Ng and Minister for Immigration and Multicultural and Indigenous Affairs
[2004] AATA 721
•6 July 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 721
ADMINISTRATIVE APPEALS TRIBUNAL )
) No W2002/476
GENERAL ADMINISTRATIVE DIVISION ) Re TJINDRASA NG Applicant
And
MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Mr Murray Allen, Member Date6 July 2004
PlacePerth
Decision The decision made on 7 November 2002 to cancel the business skills visa held by the applicant is affirmed. …..........(sgd M Allen).....................
Member
CATCHWORDS
Immigration – cancellation of business skills visa – applicant has a substantial ownership interest in an Australian company – that company carries on an eligible business - applicant has not been actively involved in the senior management of that business – applicant has not made genuine efforts to be involved in the senior management of the business – insufficient reason to exercise the residual discretion to not cancel the applicant’s visa – cancellation decision affirmed.
Administrative Appeals Tribunals Act 1975 s 37
Migration Act 1958 s 134
Re Lau and Minister for Immigration and Multicultural and Indigenous Affairs [2002] AATA 703
Re Jo and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 77
Re Yam and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 283Kim v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 31
REASONS FOR DECISION
6 July 2004 Mr Murray Allen, Member 1. On 7 November 2002 a delegate of the respondent cancelled the subclass 127 Business Skills visa held by the applicant and the visas held by the applicant’s family members, namely his wife and three children. The applicant and his wife applied to the Tribunal for review of the decisions affecting them but prior to the hearing of the matters the wife’s application was withdrawn. Accordingly, the only matter before me in these proceedings is the decision made to cancel the applicant’s visa.
2. At the hearing of the matter the applicant was represented by his solicitor, Mr Chong, and the respondent was represented by Ms Andretich, a solicitor with the Australian Government Solicitor. The Tribunal received into evidence the documents filed pursuant to s 37 of the Administrative Appeals Tribunals Act 1975 (T1 – T22 and ST1 – ST12) as well as a bundle of documents (SB1 – SB63) and Exhibit A1 tendered by the applicant. Oral evidence was given by the applicant.
3. The background to the matter is that during 1998 the applicant applied for business skills visas for himself and his family and on 3 May 1999 both visas were granted. The applicant first entered Australia under the visa on 14 August 1999.
4. By a form dated 23 August 2001 the applicant responded to a 24 month survey conducted by the respondent’s department. The applicant advised that he had no income from any source in Australia, that he had not at that time engaged in business in Australia, but that it was likely that he would become involved within the next 12 months. He stated that he and an associate had incorporated a company, Tacoma Holdings Pty Ltd (“Tacoma”) with the intention of acquiring a business or setting up an exporting business. He said that “everything is ready to operate as soon as we find a suitable business”.
5. In February 2002 the applicant provided information concerning export activities by Tacoma at the request of the respondent’s department. In July 2002 a notice of intention to cancel his visa was sent to the applicant, inviting representations by 15 August 2002. The applicant provided information concerning Tacoma’s activities but on 7 November 2002 the delegate of the respondent made the cancellation decision referred to at [1] above.
Consideration
6. A discretionary power to cancel the applicant’s business visa arises if any one of the three matters specified in s 134(1) of the Migration Act 1958 (“the Act”) are not satisfied by him. If the applicant has not failed to satisfy any one of those three matters then no power to cancel arises.
7. The first question is whether the applicant has failed to satisfy the requirements of s 134(1)(a), which requires that the applicant “has not obtained a substantial ownership interest in an eligible business in Australia”.
8. The only business activity that the applicant has been involved in in Australia concerns the activities of Tacoma. The documentary and oral evidence of the applicant establishes that Tacoma was incorporated on 13 March 2001, the three directors and shareholders being the applicant, Mr Basli Soenoto and Mr Kadir Widjaja. The applicant said that Mr Soenoto was a “silent” shareholder and played no part in the management or affairs of the company. He is a friend of the applicant and is a permanent resident of Australia. The applicant knew Mr Soenoto in Indonesia but had not previously been involved in business activities with him.
9. The applicant said that Mr Widjaja is a friend from school and university. He is also a permanent resident of Australia but the applicant said that Mr Widjaja did not spend much time in this country. Mr Widjaja has other business activities in Australia involving the importing of products into Indonesia from Singapore and elsewhere.
