Pei and Ors v Minister for Immigration
[2020] FCCA 2068
•28 July 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PEI & ORS v MINISTER FOR IMMIGRATION | [2020] FCCA 2068 |
| Catchwords: MIGRATION – Business visa – Significant Investor Stream – offshore application – whether delegate erred in interpretation of the term ‘unencumbered’ for the purpose of the Regulations – whether delegate made findings without evidentiary basis – whether finding unreasonable, illogical or irrational – error demonstrated but not material – findings not made without evidentiary basis – findings not unreasonable, illogical or irrational – application dismissed. |
| Legislation: Migration Act 1958 (Cth), ss 65, 66 and 476(4) Migration Regulations 1994 (Cth), regs 5.19B, 5.19C and cl 188.252(1) to Schedule 2 |
| Cases cited: Zhang v Minister for Immigration & Border Protection [2019] FCCA 255 Nguyen v Minister for Immigration & Citizenship [2012] HCATrans 85 |
| First Applicant: | SHUZHEN PEI |
| Second Applicant: | ZUOPING WANG |
| Third Applicant: | LIN WANG |
| Respondent: | MINISTER FOR IMMIGRATION & BORDER PROTECTION |
| File Number: | ADG 428 of 2017 |
| Judgment of: | Judge Heffernan |
| Hearing date: | 4 November 2019 |
| Date of Last Submission: | 4 November 2019 |
| Delivered at: | Adelaide |
| Delivered on: | 28 July 2020 |
REPRESENTATION
| Counsel for the Applicants: | Ms G A Costello SC & Ms T Heuzenroeder |
| Solicitors for the Applicants: | FCG Legal Pty Ltd |
| Counsel for the Respondent: | Ms H Stanley |
| Solicitors for the Respondent: | Australian Government Solicitors |
ORDERS
The application is dismissed.
The applicant do pay the respondent’s costs, pursuant to Division 1, Part 3 of Schedule 1 of the Federal Circuit Court Rules 2001 (Cth), as agreed or taxed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 428 of 2017
| SHUZHEN PEI |
First Applicant
| ZUOPING WANG |
Second Applicant
| LIN WANG |
Third Applicant
And
| MINISTER FOR IMMIGRATION & BORDER PROTECTION |
Respondent
REASONS FOR JUDGMENT
(As Corrected)
This is an application for judicial review of a decision of a delegate of the respondent. That decision was dated 20 September 2017 and it refused an application made by the applicants for a Business Innovation and Investment (Provisional) (sub class 188) visa (‘the visa’) in the Significant Investor Stream. As the application was made offshore the applicants did not have the right to a merits review before the Administrative Appeals Tribunal. The delegate’s decision was not a Part 5 reviewable decision and for that reason was not a ‘primary decision’ within the meaning of s 476(4) of the Migration Act 1958 (Cth) (‘the Act’). As a result, this Court has jurisdiction to hear the application.
The delegate refused the visa application on the basis that he was not satisfied that the primary applicant, Ms Shuzen Pei, had funds of at least AUD $5 million that were unencumbered and lawfully acquired for the purpose of making a complying significant investment.
The applicants rely on four grounds as follows:
“1.The Respondent’s delegate erred by misconstruing the meaning of “unencumbered” in regulation 5.19C(3) of the Migration Regulations 1994 (Cth) in finding that:
(a)the gift of RMB 16 million to the Applicant from her daughter was “encumbered”; and
(b)pre-paid rent to the Applicant as a landlord of real estate was “encumbered”.
2.The Respondent’s delegate erred by not finding that funds acquired from money held in the bank for several years was “lawfully acquired”.
3.The Respondent’s delegate erred by not finding that the relevant funds were “lawfully acquired” in circumstances where there was no evidence or suggestion that the funds had not been lawfully acquired.
4.Further particulars will be provided after service of the Court Book.”
On 30 May 2018, a Registrar of this Court extended the time by which the applicants were to file and serve any amended application until 1 June 2018. No amended application was filed within that time. When the applicants filed their Outline of Submissions on 11 October 2019 a further ground was identified as follows:
“4.The delegate erred by acting illogically, unintelligibly or unreasonably in concluding that he was unable to make a finding that the main applicant had RMB 16 million as claimed.”
