Ruan (Migration)

[2021] AATA 2683

Ruan (Migration) [2021] AATA 2683 (8 July 2021)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANTS:  Mr Honggang Ruan
Ms Lu He
Miss Xiaoyuan He

CASE NUMBER:  1827563

DIBP REFERENCE(S):  BCC2017/3965377 BCC2018/4185472 BCC2018/4185486 BCC2018/4970151 BCC2018/5016381

MEMBER:Robyn Anderson

DATE:8 July 2021

PLACE OF DECISION:  Melbourne

DECISION:The Tribunal affirms the decision not to grant the applicants’ Business Skills (Permanent) Subclass 888 visas.       

Statement made on 8 July 2021 at 5.26pm.

CATCHWORDS

MIGRATION – Business Skills (Permanent) visa – Subclass 888 Business Innovation and Investment (Permanent) – ownership interest – main business – business actively operating in Australia – direct and continuous involvement in management – qualifying business – limited current and historical financial and trading information – inconsistent sales data for the entirety of the relevant period – decision under review affirmed          

LEGISLATION

Migration Act 1958, ss 65, 134
Migration Regulations 1994, Schedule 2, cls 187.223, 187.311; rr 1.03, 1.11

CASES

Minister for Immigration and Citizenship v Hart [2009] FCAFC 112
Shahpari and Ors v Minister for Immigration and Anor [2016] FCCA 513

STATEMENT OF DECISION AND REASONS

APPLICATION FOR REVIEW

1. This is an application for review of a decision made by a delegate of the Minister for Home Affairs on 6 September 2018 to refuse to grant the applicants’ Business Skills (Permanent) Subclass 888 visas under s 65 of the Migration Act 1958 (Cth) (the Act).

2. The applicants applied for the visa on 26 October 2017. The delegate refused to grant the visas on the basis that Mr Ruan, the primary applicant, did not meet the requirements under cl.888.222 of Schedule 2 to the Migration Regulations 1994 (Cth) (the Regulations). This was more specifically in relation to the delegate not being satisfied that the nominated business, Sunway Trading Pty Ltd as trustee for Sunway Holding Trust (the Business), was actively operating prior to July 2016.

3. The matter was constituted to a Tribunal Member on 18 March 2021.  On 14 May 2021, the Tribunal wrote to the applicants to invite them to attend a hearing by video conference on 2 June 2021.  The Tribunal exercised its discretion to hold the hearing by video conference using Microsoft Teams. The hearing was held during the COVID-19 pandemic. The Tribunal determined it was reasonable to hold a hearing by video, having regard to the nature of this matter and the individual circumstances of the applicants. The Tribunal also had regard to the Tribunal’s objective of providing a mechanism of review that is fair, just, economical and quick, and the further delay to the matter if the hearing was not to be conducted by video.

4. The hearing invitation also included a paragraph as follows:

   Please provide all documents you intend to rely on to support your case by 26 May 2021.  The decision made by the department should set out the reasons for the decision, and you should have regard to these, and any changes in your circumstances, in providing documents and preparing for the hearing.  Any documents or written arguments sent to us should be in English and if not then accompanied by a translation from a qualified translator.

5. In response, the Tribunal received submissions and evidence from the visa applicant on 24, 25, 26 and 31 May 2021. Mr Ruan appeared before the Tribunal on 2 June 2021 via Microsoft Teams video conference from China and gave evidence and presented arguments on affirmation. The Tribunal hearing was conducted with the assistance of an interpreter in the Mandarin and English languages.

6. The applicants were represented in relation to the review by their registered migration agent, Ms Yek of Oakfair Lawyers.  Ms Yek also attended the Tribunal hearing by video conference.

7. It was discussed at hearing that lack of evidence in relation to the current financial and trading circumstances of the applicant’s nominated business would impact on the ability of the Tribunal to make a favourable decision. This is because cl.888.222(1)(b) of Schedule 2 to the Regulations requires that Mr Ruan continue to have an ownership interest in the same actively operating main business relied upon in cl.888.222(1)(a) at the time of decision. Ms Yek acknowledged that this was so and advised that she had already requested such information from the accountant.