10. The applicant and Mr Widjaja each hold 40% and Mr Soenoto 20% of the share capital of Tacoma. The company was established with a paid up capital of $10,000 with each shareholder contributing proportionately to his shareholding.
11. The applicant said that Tacoma had originally been to be a vehicle through which an established business in Australia could be purchased. He and his fellow shareholders had not been able to find a suitable business to purchase and so the company had become involved in exporting Australian goods to Indonesia.
12. The first of those export transactions involved the purchase in August and September 2001 of consignments of milk powder from a Queensland company with a value of $127,923 and $132,800 respectively. The two consignments were on sold by Tacoma to an Indonesian company C.D. Sekawan, which the applicant said he had no connection with. The combined sale price of $265,938 represented a gross profit of approximately $5,200 or margin of approximately 2 per cent. The applicant said that although he knew that the transactions involving the milk powder was occurring he had not played any part in organising either the purchase of the product in Australia or the sale of it in Indonesia. Mr Widjaja had organised the transactions because he had the relevant business connections.
13. The applicant said that after the above transactions in 2001 Tacoma had not been involved in other export activities until September 2002. He and Mr Widjaja had decided that they would not continue with milk exporting because the Australian product was not competitive with similar but lower priced New Zealand milk.
14. The applicant said that in August or September 2002 he had identified the possibility of exporting flour from Australia to Indonesia and had discussed that with Mr Widjaja. They had identified the need to have proper distribution arrangements in Indonesia and had struck upon the idea of entering into an arrangement with an Indonesian company, PT Kubulinco, to assist in the distribution of the flour. PT Kubulinco is a company owned by Mr Widjaja’s brother (Mr Hondro) and SB3 is an agreement dated 27 August 2002 between Tacoma and PT Kubulinco, further reference to which will be made below.
15. The applicant said that he and Mr Widjaja created a brand name for the flour to be exported, namely “Koala”, with three grades of flour. The first, being Koala Green, was general purpose flour; the second, Koala Yellow, was flour for noodles; and the third, Koala Red, was flour for bakeries and better noodles.
16. By a purchase order dated 25 July 2002 (T174) PT Kubulinco placed an order with Tacoma for the purchase of approximately 3,620 metric tonnes of flour, allocated between the three grades, for a total amount of $1,363,072. The flour was to be shipped in specified quantities according to a schedule commencing immediately and ending in December 2002. Documents SB8 – SB50 contain invoices and other shipping documents relating to the sale by an Australian supplier (“Weston”) to Tacoma of various grades of flour between 11 September 2002 and 3 June 2003 at a total purchase price of $1,395,217 and its shipment to Indonesia. The amount of flour involved in those purchases appears to exceed the amount represented by the July 2002 purchase order from PT Kubulinco, but no other purchase orders from that company or other parties are included in the documents before me.
17. The applicant said that the export of flour from Australia had reduced during 2003 because of the appreciation of the Australian dollar and as at the date of hearing there had been no exports of flour after June or July 2003, but the applicant expected that they would continue.
18. The financial statements provided for Tacoma for the years ended 30 June 2000 to 30 June 2002 (SB58 - SB60) show that the company did not trade in the 2000 and 2001 years and recorded net losses after expenses in those years. In the year ended 30 June 2002 the company recorded a gross profit from trading of $5,204 (from sales of $265,928) and a net profit of $3,966.
19. The applicant said that financial statements for the year ended 30 June 2003 had not yet been prepared. However, documents SB55-SB57 are the business activity statements submitted by Tacoma to the Australian Taxation Office for the nine month period from 1 October 2002 until 30 June 2003. They show that the company made export sales of $1,419,761 in that nine month period.
20. The respondent concedes that the applicant has a substantial ownership interest via his 40% shareholding in Tacoma. However, the respondent contends that Tacoma does not carry on an eligible business in Australia.
21. Section 134(10) of the Act defines an eligible business as one that the respondent (or this Tribunal):
“…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”.