The respondent did not oppose the applicants being given leave to argue this ground. I give leave to the applicants to rely on the fourth ground.
Background
The applicants lodged their visa application offshore on 15 December 2015. The primary applicant is a female Chinese citizen. The second applicant is her husband and the third applicant is her adult daughter. The applicants claimed in their Application that they would invest AUD$5 million in this country as follows:
“$500,000 Venture Capital Fund (Moelis Australia Private Investment Fund) $1,500,000 emerging company (Moelis Australia SIV Public Investment Fund) $3,000,000 Balancing investment (Moelis Australia SIV Property Fund).”[1]
[1] Court Book (‘CB’) 20.
The delegate wrote to the applicants’ migration agent on 8 March 2016 indicating that the processing of the Application had commenced but that further information would be required in order to establish their eligibility for a grant of the visa. The delegate requested that the applicants provide further documents within 28 days and indicated that on the basis of the documents that had been submitted to that point, he was unable to make a finding that they had AUD$5 million available to make the “complying significant investment” or that the assets were unencumbered and lawfully acquired.[2] He drew attention to the terms of cl 188.252(1) of Schedule 2 to the Migration Regulations 1994 (Cth) (‘the regulations’) in doing so. The delegate put the applicants on notice of the following concerns:
a)the failure to submit Form 1139A;
b)that the certificates and bank deposit slips were not issued on the same date and only totalled around RMB 9 million; and
c)they had not submitted a source of funds declaration, that what the submitted documents were trying to establish was unclear and for that reason he was unable to make a finding that their assets were unencumbered and lawfully acquired.
[2] CB, 202.
A copy of Form 1139A was annexed to an affidavit put on by the respondent.[3] It is a document headed ‘Statement of Assets and Liabilities Position’ (‘SALP’). The preamble to the document indicates that it is necessary to complete at least one SALP when applying for a visa in the Significant Investor Stream and explains why that is the case.
[3] Affidavit Laura Rose Butler, 24 October 2019, ‘LRB1’.
On 23 March 2000, the applicant submitted a “Declaration of Source of Funds” together with supporting documents.[4] The first applicant declared that the nominated assets were “free of all claims, debts, loans, lawsuits, contingent liabilities, such as indemnities or guarantees.” She also declared that the assets had not been derived unlawfully.[5]The declaration explained that:
a)An amount of RMB 9.24 million was held in various term deposits set out in a schedule.
b)An amount of RMB 16 million had been sourced as a loan from the ZhangZiXian RongHui Village Bank.
c)The combined amount of the two sources above was in excess of AUD$5 million.
d)Rental payments of RMB 6.7 million, which were part of the term deposits.
[4] CB, 203-236.
[5] CB, 204.
The supporting documents which accompanied the declaration were said to be copies of deposit certificates in relation to each term deposit.
The delegate wrote again to the applicants’ migration agent on 27 March 2017.[6] The delegate again advised the applicants that, having considered the information submitted to that point, it was unlikely that they would be able to meet cl 188.252(1) of Schedule 2. The letter acknowledged receipt of the source of funds declaration and the accompanying materials and drew the attention of the applicants to a number of concerns he held:
a)“While the certificates of deposits support your ownership of the funds, you did not explain the sources of these deposits.” (This was a reference to the term deposits).
b)Reference was made to a lease which had been submitted indicating that her husband leased a property to others and received rent in advance for a total of 10 years in the amount of RMB 6.7 million. The delegate stated “however rent received is encumbered and will need to be deducted from the total rent received as at the time of consideration”.
c)Receipts issued by the tax office showed that the second applicant’s income between 2007 and 2014 totalled approximately RMB 3.56 million but that no bank statements had been provided in support of the accumulation and continuous ownership of those funds. For that reason it had not been demonstrated that those term deposits were lawfully acquired or unencumbered.
[6] CB, 238-240.