8. Ms Yek and Mr Ruan confirmed at hearing that the financial reports to 30 June 2020 were already finalised, as were the business activity statements to 31 December 2020.  The March 2021 quarter business activity statement would be finalised imminently.  In response to a question from the Tribunal, both stated that 14 days to 16 June 2021 was sufficient time to access the information from their accountant in Melbourne, Crowe Horvath, and to provide it to the Tribunal. 

9. Accordingly, on 2 June 2021, the Tribunal deferred making a decision in this matter to allow additional time for the applicant to provide the required additional evidence in respect of the Business.  The Tribunal confirmed that evidence at hearing to be:

   ·sales journals/general ledger account in respect of the 2015/2016 financial year and 1 July 2016 until January 2017, when the Chadstone retail store commenced operations;

   ·sales journals/general ledger account in respect of the 2019/2020 financial year and from 1 July 2020 to date;

   ·financial reports in respect of the 2015/2016, 2016/2017, 2017/2018, 2018/2019 and 2019/2020 financial years; and

   ·business activity statements from 1 July 2020 to date.

10. As there had been no contact from the representative or the applicant, the Tribunal contacted Ms Yek on 17 June 2021 to seek information in respect of the applicant’s intentions to provide the further financial information requested at hearing.  The response from Ms Yek on 17 June 2021 was as follows:

    Unfortunately, we have not been able to contact our client for the requested documents after the hearing. Our client’s family situation has changed over the past couple of years, and he is unable to attend to the documents.

    Please convey our sincerest apologies to the Tribunal.

11. The Tribunal then wrote to Mr Ruan via Ms Yek on 21 June 2021 as follows:

    As discussed at hearing, the Tribunal granted 14 days, until 16 June 2021, for you to provide additional financial information in support of your claim that you meet the criterion under cl.888.222 of Schedule 2 to the Migration Regulations 1994.
    As you are aware, cl.888.222 requires not only that the applicant have an ownership interest in at least one actively operating main business in Australia during the two years immediately before the application was made, but also that the applicant continues to have the same ownership interest in the same actively operating main business at the time of decision. For the Tribunal to make a determination in respect of the second limb of cl.888.222, further financial information must be provided.
    No further submissions or evidence were provided by 16 June 2021.  The Tribunal then made contact with your representative on 17 June 2021, who responded via email on 17 June 2021 stating that you were unable to be contacted and that you are unable to attend to the documents and conveyed sincere apologies.  There was no clear explanation as to why you were unable to comply. At hearing, you acknowledged that the information should be readily available from your accountant in Melbourne, Crowe Horwath. As such, it is unclear whether you wish to continue with your application.
    The Tribunal is willing to grant a further seven days to 28 June 2021 for provision of the requested financial information from Crowe Horwath in respect of Sunway Holding Trust as follows:

    ·sales journals/general ledger account in respect of the 2015/2016 financial year and 1 July 2016 until January 2017, when the Chadstone retail store commenced operations;

    ·sales journals/general ledger account in respect of the 2019/2020 financial year and from 1 July 2020 to date;

    ·financial reports in respect of the 2015/2016, 2016/2017, 2017/2018, 2018/2019 and 2019/2020 financial years; and

    ·business activity statements from 1 July 2020 to date.

    If the Tribunal does not receive the required information by 28 June 2021, it may proceed to make a decision based on the information currently before it.

12. No further contact was made by either Mr Ruan or Ms Yek.  The Tribunal is of the view that the applicant understood clearly at hearing of the requirement to provide further information and what that information was.  In particular, the necessity to provide current financial information, as without it the Tribunal would be unable to consider making a favourable decision.  Furthermore, the Tribunal granted 14 days from hearing to 16 June 2021 for provision of the required information, as agreed to by the applicant.  The Tribunal granted a further extension of time until 28 June 2021, despite no request for an extension of time by the applicant and set out in writing the additional information that was required and discussed at hearing. 

