Nguyen v Minister for Immigration and Citizenship

[2012] HCATrans 85

[2012] HCATrans 085

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S39 of 2012

B e t w e e n -

THI KIM LAN NGUYEN

Plaintiff

and

MINISTER FOR IMMIGRATION AND CITIZENSHIP

Defendant

Application for an order to show cause

HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 2 APRIL 2012, AT 9.33 AM

Copyright in the High Court of Australia

MR L.J. KARP:   May it please your Honour, I appear for the plaintiff.  (instructed by Vietaust Lawyers)

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

HIS HONOUR:   Yes.  Now, Mr Karp, you are proceeding with your application for an order to show cause which was filed on 8 February?

MR KARP:   Yes, your Honour.

HIS HONOUR:   You rely on Kim Pham’s affidavit filed on 8 February 2012?

MR KARP:   Yes, your Honour.

HIS HONOUR:   Any problems with that, Mr Kay Hoyle?  Very well.  I have read that.  There is an affidavit of service we need not bother with, I think.

MR KARP:   No, your Honour.

HIS HONOUR:   You have no other ‑ ‑ ‑

MR KARP:   No other evidence.

HIS HONOUR:   Your evidence, Mr Kay Hoyle, is the formal evidence of Mr Jones about the court book?

MR KAY HOYLE:   That is it, your Honour, yes.

HIS HONOUR:   Yes, and you tender the court book?

MR KAY HOYLE:   Yes, I tender the court book.

HIS HONOUR:   You are happy with the court book?

MR KARP:   Yes, your Honour.

HIS HONOUR:   Yes.  The court book will be referred to as the court book.  Yes.  I have read the submissions of the parties.  Yes, Mr Karp.

MR KARP:   Your Honour, the Minister does not oppose the extension of time.

HIS HONOUR:   I think we can put that on one side and concentrate on the substantive points the Minister raises which are, I think, three in number.  One is whether the funds invested with the New South Wales Government are unencumbered, another is whether those funds were legally owned by the applicant, or now the plaintiff, and a third is whether they were accumulated from the qualifying business or eligible investment activities of the applicant.

MR KARP:   Your Honour, in my submission, the only issue which does arise is whether they were unencumbered and that is because that was the subject of the delegate’s decision.  The delegate’s decision can be found, or the relevant part of it, can be found at page 7 of the annexure to Ms Pham’s affidavit.

HIS HONOUR:   Just one moment.  So the way you see it is, if the funds were unencumbered the matter must be restored to the delegate for reconsideration pursuant to your application for a writ of mandamus and if anyone wants to take any point about funds not being owned by the applicant or not being sourced from the applicant’s business, that is the time to take the point?

MR KARP:   That is correct, your Honour.  The delegate made his decision on a very restricted basis and that is that the policy defines – the delegate used that word – the regulation and the regulation does not permit money borrowed against property to be used for the designated investment and the plaintiff’s ‑ ‑ ‑

HIS HONOUR:   Is there not an argument, though, that if – perhaps in a moment we might see how Mr Kay Hoyle puts it, but let us say that as far as things stand the money used to acquire the $750,000 investment bond was not legally owned by the applicant, would it not be futile to restore the matter to the applicant even though it might be unencumbered?

MR KARP:   No, your Honour.  The reason is that the relationship between the money which was borrowed, the plaintiff and the plaintiff’s company is a matter of fact which was not explored by the delegate and if the delegate was concerned about that, then the delegate could and should have explored the issue and asked questions or, rather, the delegate could have done that. 

HIS HONOUR:   Your qualification is reasonable, but another view would be it is for applicants for visas to fit themselves within whatever regulation they are trying to fit themselves within.

MR KARP:   Yes.

HIS HONOUR:   If material before the delegate just does not establish one or more of the integers, then the application must fail.  I suppose you would raise a natural justice point perhaps?

MR KARP:   I would raise a natural justice point and I would also say that the focus of this Court should be the decision of the delegate and not the other material which was before the delegate.

HIS HONOUR:   It might just shorten things by asking Mr Kay Hoyle.  At the very end of your written submissions you raised two points additional to the unencumbered point, are you pressing those points today?

MR KAY HOYLE:   Yes.  Just to clarify those two issues, those two issues were put on the basis that your Honour has identified, namely, that it would be futile for this Court to refer the matter back to the delegate in circumstances where, on the evidence before this Court, which was also the evidence before the delegate, it is quite clear that if you remitted the matter back to the delegate, in my submission, the evidence would clearly and unambiguously disclose that the funds were not legally owned in the sense required by the regulation nor accumulated in the sense required by the regulation.  Now, there may be matters of argument about making good those two points, but in conceptual terms that is why those two matters are there.

HIS HONOUR:   I see.  Very well.  Mr Karp, let us leave those two matters on one side and let us hear your arguments on “unencumbered”.

MR KARP:   Thank you, your Honour.  Your Honour, the argument simply is – if I can take you to the particular part of the regulations which commence on page 4 of the annexure to my additional submissions.

HIS HONOUR:   Yes, I have that.

MR KARP:   As I think it is clear, the applicant has to make what is called a designated investment of AUD750,000.  There is no question that that has been done.  At subclause (2):

The Minister is satisfied that the funds mentioned in subclause (1) were –

legally owned, unencumbered and accumulated.  Now, in my submission, what has to be legally owned, unencumbered and accumulated is the funds which have been used to make a designated investment.  The evidence ‑ ‑ ‑

HIS HONOUR:   Just one moment.  What must be unencumbered is the funds used to make the designated investment, so that the plaintiff had in her hands not cash, but she had presumably access to some bank account from which she could get $750,000.

