Nine Dings Pty Ltd (Migration)

Nine Dings Pty Ltd (Migration) [2018] AATA 2689 (9 July 2018)
DECISION RECORD
DIVISION:Migration & Refugee Division
APPLICANT:  Nine Dings Pty Ltd
CASE NUMBER:  1731635
DIBP REFERENCE(S):  BCC2017/1228141
MEMBER:Danielle Galvin
DATE:9 July 2018
DECISION:The Tribunal affirms the decision under review to refuse the nomination.

Statement made on 09 July 2018 at 9:42am

CATCHWORDS
Migration – Nominated sponsorship – Financial capacity to pay nominee’s full time salary – Financial statements provided – Injection of funds from overseas – Business losses increased annually – Decision under review affirmed
LEGISLATION
Migration Regulations 1994 (Cth) r 5.19
STATEMENT OF DECISION AND REASONS
APPLICATION FOR REVIEW

This is an application for review of a decision made by a delegate of the Minister for Immigration on 4 December 2017 to reject the applicant’s application for approval of the nomination of a position in Australia under r.5.19 of the Migration Regulations 1994 (the Regulations).
The applicant applied for approval on 31 March 2017. The requirements for the approval of the nomination of a position in Australia are found in r.5.19 of the Regulations which contains two alternative streams: a Temporary Residence Transition nomination (r.5.19(3)) stream and a Direct Entry nomination (r.5.19(4)) stream. If the application is made in accordance with r.5.19(2) and meets the requirements of either stream, then the application must be approved. If any of the requirements are not met then the application must be refused: r.5.19(5).
In this case, the applicant has applied for approval of a nomination, seeking to satisfy the criteria in the Direct Entry Nomination stream.
The delegate refused the application on the basis the applicant’s nomination did not satisfy r.5.19(4)(d)(i) of the Regulations because the applicant business had not demonstrated the financial capacity to pay the full-time salary for the nominated position for at least 2 years.
The Delegate had access to the following submitted documents in support of the application:
Employment contract dated 3/3/17
Accountant’s letter dated 15/2/17
Contracts for the purchase of 813 Elgar Road, Doncaster, 584-588 Doncaster Road, Doncaster, 811 Elgar Road, Doncaster and 3 Briar Court, Doncaster and certificates of title
Historical ABN details and ASIC company extract
Architectural drawings and plans
Lease agreement and site history assessment
Market salary guide and various documents in relation to the nominee’s credentials
Organisational chart
On 13 February 2018 the Tribunal invited the applicant to provide updated and current information addressing the relevant criteria to be met in the application under r.5.19(2) and r.5.19(4). Such information was required to be submitted to the Tribunal by the 27 February 2018.
An extension of time was sought by and granted to the applicant on 26 February 2018 so that any further evidence was required to be submitted to the Tribunal by 13 March 2018. The following documents were provided to the Tribunal on the applicant’s behalf on 13 February 2018:
Letters from De Ke Su and Yubin Tong dated 13/3/18
ASIC search of applicant as at 21/2/18
Financial statements FYE 30/6/16 and 30/6/17
Director’s loan ledger from 31/3/15-30/6/16
Applicant’s tax returns for 2016 and 2017
Loan ledger as at 8/3/18
Numerous BAS from July 2015 –December 2017
Updated organisational chart
The applicant appeared before the Tribunal on 1 May 2018 to give evidence and present arguments. The Tribunal also received oral evidence from Mr Yubin Tong, the sole director of the applicant and Ms Liying Pan, the nominee. The Tribunal hearing was conducted with the assistance of an interpreter in the Mandarin and English languages.
The applicant was represented in relation to the review by its registered migration agent, Mr Chik Hong Chua of Chua Tan Associates. The representative attended the Tribunal hearing.
During the course of the hearing Mr Tong requested the opportunity to clarify various issues raised and respond to questions asked by providing further evidence. The Tribunal allowed the applicant to provide further evidence in writing by 1 June 2018.
On 1 June 2018 the applicant’s agent provided the following further material to the Tribunal:
Tax invoice from Hayball dated 1/12/17
PAYG summaries for Yanzing Li, Tao Sheng, Lily Yang, Yubin Tong, Zhu Wang and Si Wei
Fletchers Real Estate owner ledgers
Lease agreements for 3 Briar Court, 813 Elgar Road, 811 Elgar Road and 584-588 Doncaster Road
Various NAB, Commonwealth bank and WESTPAC bank statements and letters
Land Facility Agreement
Estate Master feasibility summary of projected returns
Letter from ANCENT Accountants dated 28/5/18
AHURI REPORT dated February 2014
Letter from Yubin Tong dated 1/6/18
Letter from Chua Tan Associates dated 1/6/18
For the following reasons, the Tribunal has decided to affirm the decision under review to refuse the nomination.
CONSIDERATION OF CLAIMS AND EVIDENCE