13. The Tribunal considers that the applicant has been given every opportunity to provide the information that is necessary to enable the Tribunal to consider making a favourable decision.  No information was provided, no extension of time was requested and no explanation as to why the applicant had failed to comply with the Tribunal’s request for information was provided.  Consequently, on 8 July 2021, the Tribunal proceeded to make a decision.  For the following reasons, the Tribunal has concluded that the matter should be affirmed.

    CONSIDERATION OF CLAIMS AND EVIDENCE

14. According to Departmental records, Mr Ruan was granted a Subclass 188 Provisional visa on 31 December 2013 and arrived in Australia in February 2014. He told the Tribunal that his experience in China was in the real estate business.  However, he found it to be stressful and competitive and sought a change in his lifestyle.  Having visited Australia with his family on past occasions, he and his wife, Ms He, decided that they liked the work/life balance that was evident in Australia and were keen for their children to complete their education in Australia.

15. Mr Ruan gave oral evidence that his initial intention was to commence a business in Australia in the real estate industry, in line with his business knowledge and experience.  However, he came to realise that this type of business was not acceptable for this type of visa.  Consequently, he and Ms He set about researching and exploring various business options. The Tribunal notes that Mr Ruan also entered into the property market and has several entities set up to hold the properties for the family, some of which are rented to the Business.  He further stated that he sold all of his assets and properties in China and transferred the funds to Australia.

16. In 2015, Mr Ruan and Ms He considered the purchase of a restaurant business in the city of Melbourne.  However, prior to settlement he became aware of the financial inaccuracies provided and decided not to pursue the purchase.  Mr Ruan and his wife had noted the attraction to nature and lifestyle in Australia, which led them to commence the development of a purely natural skincare range.  Mr Ruan explained that although neither of them had direct experience in skincare, they had both studied marketing and were cognisant of the potential market in this area both in Australia and also in China, where it was evident that the population was ever seeking higher quality products.

17. Mr Ruan expressed the importance for them to develop their own brand to ensure that the range consisted of high quality and natural ingredients and acknowledged that this was the more difficult pathway. While the retail sales in Australia were both online and for a period from a retail outlet in Chadstone, his company in China, Shanghai Sunway Investment Company Ltd (Shanghai Sunway), was registered for the purpose of importing the products to China and to control that side of the sales.

18. The issue in the present case is in relation to cl.888.222 of Schedule 2 to the Regulations. Clause 888.222(1)(a) requires the applicant to have had an ownership interest in at least one actively operating main business in Australia during the two years immediately before the application was made. Clause 888.222(1)(b) requires that the criterion in cl.888.222(1)(a) continue to be met at the time of decision. In this case cl.888.222(2) is not applicable.

19. Mr Ruan has nominated the Business as the main business.  As the application was lodged on 26 October 2017, the relevant two-year period is 26 October 2015 to 25 October 2017 (the relevant period). According to the Australian Business Register, the Business traded under the name of Satsun Time from 10 July 2015 and commenced trading under the name of Minimal Skincare from 10 March 2017.

20. The Tribunal then turned its mind to whether the Business meets the criteria to be a ‘main business’. The meaning of ‘main business’ is set out in reg 1.11(1) of the Regulations (as defined in reg 1.03).  The four criteria are not mutually exclusive and must all be met before a nominated business can be considered as the ‘main business’. 

21. The first of the criteria under reg 1.11(1)(a) requires that the applicant has or has had an ownership interest. Regulation 1.03 provides that ownership interest has the meaning given to it in s.134(10) of the Act. The definition of ownership interest in relation to a business, as relevantly defined in s.134(10) of the Act means, amongst other things, ‘a shareholder in the company that carries on the business’, and an ownership interest held indirectly through a trust.