MR KARP:   Yes.

HIS HONOUR:   Your case is there is nothing to show that there is any charge or mortgage affecting that sum.

MR KARP:   Nor any trust or anything which would create an impediment to her paying the money into the designated investment fund.

HIS HONOUR:   I have an honest state of mind and I use someone else’s money to buy some property in equity, that property will be the true owner of the moneys.  There would be a trust, would there not?

MR KARP:   I think that that would be correct, your Honour, yes.

HIS HONOUR:   But your case is whether that is a problem or not, it is not a problem for today because for today we have to assume that the money was legally owned by the applicant.

MR KARP:   Yes.

HIS HONOUR:   Is there anything in any part of the decision‑maker’s reasons which indicates the sort of refinement of analysis we have just been going through?

MR KARP:   There is a history of the matter which commences at page 5 of the annexure to Ms Pham’s affidavit in which it is made clear that the funds used to make the investment were borrowed against what is called the use of property, because in Vietnam, still being nominally Communist, you cannot own property.  Apparently you can only use the property.  There has been nothing that I can see in these papers or in this description which deals with the question of how and by what means an investment or funds could be encumbered.

HIS HONOUR:   The plaintiff repeatedly referred to them as mortgages.

MR KARP:   Yes.

HIS HONOUR:   We have this difficulty that we are talking about – the transaction in New South Wales acquiring the Treasury bonds was no doubt governed by New South Wales law.  Everything else is presumably governed by the law of the Republic of Vietnam or some province within Vietnam.

MR KARP:   Yes, your Honour.

HIS HONOUR:   There is no evidence of what the law of that republic or that province is, so we presume that, subject to Danberg v Danberg considerations, we presume that the law of New South Wales is that law, that that law is the same as the law of New South Wales.

MR KARP:   That would be correct, yes.

HIS HONOUR:   Or Australia, but since the linkage is with New South Wales, it is probably New South Wales.  If someone talks about mortgages, should we not assume we are talking about mortgage security as known by the law of New South Wales?

MR KARP:   Well, that will depend on the documents which are in the court book.  Now, if I can take your Honour to ‑ ‑ ‑

HIS HONOUR:   Page 132, for example, is a contract to issue credit limit and at the bottom of page 132 with the heading “Mean of Security”:

The borrower undertakes the following methods to assure the debt payment –

and paragraph 2 then says:

And/or mortgaging to ABBANK the properties –

and paragraph 3 speaks about:

guarantee with security properties –

Now, are you contending this is not encumbrance?  I know your argument fastens on a different thing, namely ‑ ‑ ‑

MR KARP:   I am saying what is encumbered is the use of the property, not the funds.

HIS HONOUR:   Now, if I borrow a million dollars from Westpac to buy a house, you would not say money in my hands is encumbered, you would just say my security is encumbered.

MR KARP:   Yes, your Honour.

HIS HONOUR:   Well, the regulation speaks of funds being unencumbered. 

MR KARP:   Yes.

HIS HONOUR:   Now, I can understand that the Treasury bonds themselves do not appear to be encumbered.  Maybe this is a point on which minds might differ, but might it not be said that the money borrowed from these Vietnamese organisations is encumbered?  It is not just a matter of debtor and creditor, there are real rights involved, rights against real security.

MR KARP:   Your Honour, the way I read these documents at 130 and, I think, 172, which are the relevant ones, are that what is encumbered is not the funds themselves, it is the property.  If there is a default on the mortgage, then the legal right of the bank or the financial institution is against the property, not against the funds themselves.

HIS HONOUR:   Let us just get one small point of detail straight.  The borrowers in the two contracts we have been talking about, and I think there is a third one, is there not, that – but, anyway, just take those two, the credit borrower is Lan Thang Limited Liability Company.

MR KARP:   Yes.

HIS HONOUR:   There is a company in which 70 per cent of the shares are owned by the plaintiff and 30 per cent by her son called Lan Thang Company Limited.

MR KARP:   Yes.

HIS HONOUR:   Those two names refer to the same legal person?

MR KARP:   I am instructed so, your Honour, yes.

HIS HONOUR:   Is that agreed, Mr Kay Hoyle?

MR KAY HOYLE:   Yes.

HIS HONOUR:   Right.  Now, you have been saying there are two relevant contracts. 

MR KAY HOYLE:   Your Honour, at 172 of the court book.

HIS HONOUR:   Yes, I have 172 and we have looked at 130, but is there not a third one?

MR KAY HOYLE:   There is.

MR KARP:   There is another one, your Honour.  That was – I think Mr Jones is correct – 153.  That was actually the son’s property and when that was pointed out by the delegate the third contract was entered into which was over the plaintiff’s property, the mortgage to the son’s property was discharged, and the discharge can be seen – or the application for registration of the discharge can be seen at 183 and the notification of the discharge is at 187.

HIS HONOUR:   All right.  I am just at the stage of trying to sort things out.  We are discussing the fact that Vietnam was a Communist country and cannot, as it were, mortgage the fee simple, you mortgage the use of the land.

MR KARP:   That is my understanding, your Honour, on instructions.

HIS HONOUR:   On your argument it does not matter whether you call that unencumbered land or not because what matters is whether the money is raised by the transaction against that land is encumbered.

MR KARP:   That is correct, your Honour, yes.

HIS HONOUR:   That argument when correct, do you deny that, for present purposes, mortgages were created over the relevant land by those two documents?

MR KARP:   Well, they were, yes.

HIS HONOUR:   What would be an example of funds being encumbered?