The issue in this case is whether the applicant meets the requirements for approval of the nomination under the Direct Entry nomination stream set out in r.5.19(4), which is extracted in the attachment to this decision. For the nomination to be approved, all the requirements must be met.
Term of employment of the visa holder: r.5.19(4)(d)
Regulation 5.19(4)(d) requires the nominee to be employed in the nominated position for at least 2 years full time, and the terms and conditions of that employment do not expressly exclude the possibility of an extension.
The delegate from the Department of Home Affairs, as it is now known, found that financial losses sustained by the applicant from 2015 to 2016 were significant and was concerned and ultimately not persuaded that the applicant had the financial capacity to pay the full time salary for the nominated position for at least 2 years. The delegate found that the material submitted to the Department in support of the application did not demonstrate such capacity.
The Tribunal has had the benefit of access to the documents submitted in support of the application, the evidence provided at the hearing on 1 May 2018 and the further material provided on 1 June 2018.
The application, dated 21 March 2017, states that the application was for employer nomination for a permanent appointment of a Managing Director (ANZSCO 111111) for NINE DINGS PTY LTD who operate in the construction industry.
The application states that the guaranteed annual earnings for the nominee, Lyping Pan, is $185,000pa. The application further states that the applicant will be paying the salary. Further, it states that there are 2 Australian employees and the applicant had spent $112,411 in gross payroll the past 12 months.
The applicant is a company and from the ASIC report submitted, as at 21/2/18, Yulin Tong is listed as the sole director of the company and the shareholders are Yulin Tong (30%) and De Ke Su (70%).
The applicant is the registered proprietor of 4 pieces of adjacent land in Doncaster and has plans to develop the accumulated site (“the project”). Currently all 4 properties are leased. The Profit and Loss statement for the year ending 30 June 2017 states that rents received amount to $369,210.
The properties are mortgaged as follows:
813 Elgar Road, Doncaster, purchased for $2,136,797 and mortgaged to MAXCAP INVESTMENT MANAGEMENT PTY LTD (“MAXCAP”).
584-588 Doncaster Road, Doncaster purchased for $23,300,000 and mortgaged to National Australia Bank (“NAB”)
811 Elgar Road, Doncaster purchased for $2,039,097 and mortgaged to MAXCAP
3 Briar Court, Doncaster purchased for $3,224,105 and mortgaged to MAXCAP.
In his open letter of 13 March 2018 Mr Tong advised that the nominee was an historical director of the applicant but that he became the sole director to facilitate loan agreements. He advised that De Ke Su had acquired three of the four pieces of land worth $7,399,99 for the applicant and has injected capital of $17,305.254 into the applicant through his son, Huyung Su. Mr Tong referred to the loan ledger prepared by the applicant’s accountants. He advised that there has been a further injection of funds of $2,600,000 and $5 million and that approximately $25 million has been borrowed to pursue the project. He concludes by stating that the company has the financial viability to pay the nominees annual salary of $185,000 plus super of 9.5% whilst acknowledging that the applicant will sustain losses in the early stages of the project.
At the hearing Mr Tong advised that Mr Su became involved in the business in March or April 2015 and has invested $20 million into the applicant for the project. Mr Tong stated that the funds were deposited into a WESTPAC account. He advised that NAB had provided a loan to the applicant and that the Commonwealth Bank had also been involved
Mr Tong advised that Mr Su had contributed, as a majority shareholder, because he believed that the Australian Real Estate market was good to invest in and therefore he had invested funds rather than loaned them to the applicant. When asked if the passage of the funds could be checked Mr Tong advised that the actual funds came from various sources including Mr Su’s sons and therefore bank statements may not reveal that the funds came from Mr Su. Mr Tong advised that due to difficulties in sending funds from China, as a result of Chinese government restrictions on the exiting of funds from China, the funds had been sent from various sources. In his letter to the Tribunal dated 1 June 2018 Mr Tong further clarified this situation by stating that references to third parties in bank transfers was done to overcome the annual individual money transfer limitation imposed by the Chinese Government and “Therefore, our major shareholder, Mr De Ke Su has had to use his son’s name and his other business affiliation to transfer money raised by him from overseas into the company in Australia.”