With respect to the loan for RMB 16 million, the third applicant was the borrower. The relevant mortgage agreements demonstrated that the loan was secured against properties owned by the third applicant and the first applicant. Because the third applicant used jointly owned property as security for the loan those funds could not considered to be unencumbered. Further, there was no explanation of the source of the funds used to acquire the properties that secured the loan and for that reason it had not been established that those properties had been lawfully acquired and were unencumbered. There was no evidence supporting that the loan funds were held by either the first or third applicants.
The applicants were invited to either withdraw the application or submit further information.
The applicants’ migration agent wrote again to the delegate on 5 April 2017.[7] That letter took issue with the delegate’s view that rent paid in advance was not considered to be “unencumbered”. It asserted that the lease was irreversible and that full payment had already been received.[8] It further asserted that the deposit certificates showed that a significant amount of the funds in the term deposits had been in the relevant bank accounts for many years. It made the assertion that the original purchase price for the property the subject of the mortgage was insignificant in comparisons to its significantly increased current market value. No further documentary evidence was provided with the exception of a deed of gift between the third applicant and the first applicant.[9]
[7] CB, 241-243.
[8] CB, 242.
[9] CB, 244-246.
Delegate’s decision
The applicants were notified of the delegate’s decision to refuse the visa application on 20 September 2017.[10] The delegate concluded that the first applicant did not meet cl 188.252(1) of Schedule 2 because he was not satisfied that it had been demonstrated that the applicants had unencumbered and lawfully acquired assets of not less than AUD$5 million available to make the complying significant investment for the purposes of reg 5.19C of the Regulations. The delegate found that the term deposits supported the first applicant’s ownership of the funds but that the applicants had not established the source of the funds.[11] With respect to the income of the second applicant, he found that there were no bank statements submitted which supported the accumulation and continuous ownership of the funds. For that reason he was not satisfied that it had been demonstrated that the RMB 9 million in the term deposits had been lawfully acquired. With respect to the rental income, he found that it could not be considered to be unencumbered. As far as the loan was concerned, he concluded that it had been taken out by the third applicant and secured against two properties owned by the first and third applicants respectively and for that reason the loan funds could not be considered to be unencumbered. Notwithstanding the fact that the third applicant had gifted the whole of the loan to the first applicant it was not unencumbered because it was secured over the first applicant’s property. Further, he concluded that the applicants had not submitted any updated documents which indicated the current status of the loan or that was held by the applicants.[12]
[10] CB, 251-259.
[11] CB, 255.
[12] CB, 256-257.
Legislative framework
In order to qualify for the visa it was necessary for the applicants to meet the primary criteria for the ‘Significant investor stream’. Clause 188.252 of Schedule 2 to the Regulations sets out the relevant primary criterion for present purposes:
“(1)The applicant has made, on or after the time of application, a complying significant investment (within the meaning of regulation 5.19C as in force at the time of application) of at least AUD 5 000 000.
(2)The applicant has a genuine intention to hold the complying significant investment for at least 4 years.
Note: A complying significant investment may be based on one or more investments.”
The term ‘Complying significant investment’ is defined in reg 5.19C in the following terms:
(1)An investment by a person (the investor) is a complying significant investment if all of the requirements of this regulation are met.
(2)If an investment (the overall investment) is based on one or more other investments, this regulation (and any instrument under subregulation (6)) applies equally to the overall investment and each investment on which the overall investment is based.
Investment requirements
(3)All funds used to make the investment must be unencumbered and lawfully acquired.
(4)The investment:
(a)must be lawful; and
(b)must not form the basis for security or collateral for a loan.
(5)The investment, and the means by which the investment is made:
(a)must be of a kind permitted by the requirements specified in an instrument under subregulation (6); and
(b)must comply with any requirements specified in an instrument under subregulation (6).
(6)The Minister may, by legislative instrument, specify requirements for the purposes of subregulation (5).
Investment switching periods
(7)Subregulation (8) applies in relation to a period (the switching period ):
(a)beginning when the investor withdraws funds from the investment, or cancels the investment; and
(b)ending when the investor reinvests the withdrawn funds, or the funds used to make the cancelled investment.
(8)If the switching period is of no more than 30 days duration, the investment is taken not to have ceased to be a complying significant investment during the switching period only because of the event mentioned in paragraph (7)(a).