MR KARP:   Well, if there was a charge on the funds themselves or if the funds were subject to a trust.  Those are the two examples I can think of immediately, your Honour.

HIS HONOUR:   Okay.  Can I raise a larger question.  Does not the language of the relevant regulation and the ones surrounding it seem to rest on the idea that it is a good idea to grant visas to foreigners if they show they have had the economic ability to raise $750,000 out of their own businesses, as it were, capital, which capital can be used to buy some Australian capital of a safe kind like New South Wales Treasury bonds, which is, as it were, taken out of their hands for four years but at the end of the four years will go back into their hands and can be used to advance the interests of whatever business it is they are running?

MR KARP:   Yes.

HIS HONOUR:   And does it not rest on the idea that there may be a difference between an organisation which has actually made $750,000 of profits which it accumulates and an organisation which, partly because one of the principals has got some land and perhaps the son has got some land, it is possible to borrow money which can be handed over from the natural persons into the hands of the company, then perhaps out of the hands of the company again into the hands of one of the natural persons – the latter types of transaction make us think of Australia in the late 1980s, the former type of transaction one can understand why the Executive and Parliament are content to encourage that and encourage the migration of people who are able to do that.  Does that not cast some possible light on the meaning of “unencumbered”?

MR KARP:   Your Honour, it may, but if I could put a counterargument to that.  Had the plaintiff – and there is no evidence for this, but for the sake of example, if the plaintiff were to raise some large amount of capital rather than keep it in liquid form or semi-liquid form, he or she would buy property.  Now, the funds to buy the property would be accumulated from the business.  If the plaintiff were then to sell the property, the funds would be certainly free from any encumbrance.  In this case, rather than sell the property, which she could have done, she borrowed money against the property with the hope and no doubt the expectation of being able to pay the money back and retaining the property. 

Either way she had the wherewithal, the business skills, to actually raise the capital required to make the designated investment but in the way that she has done it, she maintains the property, expects to pay off the mortgage and at the end of four years have $750,000 to invest in a business in Australia.  It is simply another way of going about the same thing and, in my respectful submission, I do not see that Parliament could not have intended something like this to have happened.

HIS HONOUR:   I think that argument does rest on the initial assumption that the capital used to buy the properties came out of the business.

MR KARP:   Yes.

HIS HONOUR:   It may or may not be so, but no attempt so far has been made to establish that linkage.

MR KARP:   Well, in my reading of the papers, your Honour, no attempt has been made and had the delegate been interested in that, he or she could have made an inquiry.

HIS HONOUR:   Or at least could have said, “Look, I am against you at the moment on this unless you can show the linkage.”

MR KARP:   Yes.

HIS HONOUR:   Just looking at the language of regulation 165.222(2), you were saying that an example of the funds being encumbered would be if there was a charge over them or a trust over them.  Now, (a) says legally owned by the applicant.  Yes, I see.  An applicant might say, “Here is $750,000 which I legally owned” and the delegate might say, “Well, you own it at law but not in equity because it is subject to a trust.”

MR KARP:   Yes.

HIS HONOUR:   That would mean that the meaning of “unencumbered” would perhaps have to exclude the idea of trust and just concentrate on security charges.  You might have $750,000 in a bank account, what would be a concrete example of an encumbrance over that?

MR KARP:   Well, there might be a dispute over who owned it or possibly a lien of some description or possibly a debt owing to, say, the Australian Taxation Office where the tax office contends that the money was earned but not declared.

HIS HONOUR:   Does that give them an encumbrance?

MR KARP:   No, possibly not, your Honour.  I would have to withdraw that.

HIS HONOUR:   Might be some sort of garnishee regime.

MR KARP:   A garnishee regime would be another example, yes, your Honour.  I think another point, your Honour, is that the – maybe I move in the wrong circles, but I would imagine that very few people have $750,000 in liquid funds able to invest.  I would have thought that funds would be tied up in shares or property or something like that in normal circumstances. 

HIS HONOUR:   Your client had them.

MR KARP:   My client had the money, but it was tied up or it appears to have been tied up in property until the money was transferred to a bank account and then transferred to the Treasury bonds.

HIS HONOUR:   Your statement that you move in the wrong circles and there are not many people who have $750,000 to invest, but some people or some companies do have more than $750,000 in a bank account and lots of them have more than $750,000 of shares in companies which are traded on the stock exchange.

MR KARP:   Yes, most certainly.

HIS HONOUR:   No mortgages, no charges.  They ring up a broker at 10.30 and they get access to money at 11.00.  Now, where does this lead your argument?

MR KARP:   Well, perhaps I overstretched that one a bit, but my main point is, your Honour, that the question is whether the funds themselves were encumbered, not the property from which they may have been derived.

HIS HONOUR:   Well, there is another argument which you may or may not wish to adopt.  Subclause (2) says:

The Minister is satisfied that the funds mentioned in subclause (1) were:

(a)      legally owned –

The only funds mentioned in subclause (1) are an amount of AUD750,000, which is a designated investment and the designated investment happens to be New South Wales Treasury bonds.  The argument would be this.  That investment is not encumbered.  There might be mortgages back in Vietnam and there might be other monetary dealings which led to the money being available, but that particular investment is not the subject of any mortgage. 

MR KARP:   I respectfully adopt that, your Honour, yes.

HIS HONOUR:   Let me put another idea into the ring.  Accepting there is this distinction between people who have made $750,000 and accumulated it, amassed it and whether it is amassed inside their company structure or whether it is something that has been paid out to shareholders and can be, as it were, pulled back in again or at least mortgaged to raise money to be pulled back in again, the vice, as it were, in any scheme by which people did not actually accumulate the $750,000 originally, in other words, did not behave as people did in that long example you gave, but rather simply just borrowed against bits of property they happen to have lying around in their personal names, which may or may not have been generated because of the success of the business, any problem with the second type of transaction falling into this clause will be overcome by paragraph (a), that it is not legally owned or (c), that it is not accumulated. 