In the 1 June 2018 letter Mr Tong advised that he and Mr Su had invested in the applicant but had not formerly entered into loan agreements with the applicant. In his earlier letter and that of Mr Su, Mr Tong advised that the reference to loans was as a result of a misunderstanding of the English language and that the letters had been prepared by the accountants.
Mr Tong advised that the nominee is acting as CEO and is being paid by Mr Su’s Chinese company and continues to be paid this way. He advised that the applicant will pay her salary once the application has been approved.
On 1 June 2018 Mr Tong wrote to the Tribunal and referred to and relied on the report, dated February 2014, by the Australian Housing and Urban Research Institute (‘AHURI report”) from Curtin University. He submitted that because the project falls within the AHURI report’s classification as “high value” the report’s analysis that in such cases the developers are reluctant to share profits with third parties explains why the applicant’s shareholders are willing to raise capital to fund the project. He further relies on the report’s finding that there is fluctuation of cash flow throughout the project and that initial losses will be remedied as the project progresses.
Mr Tong referred to a term deposit held with the NAB evidence of which was supplied to the Tribunal on 6 June 2018. The term deposit is for the amount of $879,384 as shown on the 30 June 2017 balance sheet.
Mr Tong described the sole current source of the applicant’s income as the rental from the four properties.
In his letter to the Tribunal dated 1 June 2018 Mr Tong stated that he “feels confident that our company is able to pay the nominee’s proposed salary package by continuing raising money from the shareholders and bank as we have been doing these to meet our company’s other expenses.” He concludes by stating that no loan agreements have been signed between the shareholders and the company but confirmed that loans have been made from him as director, the shareholders and third parties to pay for land acquisition, business expenses and salaries.
Ms Lyping Pan, the nominee, gave evidence at the hearing and confirmed that she has been involved with the applicant since July 2016 and had obtained a bridging visa in May 2017. She confirmed that Mr Su’s Chinese company is paying her currently although she is employed by the applicant. She advised that she has historically worked for Mr Su and he pays her salary, of $800,000 RMD, through his Chinese company. She described her duties as involving daily marketing, progressing the project, dealing with architects, negotiating rents and hiring staff.
On 15 March 2017 a letter of engagement was signed by the applicant and nominee on terms expressed in the application.
On 13 March 2018 Mr Su stated in an open letter that he has made financial injections into the applicant and that further injections can be made to “meet our company’s ongoing expenses including the salary of employees and the nominee when her visa is approved.”
The applicant’s migration agent sent to the Tribunal on 6 June 2018 an article about “Mr Su Deke” (as described in the article) advising that he has won the Shaoxing Charity Award and commending his philanthropic contributions to charitable causes. However, Mr Su ‘s status as an award recipient, whilst commendable, is not relevant to the Tribunal’s considerations.
The applicant’s financial statements from 2015-2017 show consistent losses for the applicant as follows:
Profit and loss FYE     30/6/16  2015
Income $321,695  $$1,440
Loss    ($223,349)  ($101,395)
Salaries $93,650
Profit and loss FYE     30/6/17
Income $387,528
Loss ($1,042,482)- or ($1,042,382 in another version of this document)
Salaries $120,14
These statements cannot be verified as none appear to have been processed through the Taxation department portal, however they were submitted by the applicant in support of their claim.       The current assets listed for 30 June 2017 amount to $1,162,910 and the total non-current assets amount to $33,231,798. Total non-current liabilities are stated at $34,270,565 and total liabilities are $34,274,179 revealing net assets (liabilities) of ($1,042,382). The applicant is running at a loss and there is insufficient funds to pay the nominees proposed salary for a period of two years based on this information.
PAYG summaries submitted for the financial year ending 30/6/17 show gross salary payments to - Yanzing Li ($14,583), Tao Sheng ($28,829), Lily Yang ($19,325), Yubin Tong ($9,520) and Zhu Wang ($47,882). The five employees gross salaries add up to salaries $120,139.
PAYG summaries submitted for the financial year ending 30/6/16 show gross salary payments to Yubin Tong ($30,801), Si Wei ($40,348) and Zhu Wang ($22,500). The gross salaries of the three employees add up to $93,649.
Despite this evidence the applicant’s accountant’s, ANCENT Accountants, wrote an open letter dated 15 February 2017 in support of the application stating that the company lawfully operates and can meet its obligations under the ENS nomination to pay a salary of $185,000 plus super for “the next two years”. No explanation as to why they formed this view was proffered.
