa Australia. It includes ambitious plans and timelines for a comprehensive lift business comprising the manufacture and assembly of elevators in Australia.  However the evidence about the involvement of Beijing Sunwa is unclear, and there is uncertainty about whether Sunwa Australia will operate as a subsidiary of Beijing Sunwa or as a business partner/joint venturer, and whether Sunwa Australia plans to import elevators from China.

17.      The business plan provides no details of the resources needed for the project, its proposed markets or its customers.  Given that research commenced in 2004, there would be an expectation that a greater level of detail and planning would have occurred.  The basic task of registering Sunwa Australia as a business in Australia did not occur until April 2007, and the Tribunal concludes that the business plans are not genuine, realistic and achievable.   The documents describing research that has been undertaken contain generalisations about the Australian elevator market and do not include evidence of consultations with business advisors, and the Tribunal concludes that there has not been continuous and genuine business research.

18.      Mr Luo has spent 39 days in Australia in the period of more than three years from the grant of the visa until its cancellation, which does not constitute a significant time, and suggests that his major focus was on his business interests in China rather than promoting his Australian businesses.  There is little evidence of day-to-day management or involvement in either business, and Mr Luo appears to have relied on Mr Ovuka during the period from December 2006 until after the date of cancellation when the implementation of the business plan was to occur.  Mr Luo has transferred about $A250,000 to a bank account for HIA, which is considerably less than the amounts estimated by him for the establishment of the elevator business in Australia.  Mr Luo has failed to comply with one request by the Department of Immigration and Citizenship for information.   

19. After considering all the relevant factors in s 134(3) of the Act, the Tribunal finds that Mr Luo has not made a genuine effort to obtain a substantial ownership interest in an eligible business in Australia (s 134(2)(a) of the Act). Therefore he cannot satisfy s 134(2) of the Act.

SHOULD THE RESIDUAL DISCRETION NOT TO CANCEL THE VISA BE EXERCISED?

20.      In Kim v Ministerfor Immigration and Multicultural and Indigenous Affairs [2004] FCA 31 at [21] Kiefel J referred to a residual discretion which arises in situations where an applicant fails the tests in s 134(1) and s 134(2) of the Act:

The Minister might be satisfied of the matters referred to in subs (1) and not be satisfied as to the efforts made as referred to in subs (2) but nevertheless consider in a particular case that further time should be given to the visa holder to undertake what was required of them.

21.      In Re Ah Kow Phoon and Minister for Immigration and Multicultural Affairs [2006] AATA 527 the Tribunal referred to the need to demonstrate a sufficient level of sustained commitment over a 24-month period.

22.      The Tribunal takes into account Mr Luo’s evidence about his efforts to develop his business interests in Australia and the impact of the cancellation on his plans.  Mr Luo lives in China with his family and is the president and general manager of a large elevator company.  Although he said that he wishes to live permanently in Australia he has not shown any real commitment to doing so.  The business proposals for Australia appear to be hastily conceived and are unrealistic.  Benefits from the proposal regarding the elevator industry would probably be of greatest value to Mr Luo’s business interests in China.  For these reasons, the Tribunal concludes that he has not demonstrated a sustained commitment to either of the businesses in Australia in the period up to the date of cancellation of the visa that would warrant the exercise of the residual discretion in his favour.

DECISION

23.      The Tribunal affirms the decision under review.

I certify that the twenty-three [23] preceding paragraphs are a true copy of the reasons for the decision of:

G.D. Friedman, Senior Member

(sgd) Mara Putnis

Associate

Dates of hearing:  7 July 2008, 28 October 2008
Date of decision:  3 November 2008
Advocate for the applicant:          Mr L Zhong
Advocate for the respondent:      Ms K Miller

Solicitor for the respondent:        Australian Government Solicitor