Now, let us just test that.  Of course, if you say that the only relevant funds are the $750,000 designated investment, vice is not dealt with and in

(c) when it talks about accumulated from the qualifying business, there the search is for some chain of sources, as it were, perhaps would you say this, that the vice that the defendant has pointed to in its written submissions will be met at that stage.  If the money has not actually come from the qualifying business but other businesses or inheritance from relatives, the application will fail on that ground?

MR KARP:   I would certainly say that, your Honour, yes.

HIS HONOUR:   Right.  Are there any other points you want to make?

MR KARP:   Nothing further, your Honour.

HIS HONOUR:   Yes, Mr Kay Hoyle.  On the futility question, Mr Kay Hoyle, at the moment I think Mr Karp is correct, that whether those are, as it were, really decisive points, it is not something one can be sure of without them being raised with the applicant/plaintiff.  This is no fault of the delegate, but they were not raised when the matter was before the delegate.  If they are to be raised on the next occasion before the delegate, if there is a next occasion, they can be raised then.  Are you content with that course? 

MR KAY HOYLE:   Well, given your Honour’s indication, yes.  I would only be repeating my previous submission.

HIS HONOUR:   I do not want to force you in any direction, but ‑ ‑ ‑

MR KAY HOYLE:   Well, I recognise ‑ ‑ ‑

HIS HONOUR:   I mean, take the proposition that the money was not owned by the applicant, it would be the matter of five minutes work to get a resolution of the directors of the relevant company to agree – it would be a matter for them whether it was bona fide in the best interests of the company to agree that the money should be on lent to this plaintiff for this plaintiff to acquire the investment bond.  No doubt a prudent company would demand some sort of security over it which would lead into trouble in paragraph (b), but we just do not know what the facts are.

MR KAY HOYLE:   Well, if I may put the matter in another way, your Honour.  I think the futility argument would only be one that your Honour would consider in circumstances where your Honour was entirely satisfied that, on the evidence before your Honour, the answer was going to be that neither (a) nor (c) were met.  Now, in circumstances where there may well be still a residual issue on those matters, then considerations of natural justice then would take that course, yes.

HIS HONOUR:   All right.  Now, the various possibilities which Mr Karp raised or accepted in argument, we are concentrating on paragraph (b) which says:

The Minister is satisfied that the funds mentioned in subclause (1) were –

unencumbered.  Now, do you accept that the designated investment was unencumbered?  This is to construe the clause relatively narrowly.  You have a broader construction?

MR KAY HOYLE:   Well, on the narrow construction, that is to say, the construction favoured by my learned friend, Mr Karp, then on one view it can be said that the funds, being the designated investment, of an amount of $750,000 would not be encumbered, that is to say, there would be no direct claim on the money in the form of some sort of equitable claim or garnishment claim of the sort your Honour has already identified, yes.

HIS HONOUR:   Yes.  I mean, if this went back to the delegate, it would be perhaps a line of inquiry that would have to be considered, whether a company should not just give $750,000 to its principal shareholder without there being any encumbrance over it because it would mean at the end of the four years the shareholder could just put the $750,000, once the New South Wales Government gave it back again, into her pocket and her son could whistle for it, or the company and the other shareholder in the company could whistle for it.  In other words, it might be rather unrealistic to suppose that in this type of circumstance it really was unencumbered.  Either minds will turn to the question – if they were turned to the question, you would think there would be an encumbrance.  If they were not turned question, then it is rather a slack state of affairs.  Again, this would be something to be looked at later rather than now.

MR KAY HOYLE:   Well, that may be the case, but in this particular instance what the defendant submits occurred is that the delegate applied – and this will be apparent from my written submissions – the delegate applied the ordinary meaning of the term “unencumbered”.  Now, in your exchanges with my learned friend your Honour identified certain ways in which a claim of encumbrance on the funds could be framed and one of the propositions that we rely on is that my learned friend’s interpretation is essentially a narrow technical one, one that is not mandated by the ordinary words or, indeed, the broader purpose that we say can be inferred from the regulation. 

Now, it is in that context, and I recognise there are a whole range of circumstances which may illuminate shades of meaning of the word “unencumbered”, but what occurred here was that the delegate took the ordinary meaning, the broad meaning, and, consistent with the purpose of the regulation, concluded that where the funds were subject to a form of fetter or burden or hindrance that that circumstance brought it within that more ordinary meaning of “unencumbered”. 

Now, in that context, the distinction that my learned friend relies on is to some degree artificial, although it relies upon coming to a conclusion about the correct statutory meaning.  It is artificial because when these provisions are read in their entirety and in context, and your Honour has already alluded to this in your Honour’s remarks from the Bench, what is being determined is whether an individual is able to bring a sum of money – yes, the sum of money identified in subparagraph (1) – a sum of money entirely free of potential difficulties in relation to those funds.

Now, it may be the case that in a narrow technical meaning the funds may not be encumbered – may – however, in my submission, that is not the correct test.  The correct test, taking into account the matters that you have already referred to and that are referred to in my written submissions, the correct test is, is this sum of money subject to some form of hindrance or burden whether actual or potential because over the course of the investment in the security in them and the securities then made liquid, those funds may then have to be used to discharge liabilities in relation to the very assets or property which generated the funds in the first place.  So when seen in that wider context of ordinary meaning, what is being sought is someone who can provide funds that are in no way subject to potential constraint.