On 28 May 2018 the accountants wrote a further letter in support of the application providing ledger reports detailing money “the company borrowed from directors and/or shareholders, and other parties to keep the business running”. The letter states that the “loans” are non-current liabilities as loan terms are more than 12 months and will be paid back when the project is sold as advised by the client. The ledger reveals that from 18 March 2015 to 30 June 2016 credit of $19,565,604.65 was received, - $17,305,254.60 of which was received from Huguang Su. The balance was received from Yulin Tong. From 1 July 2016 to 30 June 2017 $8,486,182.84 was received , $7,600,000 of which was received from De Ke Su and the balance from Yulin Tong. From 1 July 2017 to 15 December 2017 Yulin Tong provided $51,471.44 and from 1 July 2017 to 12 December 2017 borrowings from third parties amounted to $2,925,330.58.
Currently the income received by the applicant is the rent from the four properties and collectively amounted to $369,210 for the financial year ending 30 June 2017. The details found in the Fletcher Real Estate Owner’s ledger show the calendar monthly rental for 3 Briar Court as $2,086, 813, Elgar Road as $1955 and 811 Elgar Road as $1564.The renewal and variation of the retail lease for 584-588 Doncaster Road states that the rent is $462,786.36 per annum plus GST. The income from this tenancy appears to be deposited in the NAB account of the applicant from statements dated 30/12/17-29/3/18, 30/9/17-29/12/17, 19/8/17-29/9/17 and 19/5/17-18/8/17. From the financial statements submitted this income does not meet the company’s expenses. The applicant claims increasing losses, in its financial statements, despite this income, which is allocated to meet the expenses of the company. It is apparent from the financial statements, summarised in paragraph 35 above, that there is insufficient income to meet the current expenses and therefore there is no income available to guarantee a further - salary of $185,000 plus superannuation per annum for two years. There is insufficient verifiable evidence that the applicant as a stand-alone company can meet this commitment.
On 6 June 2018 the applicant’s migration agent forwarded to the Tribunal further bank statement extracts for the applicant as follows: WESTPAC statement for 31/8/15-30/9/15 showing deposits of $400,000 on 4/9/15 and $191,500 on 7 /9/15 and leaving a balance of $195.35. No explanation is provided as to where the funds came from or how they were utilised; NAB statement for 10/8/15-18/11/15 which notes the establishment of a term deposit of $864,000 and a deposit of $7,200,000 (a hand written note states that this is a bank loan) and $7,979,876.17 (a hand written note describes this - as shareholder equity contribution) which is verified by a letter from NAB to the applicant on 5/6/18 and ; WESTPAC statement 29/1/16-29/2/16 showing 2 deposits of $200 and one of $150 from Yubin Tong leaving a balance of $10.75. Despite these injections of funds and the establishment of the term deposit the financial statement for the end of the financial year of 2016 shows an overall loss incurred by the applicant of $223,349 as summarised in paragraph 35 above.
Despite the continued statements of Mr Tong, Mr Su and the applicant’s accountants the information submitted in support of the application clearly establishes that the applicant is not yet in a position to pay the proposed salary to the nominee for a two-year period.
The evidence is that the applicant is continuously financially bolstered by other parties who are not obliged in any way to meet the legal obligations of the independent applicant company. The intentions of the shareholders to support the project are not evidenced in any enforceable agreements and there is no apparent security to ensure that the applicant could sustain the proposed employment of the nominee.
Mr Tong gave evidence that there were no loan agreements as it was the plan of the shareholders that they would retain all profits. The consequence of such an arrangement is that there is no legally enforceable obligation on the third parties injecting funding into the applicant to do so or continue to do so. Such uncertainty does not support the proposition that the applicant is capable of complying with the obligations of r.5.19(4)(d)(i). The evidence is that the processing of funds used to support the applicant has been done in such a way as to bring funds to Australia and avoid the restrictions imposed by the Chinese Government as to the exiting of funds from China. The lack of loan documentation and verifiable and sustainable legally binding financial commitments from outside sources and the continuous and increasing losses sustained by the applicant combine to establish that the applicant has not demonstrated that it can comply with the requirement to provide the nominee with at least 2 years of full-time employment. The Tribunal therefore finds that the applicant has failed to satisfy the criteria required to be met in r.5.19(4)(d)(i).