Investor requirements
(9)The investor must be an individual.
(10)The investor must make the investment:
(a)personally; or
(b)with the investor's spouse or de facto partner; or
(c)by means of a company that has issued shares and in which:
(i) the investor holds all of the issued shares; or
(ii) the investor and the investor’s spouse or de facto partner hold all of the issued shares; or
(d)by means of a trust to which the following applies:
(i) the trust is lawfully established;
(ii) the investor is the sole trustee or the investor and the investor's spouse or de facto partner are the sole trustees;
(iii) the investor is the sole beneficiary or the investor and the investor's spouse or de facto partner are the sole beneficiaries.”
Submissions
Applicant’s submissions
Ground one
The respondent has conceded that the delegate was in error to conclude that the advance payments of rent and the loan funds could not be regarded as ‘unencumbered’ but submits that the error was not jurisdictional. Given that the applicants submit that these errors were pivotal to the reasoning of the delegate and establish jurisdictional error it is still necessary to summarise the submissions made by them on this ground.
The term ‘unencumbered’ is not defined in either the Act or the Regulations. The applicants submit that in the context of the Regulations, the decision of whether funds are encumbered comes down to whether they are free from mortgages and claims from creditors. It was submitted that support for that proposition can be found in the Department’s Policy and Advice Manual (‘PAM 3’). The applicants acknowledged that PAM 3 is not binding and that the decision-maker must still make an independent assessment of the material with a view to reaching the correct decision.
The delegate was simply wrong to have reached his conclusion with respect to the advance rent payments. That submission was, with respect, obviously correct and requires no amplification.
The applicants argue that the delegate failed to consider or evaluate the applicant’s argument that the loan was not unencumbered and simply jumped to a conclusion that “it is not considered unencumbered”. In particular, the finding that the loan amount was encumbered because the daughter had used Ms Pei’s property as security for the loan was erroneous and contrary to PAM3 which states “If funds are borrowed by an applicant using a different asset as security for the loan, the funds themselves would be unencumbered for 188.246(2)(a) purposes”. That error suggests that the delegate proceeded on an erroneous understanding of what ‘unencumbered’ meant. The result was that the delegate failed to apply the correct criteria to the facts and evidence before him and as a result failed to exercise his jurisdiction. The fact of the matter was that Ms Pei’s source of funds included a loan against properties that were either owned by her as registered owner or gifted to her, by virtue of the deed of gift, by her daughter who was the registered owner. On no interpretation could that loan properly be regarded as being encumbered. It was submitted that the application should succeed on the basis of the error as to the rent paid in advance and the loan irrespective of the merits of any of the other grounds.
Grounds two and three
These two grounds and the argument submitted in support of them have the hallmarks of an emphatic disagreement with factual findings, in other words, an application for an impermissible merits review. It was submitted that there was no basis on the evidence for the delegate to have concerns that the funds were not lawfully acquired. To the contrary, the evidence before the delegate provided a solid foundation with respect to the source of funds. In large part, funds had been held for many years and the rental property, which was the source of the advance payment, had been under the tenant’s possession for six years. The evidence was clear and lacked any inconsistency. There was no reason for the delegate to find that the funds had not been lawfully acquired. The applicants pointed again to the funds secured against the property and emphasise that they could not be considered to be encumbered or unlawfully acquired. The contrary conclusion of the delegate on that matter demonstrated the erroneous approach taken overall as to whether the funds had been lawfully acquired. It was implicit in the delegate’s conclusion that the funds had not been established to have been lawfully acquired, then they were unlawfully acquired which was a serious finding to make. The conclusion of the delegate that the applicants did not have RMB 16 million as claimed did not support the delegate’s own findings and further, the delegate had made findings which were not supported by the evidence. It was submitted that the applicant’s complaint was more than a dispute on the merits because the reasoning of the delegate showed that he applied facts on a wrong understanding of the critical provision that required satisfaction that the funds were unencumbered and lawfully acquired.