Now, if your Honour were to accept that the ordinary meaning were the correct one here, an additional issue arises which is that it may be the case that the delegate considered that this particular factual circumstance was one that was unencumbered and that may have been an error of fact given the range of potential factual matters that might apply to the term “unencumbered”.  However, once he applied the correct statutory construction, then the delegate’s choice to then consider that those factual circumstances were ones that met that construction, then even if one were to characterise that as an error, that would be an error, in my submission, within jurisdiction in the way that I have sought to refer to in my written submissions.  That is the essential point of difference between myself and my learned friend.

HIS HONOUR:   Let us just look at the delegate’s reasons.  Is the annexure to Ms Pham’s affidavit the best place?

MR KAY HOYLE:   Or, alternatively, page 295 of the court book, your Honour.

HIS HONOUR:   Let go there.

MR KAY HOYLE:   The decision actually starts at page 291 of the court book.

HIS HONOUR:   Where do you submit the heart of the reasoning is?  Clause 22.1, policy overview, is a mixture of general summary and policy.

MR KAY HOYLE:   I would venture to suggest that the heart of the reasoning is in the lower third of that page.  It is apparent that what the delegate did in this case was take the policy overview statement – which is also referred to at page 278 of the court book – took that statement as a correct statement of the position, that is to say, a correct statement of the outcome, namely, that on a proper application the funds could not be borrowed and, in turn, the delegate then referred to, again in policy advice seemingly, the meaning of the term.  You will see towards the bottom of page 295:

Unencumbered is not defined in the Regulations, but is defined in the Oxford dictionary as meaning:

(a)      not encumbered with a burden –

and those other definitions. 

HIS HONOUR:   The thing is, in a way it is not whether it is a very narrow or a rather narrow or a broader meaning for “unencumbered”, it is a question of meanings of various width to the phrase “unencumbered funds”.  If you treat the funds as merely being the $750,000, that is one thing.  If you treat the funds as referring to the entire process by which that sum of money was generated which ended up in the hands of the New South Wales Government, then that is another and the delegate is really saying that if you look at the money in its various mutations, it is not unencumbered with a burden, it is subject to a liability and it is subject to a financial obligation because eventually those loans will have to be repaid. 

I must say, on the current material I cannot see that if anyone went to the New South Wales Government and said, “We need that money because there has been a breach of the covenants under the loans back in Vietnam”, the New South Wales Government will just say, “We do not know anything about this at all.  We are not giving it to you”, and they would be right, would they not?

MR KAY HOYLE:   It would be right and it is certainly correct to say that as far as the correctness of the delegate’s decision is concerned, it implicitly or otherwise relies upon the notion that the phrase “unencumbered” when linked to funds takes the matter back to the totality of the application, that is to say, one cannot divorce in the context of the regulations and noting what, in my submission, is their inferred purpose, one cannot divorce the provenance of those funds, the manner in which they are generated and the potential way in which those funds may have to be repaid.  One cannot divorce that from the idea of funds just sitting in a bank account.  It is correct when one reads the term “funds” in that way, but there will be very few circumstances in which funds sitting in a bank account – there may be some – but, ordinarily speaking, the funds themselves being....someone comes and claims them, then it is likely to be met with a claim of, well, I cannot see how those funds are encumbered. 

However, in my submission, when the regulation is construed in the context of the other matters that are required and its purpose – well, in my submission, the inferred purpose – then those purposes would not be met by allowing an applicant simply to say, “Well, it does not matter how I got the funds here.  It does not matter what I did”, the fact is they are in a bank account and there is no technical legal reason, in the narrow sense that we have been discussing this morning, why those funds are encumbered.  In my submission, that would defeat what is clearly a well‑identified attempt in the regulations to encourage funds free and clear in the wider sense.

HIS HONOUR:   Does it come down to this then?  There are certain mischiefs that the regulation deals with.  If the money is handed over in exchange for the Treasury bond and a beneficiary comes along and says, “That is my Treasury bond.  Do not pay any interest out to the plaintiff, pay it out to me”, that is a mischief which would be dealt with by (2)(a), legally owned.

MR KAY HOYLE:   Yes.

HIS HONOUR:   Between the three of us we are having some difficulty in thinking up encumbrances that can attach to funds in a bank account which, just before it is handed over to the New South Wales Government, and let us assume for the sake of argument you cannot think of any, nonetheless, there is the fact that at the end of the four years the money goes back into the plaintiff’s hands and it is contemplated that when it is back in the plaintiff’s hands it will be used in the plaintiff’s business.  Now, what is the regulation that you rely on to support that?

MR KAY HOYLE:   That is 165.216.  Does your Honour have a copy of the complete regulation?  I do have a copy if your Honour ‑ ‑ ‑

HIS HONOUR:   No.  I have that.  It is annexed to the plaintiff’s additional submissions.

MR KAY HOYLE:   I am obliged.  It is 165.216.

HIS HONOUR:   Your sort of horror scenario is everything goes wrong in Vietnam.  The Vietnamese creditors are circling around the carcass of the plaintiff’s empire.  Once the New South Wales Government has handed the money back, they will pounce on it and nothing will be used in New South Wales.

MR KAY HOYLE:   It all goes and, furthermore, it has got to go.

HIS HONOUR:   On what we know, the person who procured the money to be handed over to the company with two names, which I think is a guarantor on at least one of the transactions, so properties are up as real security, although she may not have any personal liability, she does have those liabilities and to get out of that fix, she will have to use the $750,000 perhaps.