22. In this case Sunway Trading Pty Ltd is the corporate trustee of Sunway Holding Trust.  While incorporated on 7 April 2014, it was not until the establishment of Sunway Holding Trust on 24 April 2015 that it took on the role of corporate trustee.

23. Current and historical extracts from ASIC confirm that Mr Ruan has been the director from incorporation on 7 April 2014; Ms He registered as a joint director in April 2015.  ASIC documents also record 100% of the shares being held between Mr Ruan and Ms He throughout the relevant period.

24. Mr Ruan confirmed that Sunway Trading Pty Ltd does not operate in its own right, rather, it operates the Business on behalf of the Trust for the benefit of the beneficiaries. The Schedule to the trust deed, dated 24 April 2015, records Mr Ruan and Ms He as the primary beneficiaries.

25. Consistent with the findings in the case of Minister for Immigration and Citizenship v Hart [2009] FCAFC 112, the Tribunal accepts that, ‘a shareholder in a company that carries on the business has an interest in the business, and that interest is an ownership interest’. Therefore, the Tribunal is satisfied that Mr Ruan has an ownership interest in the Business. Consequently, the first criterion in reg 1.11(1)(a) is met.

26. Secondly, the applicant must maintain or has maintained direct and continuous involvement in management of the Business from day-to-day and in making decisions affecting the overall direction and performance of the Business.

27. Mr Ruan told the Tribunal that he is responsible for the overall operations of the Business and the day-to-day management, which includes negotiations with suppliers and purchasers, logistics and the signing of relevant contracts. Ms He is mainly involved in the research and development of the products.  He further stated that he manages the warehouses and sales in Australia and also controls the human resources and marketing side of the Business.  In response to a question from the Tribunal, Mr Ruan stated that his wife is more involved on the bookkeeping side.  However, both he and Ms He liaise with the accountant on a quarterly basis.

28. It was evident that Mr Ruan’s signature was on the financial reports, a truck selling agreement, and the Product Development Agreement with Syndet Works Pty Ltd – the company who developed the skincare product samples at the outset and has continued to manufacture the products for sale.  It is also Mr Ruan’s signature on the lease agreement with Chadstone Shopping Centre in December 2016 and emails between Mr Ruan and Chadstone Shopping Centre are evident in respect of Mr Ruan’s decision in April 2018 to terminate the lease early on account of the negative impact of the upcoming redevelopment project and forced closure of the store from 1 June 2018. It is noteworthy that evidence in the form of information in relation to a proposed letter of invitation to rent retail premises at Eastland Shopping Centre, dated 16 May 2016 was also before the Tribunal. 

29. While the Tribunal acknowledges the role of Ms He, the Tribunal is also satisfied that Mr Ruan has had control of many aspects of the Business on a day-to-day basis and he has made the decisions impacting the direction and performance of the Business throughout the relevant period. Therefore, the Tribunal finds that the second criterion in reg 1.11(1)(b) is met.

30. Thirdly, the value of the applicant’s ownership interest, or the total value of the ownership interests of the applicant and the applicant’s spouse or de facto partner, in the Business must meet or have met certain thresholds. As the Business is not operated by a publicly listed company, the required ownership interest must be at least 30% if the annual turnover is greater than or equal to AUD400,000 and at least 51% if the annual turnover is less than AUD400,000. In this case, regardless of the turnover of the Business, as the Tribunal determined above that Mr Ruan and Ms He have always held a 100% ownership interest in the Business together, the third criterion in reg 1.11(1)(c) is clearly met and the Tribunal finds accordingly.

31. Finally, the Business must be a qualifying business. ‘Qualifying business’ is defined in reg 1.03 as an enterprise that is operated for the purpose of making a profit through the provision of goods or services or goods and services (other than the provision of rental property) to the public and is not operated primarily or substantially for the purpose of speculative or passive investment.