The Tribunal notes that the undated land facility agreement between the applicant (the only party to have signed the agreement) as borrower and MAXCAP as financier has been prepared in relation to 811-813 Elgar Road, Doncaster and 3 Briar Court, Doncaster. MAXCAP is stated to be acting “in its capacity as trustee for the Maxcap Nine Dings Unit Trust”. There would appear to be an association between the applicant and the financier which is not an arms-length commercial transaction. The financier is the trustee of a trust, the details of which have not been provided to the Tribunal. In the absence of further details this evidence does not satisfy the Tribunal that the applicant has sufficient financial capacity to comply with the requirement to provide the nominee with at least 2 years of full-time employment.
Whilst Mr Tong was at pains to show that the development industry takes time to turn a profit, this position is not supportive of the submission that the applicant can meet the obligation to pay the proposed salary for two years given the current financial position of the applicant. The applicant’s financial records reveal losses that have increased annually since the company was established. The applicant is the legal entity that is required to meet the payment of the salary and has guaranteed to do so in its original application. The financial assistance of outside parties where there is no evidence of any obligation or contractual imperative for that third party to financially contribute to the applicant does not satisfy the Tribunal that the applicant has sufficient financial capacity to comply with the requirement to provide the nominee with at least 2 years of full-time employment. There is evidence of occasional and random injections of funds into the applicant’s bank accounts. There is no evidence of any guarantee in place or contractual obligation of outside sources that are legally enforceable to secure funding.
For the above reasons the Tribunal is not satisfied that the applicant meets the requirements of r.5.19(4). The applicant has not sought to satisfy the criteria in Temporary Residence Transition Nomination stream, and as such has not met the requirements in r.5.19(3). Accordingly, the nomination of the position cannot be approved. Therefore, the Tribunal must affirm the decision under review.
DECISION
The Tribunal affirms the decision under review to refuse the nomination.
Danielle Galvin
Member