MR KAY HOYLE:   But perhaps it is, to forestall the possibility of that, is really the – there is no guarantee that that would happen in reality, but the regulation is designed to limit the possibility of it.

HIS HONOUR:   Yes.  Anything else?

MR KAY HOYLE:   This is possibly a minor point in the scheme of things, your Honour, but just to go back to the point your Honour raised in the course of your exchanges with my learned friend about Vietnamese law, just a brief point on that.  One of the things that the construction that we contend for, in my submission, would limit the potential inquiry into Vietnamese law only because there would be a broader inquiry as to the nature of how the funds might be constrained, but, in my submission, the primary focus, as your Honour has indicated ‑ ‑ ‑

HIS HONOUR:   Just going back, though, to what you have been saying, I do not quite grasp it. 

MR KAY HOYLE:   Actually, your Honour, I am just thinking about that now.

HIS HONOUR:   The background circumstances ‑ ‑ ‑

MR KAY HOYLE:   No, I am thinking about it on my feet actually.  In fact, the question of Vietnamese law will always be one that is going to be raised potentially.

HIS HONOUR:   Well, anyone can – I mean, if this were – what happens in front of the delegate were conventional litigation, which it is not, if the

party wanting to rely on Vietnamese law can rely on it either by pointing to books or pointing to witnesses – certainly mysteries associated with what happens when you move from the world of the delegate past the Migration Review Tribunal into a court, but if anything is really to be made about Vietnamese law, something would have to be established in front of the delegate about that and, indeed, in an earlier case, did we not look into Chinese law to some extent?  There was material before the decision-maker in ‑ ‑ ‑

MR KAY HOYLE:   Quite so, your Honour.

HIS HONOUR:   Anyway, this point you wanted to raise, do you need to bother about it?

MR KAY HOYLE:   I am content to leave my submissions there, unless your Honour has anything further.

HIS HONOUR:   I do not think so.  Yes, Mr Karp.

MR KARP:   Your Honour, two points in reply.  The first is that the horror scenario that my friend and yourself were discussing that everything goes bad could happen in a number of different ways, not only is it possible that the mortgage repayments were not able to be met, but in the four years of the investment a great deal could go wrong and the plaintiff might need to use the $750,000 for a part of it after the investment is completed to repay other debts, so there is no necessary correlation or no absolute correlation between the money which is used for the designated investment and the mortgage itself. 

The other point is that my friend was suggesting an implied rationale for the word “unencumbered” in this particular regulation.  My simple submission is if the Parliament meant that funds could not be borrowed to make this designated investment, it would be very easy for it to simply say so.

HIS HONOUR:   I must have used that form of argument hundreds or thousands of times in my life in various capacities, Mr Karp, but the older I get the weaker that type of argument always appears.  But in this instance, does not the requirement that it be accumulated from the qualifying business mean it is not to be merely borrowed by the qualifying business?

MR KARP:   It depends what “accumulated” means and the money which is accumulated from the business could be converted into an asset from which the funds are then drawn and this is essentially what is happening in this case.

HIS HONOUR:   This is a kind of harkening back to a point you made earlier.  Maybe the business did very well.  The owners of the business took the money out of the business and put it into other properties that might not be technically part of the business.  Now the business wants to take a new step into Australia, it needs to raise $750,000 so it borrows against the properties that were actually a reflection of the success of the qualifying business.

MR KARP:   Yes.

HIS HONOUR:   Yes, okay.

MR KARP:   Unless I can further assist your Honour.

HIS HONOUR:   Thank you.

MR KARP:   Thank you.

HIS HONOUR:   I will just adjourn for five minutes and return.

AT 10.34 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.47 AM:

HIS HONOUR:   On 8 February 2012, the plaintiff filed an application for an order to show cause why a writ of certiorari should not issue quashing a decision made on or about 13 October 2011 by a delegate of the defendant, the Minister for Immigration and Citizenship.  By that decision the delegate refused to grant to the plaintiff a State/Territory Sponsored (Investor) Provisional Subclass 165 visa.  The application for an order to show cause also sought an order enlarging the time for filing the application and other relief.

The plaintiff’s application for the visa was sponsored by the government of the State of New South Wales. By reason of section 347(2)(b) of the Migration Act 1958 (Cth) (“the Act”) read with section 338(5), only a sponsor can seek review of a decision to refuse applications of that category of visa from the Migration Review Tribunal. On 14 October 2011, the plaintiff requested the sponsor to seek review. However, on 14 November 2011, it refused to do so.

On 30 November 2011, the plaintiff filed an application to the Federal Magistrates Court for judicial review pursuant to section 476 of the Act. The defendant claimed that by reason of sections 337, 338(5)(b), 347(2)(b) and 476 of the Act the Federal Magistrates Court did not have jurisdiction. This is now common ground and the plaintiff procured the dismissal of the Federal Magistrates Court proceedings. The plaintiff then commenced the present proceedings. It is also common ground that the Federal Court of Australia has no jurisdiction so that it is not possible to remit the proceedings to it.

The plaintiff relied on clause 165.222(2)(b) of Schedule 2 of the Migration Regulations 1994 (Cth). The clause as a whole is as follows:

(1)The applicant has made a designated investment of an amount of AUD750 000, in the name of the applicant or in the names of the applicant and his or her spouse or de facto partner, in the State or Territory in which the appropriate regional authority that sponsored the applicant is located.