Ground four
Counsel for the applicant submitted that the underlying rationale for the delegate’s decision was contained in the following passage of his reasons:
“For loans using properties as security, the borrower must use his or her own property as security in order for the loan amount to be accepted as unencumbered funds. Given Wang Lin used one of your property (sic) as security for the loan, this renders the loan amount encumbered and is not acceptable. Furthermore, while you advised that the bank has approved the loan, you were advised in the letters dated 08/03/2016 and 27/03/2017 that there is no evidence submitted to support the loan amount is held by you or Wang Lin. The loan agreement indicated the term is for 12 months from 15/10/2015 to 14/10/2016 and you have not submitted any updated document to indicate the current status of the loan. Given there is no evidence such as fund transfer or records or bank statements submitted indicating you or Wang Lin had received the loan amount or currently holding the loan amount despite being requested for such evidence twice, I am unable to make a finding that you have RMB 16 million as claimed.”[13]
[13] CB, 256-257.
There was an error in the above passage. The delegate had not asked twice or even once for evidence that Wang Lin had received the loan amount or was currently holding it. The letters referred to did not support the delegate’s findings about that matter. That renders his reasoning unintelligible. The task for the delegate was to apply the correct criteria to the actual evidence. If that is not done, it can amount to a failure to have regard to a relevant consideration, or a failure to perform the statutory task to consider the facts and merits of the claim. Even though the delegate was obliged under ss 65 and 66 of the Act only to give limited reasons, the reasons that were given are to be taken as a statement of those matters which were taken into account.[14] The reasons that were given for non-satisfaction with reg 5.19B are so difficult to follow that the only conclusion open to the Court is that the delegate erred. The delegate fell short of the standard of reasonableness required.
Respondent’s submissions
[14] Zhang v Minister for Immigration & Border Protection [2019] FCCA 255 [83].
Ground one
It was submitted that the error relating to the term ‘unencumbered’ was not such that the applicants should be granted the relief they sought. It was quite apparent from the findings of the delegate that even if that error had not been made he would have reached the same conclusion. There was no likelihood of a different outcome. The visa had in fact been refused for multiple reasons only one of which turned on the meaning of ‘unencumbered’. That is because the evidence advanced for the source of the funds as a whole was inadequate. The delegate had no other option but to refuse the visa.
Grounds two and three
Counsel for the respondent submitted that in truth these grounds amounted to a request for an impermissible merits review. It involves circular reasoning to the effect that the delegate erred by not finding that the funds were lawfully acquired because there was no evidence to show that they were not lawfully acquired. The delegate did not reach a state of satisfaction that the funds were unlawfully acquired. Not having reached the state of satisfaction acquired, the delegate did not have power to make a positive finding on the evidence. It was open to the delegate to seek further information from the applicants, which he did on two occasions. He made his concerns clear on both occasions. The reasons demonstrate that the delegate considered all the information with which he had been provided, including the submissions made by the applicants with respect to the source of the funds held in the term deposits. It was open to him to find that the applicants had not demonstrated that the funds were lawfully acquired. That finding obliged him to refuse to grant the visa.
Ground four
Contrary to the submission of the applicants, the delegate did seek further information from them on two occasions. Form 1139A, to which the delegate directed the applicant’s attention, clearly required them to list assets and relevant details with respect to them. It also made clear that supporting documentation was required. The Form was not completed by the applicants. On the second occasion the delegate wrote to the applicants seeking further information and pointing to the lack of evidence which had been provided. The reasoning of the delegate is both intelligible and reasonable. He was not satisfied because he had no evidence of the applicant actually possessing the loan funds and had no evidence as to the source of the funds in the term deposits. His conclusion flowed reasonably from that lack of satisfaction.
Consideration
There can be no doubt that the applicants are correct with respect to the error which occurred in relation to the meaning and application of the term ‘unencumbered’ by the delegate. If the findings of the delegate with respect to the advance rental payments and the loan was the only basis on which the visa had been refused, then this application would have been successful.[15]
[15] Nguyen v Minister for Immigration & Citizenship [2012] HCATrans 85.
However, I accept the submission of the respondent that the refusal was based on other matters as well. I am not satisfied that the error with respect to the payments and the loan infects the lack of satisfaction he held by the delegate with respect to those matters.