22. On the evidence before me I am satisfied that Tacoma did carry on a business in Australia. It has a corporate form, there has been a continuity and repetition of transactions over many months, there has been an intention to make a profit and profits have been made in the latter years of its operation and the company has complied with necessary regulatory (such as taxation) requirements and has the indicia of a business. The next question is whether, having regard to the factors identified in s 134(10), the business is an eligible business. Paragraph 4.3.2 of the Migration Series Instructions 133 issued by the respondent to guide the administration of the relevant part of the Act notes that eligibility of a business relates to the achievement of stated objectives through the activities of the business, not directly to the size or scale of the business. Paragraph 4.3.3 notes that there is no requirement for the activities to be on any particular scale; it is sufficient for the business to demonstrate that its activities have achieved one of the stated objectives.
23. At the time of cancellation of the applicant’s visa in November 2002 Tacoma had exported milk to the value of approximately $260,000 and flour to the value of several hundred thousand dollars and had a contact for the supply of considerable quantities of flour in the period thereafter. Accordingly, I am satisfied that at the time of cancellation Tacoma had exported Australian goods and services and would continue to do so thereafter. Accordingly, I find that item (c) of the matters identified in s134(10) of the Act was satisfied. It is of course sufficient if only one of those items is satisfied, but on the evidence I am also satisfied that at least item (b) (creation or maintenance of employment in Australia) and (f) (increasing commercial activity and competitiveness) would also be satisfied.
24. Accordingly, I find that Tacoma did conduct an eligible business in Australia and the applicant had not failed to satisfy the requirements of s134(1)(a). I must therefore consider whether the applicant failed to satisfy the requirements of s134(1)(b) of the Act, which requires that he utilise his skills “… in actively participating at a senior level in the day to day management of …” the eligible business conducted by Tacoma.
25. As noted above the applicant said that Mr Soenoto was a silent participant in Tacoma and played no part in its management. Accordingly, whatever senior management did occur must have been undertaken by the applicant or Mr Widjaja.
26. The applicant’s evidence was that he is a senior executive with a major Indonesian bank and is a member of the Board of Directors, the second most senior decision-making entity in the corporation. He is responsible for the bank’s credit risk function and he has three people reporting directly to him with another 30 to 40 beneath that. The applicant said that despite his long working hours at the bank he was able to spend about 25 hours each week working on Tacoma affairs. He said that he was able to take phone calls during working hours and could have meetings concerning Tacoma at lunch time or after working hours. He thought that he spent at least two hours a day, Monday to Friday, on Tacoma affairs and spent seven or eight hours on Saturdays. He said that most Indonesian small businesses work on Saturdays and so he was able to visit potential customers on that day.
27. The applicant said that at the time he had been granted his visa his intention was to resign from the bank but he subsequently decided that staying with the bank was adding value to Tacoma’s business because his bank contacts were often potential Tacoma customers.
28. The applicant said that Mr Widjaja operates an import business with a base in Jakarta, and with Mr Hondro is involved in the importation and distribution of sugar from Italy, a product which has similar customers as for flour. It is apparent that Mr Widjaja played a major role in the management of Tacoma’s affairs. The applicant said that the first two exports of milk were entirely due to Mr Widjaja’s efforts and that the applicant was not involved at all. Mr Widjaja negotiated with Weston regarding the purchase of the flour and Mr Widjaja’s office in Jakarta handled all the documentation regarding the purchase and importing of the flour and the passing on of documents to Tacoma’s accountants in Australia for the purpose of preparing financial statements and filing tax returns.
29. In August 2002, when responding to the notice of intention to cancel his visa, the applicant provided a document (T176) that purported to state his “key duties and responsibilities” concerning Tacoma - as follows:
“1.Establish strategy for the company, including products, target markets and annual sales targets;
2.Evaluate credit risk of new customers and, on that basis establish settlement terms in advance of shipments;
3. Review credit risk of existing customers at least annually, adjust settlement terms as deemed necessary;
4.Engage professional accountants to prepare financial statements, filings and tax returns;
5.Ensure financial controls including signing authority over bank accounts are sufficient and that disbursements are reviewed;
6.Review pricing decisions to ensure the company remains competitive and can earn adequate margins;
7. Support marketing efforts by identifying potential new customers.”
30. In relation to point 1 the applicant said that he and Mr Widjaja had identified flour and decided what strategy to employ - such as creating the Koala brand with the three grades of flour. Because there had been no other products since that time this point had no longer been relevant. In relation to points 2 and 3 this had only been done once and involved Mr Widjaja because it concerned PT Kubulinco. In relation to point 4, the applicant said that this had already been done prior to August 2002. The applicant said that point 5 was left to Mr Widjaja. In relation to point 6 the applicant said that he and Mr Widjaja had been involved in setting the price at which the flour would be sold to PT Kubulinco but, in reality, there had been very little flexibility regarding price because PT Kubulinco knew the price at which the product could be sold in Indonesia and there were very small margins involved.