(2)The Minister is satisfied that the funds mentioned in subclause (1) were:

(a)legally owned by;

(i)the applicant; or

(ii)the applicant’s spouse or de facto partner, or

(iii)the applicant and his or her spouse or de facto partner together, and

(b)unencumbered; and

(c)accumulated from the qualifying business or eligible investment activities of

(i)the applicant, or

(ii)the applicant’s spouse or de facto partner; or

(iii)the applicant and his or her spouse or de facto partner together.

The Regulations stipulate that clause as containing criteria which must be satisfied by people in the position of the plaintiff.

The plaintiff made an investment of $750,000 in New South Wales Treasury bonds.  She thus claims to have satisfied clause 165.222(1).  The transaction, apart from that $750,000 investment, was carried out in Vietnam and likely to be governed by Vietnamese law.  There being no evidence of that law it will be presumed to be the same as New South Wales law.

The plaintiff in her written submissions stated that the “funds used to make the investment were derived from contracts by which the use of specified land in Vietnam was transferred to certain financial institutions in return for loans”. The plaintiff argues that although the moneys which provided the source of the funds comprising the investment were lent, and although the loans were secured, the investment itself is unencumbered, hence clause 165.222(2)(b) is satisfied. The plaintiff challenges the following passage in the reasons of the delegate:

Policy advice received and relating directly to a situation where funds have been borrowed against property assets owned by the applicant was addressed as follows:

The Minister is satisfied, based on the evidence provided by the applicant, that the funds invested were:

(a)      legally owned by the applicant;

(b)      unencumbered; and

(c)      accumulated from the qualifying business or eligible investment activities of the applicant.

“Unencumbered” is not defined in the Regulations, but is defined in the Oxford dictionary as meaning:

(a)      not encumbered with a burden;

(b)      having no liabilities; and

(c)      not subject to financial obligation. 

Therefore borrowing money against property to fund the DI is not accepted.

The defendant takes three points.  First, he says that there is no evidence that the investment is owned by the plaintiff.  Rather, he submits, the $750,000 was sourced as follows.  There is a company called “Lan Thang Company Limited”.  The plaintiff and her son are the two shareholders in it.  Two loans were made to “Lan Thang Limited Liability Company” which the defendant alleges is “Lan Thang Company Limited”.  It is agreed between the parties that the two names refer to the same company.

Each loan was secured against the “right of land use and the property is fixed to the land at” various locations.  The properties were owned by the plaintiff.  The plaintiff has more than once described those arrangements as mortgages and, for today’s purposes, accepted that they do correspond to mortgages as understood in New South Wales law.

In her application the plaintiff said that the assets used to fund the investment in the $750,000 worth of Treasury bonds were “the income from my company in Vietnam”.  It is to be inferred that the source was not, strictly speaking, the income from that company, at least directly, but the moneys which it had borrowed under the two contracts.  That inference flows from, apart from the circumstances identified above, statements by the plaintiff to the delegate.

The plaintiff’s first point is simply that there is no evidence that Lan Thang Company Limited lent the money to the plaintiff, hence the investment in the $750,000 worth of New South Wales Treasury bonds is owned by the company, not the plaintiff, and the plaintiff thus does not satisfy clause 165.222(2)(a).

The defendant’s second point is that clause 165.222(2)(c) requires that the funds used to make the $750,000 investment in Treasury bonds be “accumulated” from the qualifying business or from eligible investment activities.  However, the above circumstances suggest that they were not accumulated in those ways but simply borrowed.  Having been borrowed, they must be repaid and, in any event, they cannot be described as having been accumulated.

The plaintiff opposed these points being considered today since they formed no part of the delegate’s decision.  The defendant said they were only relied on today as going to futility, that is, if the plaintiff otherwise succeeded the matter would have to be returned to the delegate and it was an argument against doing that those two points would be fatal to the plaintiff’s cause.  The defendant, however, also accepted that it was only if the points were plainly good that they should prevent remitter.

In my opinion, factual questions may be raised by both points.  Perhaps the company lent the money to the plaintiff.  Perhaps the assets mortgaged in Vietnam were originally gained by the plaintiff from the success of her business.  Those are points of controversy as to which the plaintiff had no notice before the delegate.  They are matters for factual analysis before the delegate if the matter is to be returned to the delegate.  It follows that it is only necessary to concentrate on the defendant’s third point.

That third point arises as follows.  The plaintiff submits two matters in relation to the word “unencumbered”.  The first is that there is no evidence that the actual investment in the $750,000 worth of Treasury bonds is encumbered.  The second point is that the only encumbrance that exists in the transactions which have brought the parties here today is the encumbrance over the land mortgaged in Vietnam.  The submission is that the funds generated by means of those secured borrowings are not themselves encumbered.

The defendant, on the other hand, submits that “unencumbered” does not refer only to the designated investment of $750,000 in New South Wales Treasury bonds.  He submits that the expression “unencumbered funds” has a wider meaning when the words of the clause are construed in context.  The context emerging from the language of the legislation is as follows.  The source of the investment must be moneys “accumulated” from the qualifying business, that is amassed, accrued or built up from it.  It must be generated from the operations of the applicant’s business, not merely borrowed.

The class of visa in question concerns individuals who putatively have significant business skills, hence the requirement for accumulation from the qualifying business, and who have significant funds to invest in Australia, namely the $750,000, which they can afford to have kept in government securities for a period of four years.

The legislation thus contemplates applicants with businesses sufficiently successful to generate the amount of the designated investment outright, without recourse to third parties such as lenders, and designated investments in relation to which there is no potential for any prior or competing claims by a third party during the four year period of the investment.