With respect to grounds two and three, the submission of the applicants ignores a fundamental fact. It was for the applicants to satisfy the delegate that the criteria for the visa had been met. To observe that there was no evidence to demonstrate that the funds had not been lawfully acquired takes the matter no further. It was not for the delegate to disprove that the funds had been lawfully acquired. There was an onus of proof and it lay with the applicants. That onus was not reversed by matters asserted in the submissions made by the applicants to the delegate or by an incomplete provision of the type of information required by Form 1139A to which the delegate had drawn the attention of the applicants and which, as the respondent has pointed out, was never completed by them.
In the applicants’ submissions, great emphasis was placed on the materials that had been provided to the delegate. The delegate’s lack of satisfaction turned on the type of documents that to his mind should have been, but were not, provided to him in order to establish the lawful provenance of the funds. I do not accept the submission of the applicants and it does not follow as a matter of logic that the delegate’s failure to be satisfied that the applicants had demonstrated the source of funds to be lawful amounted to the serious alternate finding that the funds had been unlawfully acquired. No such finding was made. The delegate’s lack of satisfaction simply demonstrated that to his mind the applicants had not satisfied him otherwise. He explained in clear terms why that was. He had no evidence that the first or third applicants actually possessed the loan funds. There were no bank statements to support the ownership of the funds prior to the opening of the term deposit accounts.[16] The taxation documents and company registration documents did not establish a link between the income of the second applicant and the term deposits. There was no documentation which explained the sources of funds in the term deposit accounts. As submitted by the first respondent, the state of satisfaction required by the regulations was a condition precedent to the discharge of the obligation to grant or refuse the visa. It was a jurisdictional fact on which the exercise of the delegate’s power depended.[17]
[16] CB, 256.
[17] Minister for Immigration & Citizenship v SZMDS (2010) 240 CLR 611 [37].
I dismiss grounds two and three.
Ground four
In my view nothing turns on the submission by the applicants that the delegate did not request them twice for evidence that Wang Lin or the first applicant had actually received the loan or was currently holding it. The delegate made abundantly clear that further information was required and put the applicants on notice that he was unable to reach the required state of satisfaction with the evidence that had to that point been provided. It was up to the applicants to provide the delegate with sufficient evidence to enable him to be satisfied that they met the criteria. Further, the rationale of the delegate for not being satisfied that the applicants did not have RMB 16 million was not, contrary to the applicants submission, fully contained within the passage from his reasons at the bottom of page 256 and the top of page 257 of the Court Book. His lack of satisfaction was substantially based on the matters to which I have referred at paragraph 31 above. An error as to whether the delegate did or did not make a request for a certain type of information did not mean that the delegate did not apply the correct criteria to “the actual evidence”[18] He plainly did so and it failed to satisfy him. I am not satisfied that the delegate fell short of the statutory standard of reasonableness required of him[19] as submitted by the applicant. It could not be said that the delegate’s finding lacked an evident and intelligible justification,[20] nor was it a decision that no rational or logical decision maker could have arrived at on the same evidence.[21]
[18] Applicants’ submissions [36].
[19] Salopal v Minister for Immigration & Border Protection [2017] FCCA 3081.
[20] Minister for Immigration & Citizenship v Li (2013) 297 ALR 225 [76].
[21] Op cit, SZMDS.
I dismiss ground four.
Writs should not be issued where it would serve no useful purpose to do so. Relief is discretionary. Irrespective of the error established with respect to ground one, the decision was open to the delegate for other reasons on which he relied and clearly articulated. To grant relief in this matter would lack utility.[22]
[22] Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82 [56].
I dismiss the application and make the orders to be found at the beginning of these reasons.
I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge Heffernan
Associate:
Date: 28 July 2020
CORRECTION (30 July 2020)
Cover sheet and Orders: Page 2 – the name Ms T Heuzenroeder was inserted as counsel for the Applicants.
Key Legal Topics
Areas of Law
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Administrative Law
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Immigration
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Statutory Interpretation
Legal Concepts
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Judicial Review
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Natural Justice
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Procedural Fairness
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