31. The applicant said that point 7 was his major role in the company, but he acknowledged that he had not been very successful in finding new customers for the flour. The applicant said that the agreement between Tacoma and PT Kubulinco (SB3), although described as a partnership agreement, was in reality a distribution arrangement. The agreement involved PT Kubulinco buying the flour from Tacoma at its own risk, but because flour was a new product for PT Kubulinco it wanted the ability to call on Tacoma (i.e. Mr Widjaja and the applicant) to provide support by way of marketing to the contacts that Mr Widjaja and the applicant had in Indonesia. The target market was small businesses – such as noodle makers – and the idea was that the applicant’s existing bank contacts and any new contacts that he could make could be encouraged to buy flour from PT Kubulinco.
32. In August 2002 the applicant had, as part of his response to the notice of intention to cancel, provided a list of what was described as “a target customer list”. The applicant said that he had not made contact with all of them and not all of them had become customers.
33. Involvement in the senior management of a business does not require daily involvement nor does it necessarily require involvement in what might be called the administrative aspects of the company’s management. Involvement at a senior level by experienced business persons will often be intangible and may involve ideas and planning. What is required is that there be sufficient management for the needs of the specific business: see Re Lau and Minister for Immigration and Multicultural and Indigenous Affairs [2002] AATA 703 at [32] and [33], Re Jo and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 77 at [35], and Re Yam and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 283 at [93]-[95]. It is not necessary that the management activities take place in Australia: see Re Jo (supra) at [33], and Re Yam (supra) at [101].
34. The applicant spent only 42 days in Australia prior to the cancellation of his visa, visiting on 12 occasions for a few days each. He said that he met with Tacoma’s accountant on each occasion to discuss possible business activities but he had not examined the five possible business acquisitions that the accountant had suggested in a letter dated 16 August 2001 (T134). Since that time the accountant had not suggested other possible businesses to acquire but the applicant said that he had asked the accountant to look at the possibility of exporting other products such as butter, oysters and wine. The accountant had not given him any advice that he could use regarding those possibilities and the applicant said he had made no inquiries about gaining supplies of those possible products.
35. I note that when the applicant completed the 24 month survey form on 23 August 2001 he referred to the incorporation of Tacoma and noted that everything was ready to operate as soon as a suitable business was found. In fact, by that date Tacoma had already made one purchase of milk products, which the applicant said he was aware of, and had already received the purchase order from PT Kubulinco dated 25 July 2002 for a very substantial purchase of flour that would extend over a number of months. In addition, the agreement between Tacoma and PT Kubulinco is dated 27 August 2002, i.e. four days after the applicant signed his 24 month survey form. None of these actual or prospective developments were referred to in that response.
36. That fact, plus the applicant’s evidence that the milk transactions had been totally the work of Mr Widjaja and that it was Mr Widjaja who essentially managed the day to day activities of Tacoma leads me to the conclusion that the applicant has exaggerated to a substantial degree his involvement in the management of Tacoma. The applicant said that it had not occurred to him to arrange for Mr Widjaja to give evidence about the respective roles of the applicant and Mr Widjaja in Tacoma. SB2 is a letter dated 5 March 2003 from Mr Widjaja on behalf of Tacoma confirming the applicant’s shareholding in Tacoma and stating to the effect that the applicant had been active in the day to day management of Tacoma, his main responsibilities being business strategy, evaluating customer credit risk, researching industry trends, competitor analysis, and identifying potential new customers. That list bears considerable similarity to the list produced by the applicant in August 2002 and as referred to in [29] - [31] above did not represent accurately the true involvement of the applicant in Tacoma’s affairs.