The legislation also contemplates that once the designated investment is returned to the applicant, the money will be available in the applicant’s business without being removed because of some prior or competing claim by a third party lender.  In that regard, the defendant relied on clause 165.216 which is referred to in clause 165.221 as a criterion which the applicant must continue to satisfy by the time of the decision.  That criterion is:

The applicant genuinely has a realistic commitment, after entry to Australia as the holder of a Subclass 165 visa, to continue to maintain business or investment activity in Australia after the designated investment made by the applicant, or by the applicant and his or her spouse or de facto partner, has matured.

The defendant, in effect, fastened on the words “realistic commitment” and submitted that the realism in an applicant’s commitment to continue business or investment activity in Australia will be enhanced if the designated investment remains available for use by the applicant after the four years.  Hence, the defendant submits that the word “unencumbered” has the function of dealing with all the circumstances in which the investment might not be capable of being used or deployed freely after the four years.

The defendant accepted that on the narrowest meaning of “unencumbered funds”, namely, a meaning which fastens on the $750,000 worth of Treasury bonds, the funds are unencumbered.  So far as the evidence shows there could be no direct claim on the money so invested.  The defendant submits, however, that that is not the correct construction of the words “unencumbered funds”.  The defendant submitted that the plaintiff’s interpretation was unduly narrow and technical when considered against the purposes of the regulation which emerged from its words.

It was submitted that where funds were subject to a fetter or burden or hindrance, actual or potential, they could be described as unencumbered in the ordinary meaning of that expression.  Here, the defendant submitted, even if the funds were safe for the four years of the life of the Treasury bonds, after those four years they may have to be used to discharge the liabilities which generated the funds in the first place, that is, the Vietnamese creditors may wish to pursue the plaintiff for the return of their moneys by recourse to the secured properties or by recourse to guarantees.  To avoid losing the properties or paying on the guarantees it may be necessary for the $750,000 returned by the New South Wales Government to be used.

The defendant submitted that in assessing and applying the meaning of “unencumbered funds” it was not possible to divorce the provenance of the funds, the manner of their generation and the way in which they might have to be repaid from the fact that, at the moment, they are safe in the hands of the New South Wales Government. 

At the end of the day the controversy comes to this.  The defendant’s construction depends on a wide view of the expression “unencumbered funds”.  It treats the expression, not as referring simply to the Treasury bonds, nor as referring to the money from which the payment to the New South Wales Government was immediately sourced, but to all earlier forms which the funds took as those funds moved from the hands of the Vietnamese creditors towards the hands of the New South Wales Government.  That is, I think, a very broad construction.

The defendant was correct to draw attention to the mischief which would arise if the New South Wales Government were exposed to demands or litigation putting at risk the investment in its hands.  However, some of those risks are overcome by the requirement that the funds advanced be legally owned by the applicant for that excludes all claims by beneficiaries under a trust.  The mischief is also to some extent met by the requirement that the funds be accumulated from the qualifying business and the mischief is met by the requirement in paragraph (b) that the funds in the hands of the New South Wales Government be unencumbered.

The mischief which would arise after the four years when an applicant who, as this one, has borrowed money in order to fund the payment to the New South Wales Government and because of commercial vicissitudes or other reasons is unable to repay the creditors and, therefore, unable to employ the $750,000 in furthering the health of the business in New South Wales, is not fully met by the plaintiff’s construction, but in circumstances where most of the vices or mischiefs at which the regulation is directed are sufficiently met by other means, it is not possible to widen the construction of clause 165.222.  That is so even if one takes into account clause 165.216.

That clause concentrates on the genuineness of the applicant’s realistic commitment.  That focuses on the applicant’s mental state, perhaps not entirely, but largely.  There is no clause expressly requiring that the funds invested with the New South Wales Government be available for use in the business after they have been returned by the New South Wales Government.

It will be recollected that the decision‑maker adopted the following proposition:  “borrowing money against property to fund the DI is not accepted”.  That conclusion may well be correct, but if it is correct, it is correct because of the need to satisfy subclause (c), the need for the money to be accumulated from the qualifying business.

In all the circumstances, the construction which the defendant would place on clause 165.222 is unduly wide.  That construction appears to have been adopted by the delegate and, in those circumstances the plaintiff’s criticisms of the delegate’s reasoning are not sufficiently made out.  It follows that the relief sought by the plaintiff should be granted.

It is necessary for an order to be made enlarging time for this application.  Do you oppose the enlargement of time?

MR KAY HOYLE:   No, your Honour.

HIS HONOUR:   The defendant does not oppose the making of that order and that is a realistic position to take because the complexity of the legislation which has to be understood in order to work out that a person in the plaintiff’s position can only come to this Court and no other place is considerable.

Now, Mr Karp, do you have short minutes of order that reflect the precise relief you want granted?

MR KARP:   Your Honour, I do not have short minutes of order but I would ask for the relief which is set out at paragraph 28 of my additional submissions.

HIS HONOUR:   Any problems with those four paragraphs?  Very well.  I will make the following orders:

1.The plaintiff be granted an extension of time to 8 February 2012 to make an application for a remedy to be granted in the exercise of the Court’s original jurisdiction pursuant to section 486A(2) of the Migration Act 1958 (Cth).

2.That a writ of certiorari issue quashing the decision made by a delegate of the defendant on or about 13 October 2011 to refuse to grant the plaintiff a State/Territory Sponsored (Investor) Provisional Subclass 165 visa.

3.That a writ of mandamus issue requiring the defendant to determine the plaintiff’s application for a State/Territory Sponsored (Investor) Provisional Subclass 165 visa according to law.

4.That the defendant pay the plaintiff’s costs of this application.

Thank you, gentlemen.  The Court will now adjourn.

AT 11.15 AM THE MATTER WAS ADJOURNED