ATTACHMENT - EXTRACTS FROM THE MIGRATION REGULATIONS 1994
5.19Approval of nominated positions (employer nomination)
…
(2)The application must:
(a)be made in accordance with approved form 1395…; and
(aa) include a written certification by the nominator stating whether or not the nominator has engaged in conduct, in relation to the nomination, that constitutes a contravention of subsection 245AR(1) of the Act; and
(b)be accompanied by the fee mentioned in regulation 5.37.
…
Direct Entry nomination
(4)The Minister must, in writing, approve a nomination if:
(a)the application for approval:
(i)       is made in accordance with subregulation (2); and
(ii)      identifies a need for the nominator to employ a paid employee to work in the position under the nominator’s direct control; and
(b)the nominator:
(i)       is actively and lawfully operating a business in Australia; and
(ii)      directly operates the business; and
(c)for a nominator whose business activities include activities relating to the hiring of labour to other unrelated businesses — the position is within the business activities of the nominator and not for hire to other unrelated businesses; and
(d)both of the following apply:
(i)       the employee will be employed on a full-time basis in the position for at least 2 years;
(ii)      the terms and conditions of the employee’s employment will not include an express exclusion of the possibility of extending the period of employment; and
(e)the terms and conditions of employment applicable to the position will be no less favourable than the terms and conditions that:
(i)       are provided; or
(ii)      would be provided;
to an Australian citizen or an Australian permanent resident for performing equivalent work in the same workplace at the same location; and
(f)either:
(i)       there is no adverse information known to Immigration about the nominator or a person associated with the nominator; or
(ii)      it is reasonable to disregard any adverse information known to Immigration about the nominator or a person associated with the nominator; and
(g)the nominator has a satisfactory record of compliance with the laws of the Commonwealth, and of each State or Territory in which the applicant operates a business and employs employees in the business, relating to workplace relations; and
(h)either:
(i)       both of the following apply:
(A)the tasks to be performed in the position will be performed in Australia and correspond to the tasks of an occupation specified by the Minister in an instrument in writing for this sub-subparagraph;
(AAA)the occupation is applicable to the person identified under subparagraph (a)(ii) in accordance with the specification of the occupation;
(B)either:
(I)the nominator’s business has operated for at least 12 months, and the nominator meets the requirements for the training of Australian citizens and Australian permanent residents that are specified by the Minister in an instrument in writing for this sub-sub-subparagraph; or
(II)the nominator’s business has operated for less than 12 months, and the nominator has an auditable plan for meeting the requirements specified in the instrument mentioned in sub-sub-subparagraph (I); or
(ii)      all of the following apply:
(A)the position is located in regional Australia;
(B)there is a genuine need for the nominator to employ a paid employee to work in the position under the nominator’s direct control;
(C)the position cannot be filled by an Australian citizen or an Australian permanent resident who is living in the same local area as that place;
(D)the tasks to be performed in the position correspond to the tasks of an occupation specified by the Minister in an instrument in writing for this sub-subparagraph;
(DA)the occupation is applicable to the person identified under subparagraph (a)(ii) in accordance with the specification of the occupation;
(E)the business operated by the nominator is located at that place;
(F)a body that is:
(I)specified by the Minister in an instrument in writing for this sub-subparagraph; and
(II)located in the same State or Territory as the location of the position;
has advised the Minister about the matters mentioned in paragraph (e) and sub-subparagraphs (B) and (C).

[2018] AATA 2689

9 July 2018

Key Legal Topics

Areas of Law

Immigration

Administrative Law

Legal Concepts

Judicial Review

Statutory Construction

Procedural Fairness

Jurisdiction