37. On balance I consider that the activities of Tacoma have, essentially, been conducted as an extension of the importing business conducted in Indonesia by Mr Widjaja and, possibly, that of his brother. I can accept that the applicant has had some involvement in the generation of the idea to import flour, but I am satisfied that he has not been involved in the management of Tacoma’s affairs to the extent that he claims, either on a regular basis or on an intermittent basis. Accordingly, I am not satisfied that he has been actively involved in the senior management of Tacoma’s affairs to the extent required by s134(1)(b) and I find that he has failed to satisfy that requirement. Because of that failure it must follow that he also fails to satisfy the requirements of s134(1)(c), which requires the applicant to intend to continue to be actively involved in the management of the relevant business. I find, therefore, because of the failure of the applicant to satisfy the requirements of s134(1)(b)and (c), that the discretionary power to cancel the applicant’s visa did arise under s134(1) of the Act.
38. I must therefore consider whether the applicant has satisfied all the requirements of s134(2). If he has so satisfied those requirements then his visa must not be cancelled. Section 134(2) relevantly provides that a business visa must not be cancelled under s 134(1) if the respondent (or the Tribunal) is satisfied that the holder: “(a) has made a genuine effort to continue 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.”
39. In the present case it is clear that the applicant has made a genuine effort to satisfy the requirements of s134(2)(a) and has succeeded in obtaining the requisite ownership interest in an eligible business.
40. In relation to s134(2)(b), I have already concluded that the applicant, despite being a substantial shareholder and director of Tacoma, did not actively involve himself in the management of that business. The absence of evidence from Mr Widjaja means that I do not have direct evidence (other than that of the applicant) of how Mr Widjaja and the applicant organised the affairs of Tacoma between themselves. I have concluded above that the applicant’s evidence exaggerated his involvement. Had the applicant tried to be more involved in Tacoma’s affairs than I have found he was, I have no doubt that he would have given evidence of those efforts and the reasons why it had not been possible for him to be involved to a greater extent. This is not a case where the applicant has been unable to establish an eligible business in Australia, as is often the case. Rather, the requisite business has been established but I have concluded that the applicant has not involved himself to the requisite degree in its management. No doubt for entirely understandable reasons the applicant has chosen to remain a very senior executive in a major bank and I have no doubt that his time is accounted for to a very high degree in the discharge of his duties to the bank. The applicant and his wife and children have remained resident in Jakarta and on the evidence I am satisfied that the various trips made to Australia were not substantially to advance the interests of Tacoma, although the applicant may well have met the company’s accountant on those visits.
41. In all the circumstances, I consider that there is insufficient evidence upon which I can find that the applicant made a level of effort that went beyond a superficial or token involvement in Tacoma’s business. See Re Yam (supra) at [53] Accordingly, I conclude that the applicant has not satisfied the requirements of s134(2) of the Act and hence that subsection does not prevent the cancellation of his visa. The power to cancel the applicant’s visa under s134(1) is a discretionary power and a residual discretion remains to not cancel the visa even though the power to do so has arisen: Kim v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 31 at [24].
42. At the hearing and in subsequent written submissions the applicant did not identify any particular factors that ought to be taken into account when considering whether to exercise that residual discretion in his favour. On the evidence the applicant and his family have at all times been resident in Indonesia and the applicant has spent very little time in Australia under the visa. He said that he intended to spend more time in Australia once Tacoma’s business had become more established with more products and customers, but no particular timeframe was mentioned.
43. The only evidence of the applicant regarding his family’s affairs, apart from that mentioned above, is that his wife does not work and that his children all attend school in Indonesia, utilising an Australian school curriculum in anticipation of an eventual move to Australia. There is no evidence of any hardship that would eventuate to the applicant or the members of his family if the applicant’s visa were to be cancelled. They would continue to live in Indonesia and the applicant would continue in his senior position with the bank.
44. In all the circumstances I am not satisfied that there is sufficient reason to exercise the residual discretion to not cancel the visa in the applicant’s favour. Accordingly, my decision is that the decision made by a delegate of the respondent on 7 November 2002 to cancel the business visa held by the applicant is affirmed.
I certify that the 44 preceding paragraphs are a true copy of the reasons for the decision herein of Mr Murray Allen, Member
Signed: ..............(sgd V Wong).................................
AssociateDate/s of Hearing 7 November 2003
Date of Decision 6 July 2004
Counsel for the Applicant Mr J Chong
Counsel for the Respondent Ms J Andretich
Solicitor for the Respondent Australian Government Solicitor
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