32. As there is no definition of the term ‘the public’ in the Act, it is therefore taken to have its ordinary meaning. The Cambridge English Dictionary defines ‘public’ as involving people in general and not limited to a particular group of people.  The Macquarie Dictionary refers to pertaining to or affecting people as a whole. The Tribunal is also cognisant of the need to consider the particular circumstances of the case on their own merits to come to a conclusion as to whether the purpose of the Business is to provide goods or services or goods and services to the public.

33. There was a significant amount of documentary evidence before the Tribunal in support of the significant time and effort required, prior to the first sale, in research and development of the products, design of the product packaging and marketing.  The evidence included contracts, minutes, emails, order requests and invoices with Syndet Works Pty Ltd and Organic Formulations Pty Ltd, in relation to development of the products.  Certificates of Analysis in relation to seven different products were also issued by Syndet Works Pty Ltd in July 2016. Evidence in respect of the packaging and design process, including quotations from suppliers and the development of a brochure in English and Chinese were also provided.  

34. The Tribunal reviewed the business activity statements in respect of the period commencing 1 April 2015 to 30 September 2017, draft financial reports of the Business in respect of the 2015/2016 and 2016/2017 financial years and the 12-month periods ending 30 September 2016 and 30 September 2017.  It was evident from the business activity statements that there were nil sales in the period to 30 June 2016.  However, the draft profit and loss statement at 30 June 2016 that was provided to the Department records sales of $22,881.  Mr Ruan was unable to explain the discrepancy.

1. According to the quarterly business activity statements, sales for the quarter ending 30 September 2016 were exclusively export sales in the amount of more than $158,000, reverting to only $1,166 in the quarter ending December 2016 in addition to local sales of $1,326.  Following the opening of the retail outlet in Chadstone Shopping Centre the local sales increased significantly to more than $350,000 and nil export sales in the quarter ending 31 March 2017.  However, in the quarter ending 30 June 2017, export sales exceeded $188,000 while local sales reduced to around $30,000.  The profit and loss statement in the 12-month period ending 30 September 2017 recorded sales of $548,625. Based on the GST exclusive sales recorded on the business activity statements from 1 October 2016 to 30 June 2017 of $535,484, sales in the September 2017 quarter were only $13,141.

2. Mr Ruan gave oral evidence that during the period commencing January 2017 the focus was on the local market which represented at least 80% of sales until closure of the Chadstone store in April 2018.  This evidence does not align with the sales recorded in the business activity statement at 30 June 2017.

3. In this case there is no question that business activities were in operation from October 2015, noting that the product development agreement with Syndet Works Pty Ltd was signed by Mr Ruan on 26 November 2015 and product information documents for the samples were drawn up and dated in October 2015.  The plethora of evidence following through the development of the skincare products, the packaging, design and marketing clearly demonstrates that the Business was actively involved in developing the product, which entered the export market initially in mid-2016, later expanding into the local market.

4. Regardless of the discrepancy in the available evidence in regard to sales, this does not change the fact that the Business has operated for the purpose of making a profit through the provision of goods or services or goods and services (other than the provision of rental property) to the public in the relevant period.  As the income of the Business is generated exclusively from the sale of skincare products, it is clearly not operated primarily or substantially for the purpose of speculative or passive investment. Consequently, the Tribunal finds that the Business is a qualifying business, thereby satisfying the criterion in reg 1.11(1)(d).

5. Accordingly, all four criteria under reg 1.11(1) are met. As the main business is limited to the Business, it follows that the criterion under reg 1.11(2) is also met. Consequently, the Tribunal finds that the Business can be considered as the ‘main business’ in respect of the relevant period.

6. In respect of cl.888.222(1)(a), the Tribunal must now be satisfied that Mr Ruan had an ownership interest in the Business and that it was actively operating throughout the relevant period.

7. As discussed above, Mr Ruan has been a director and shareholder, together with Ms He, of the corporate trustee company that operates the Business through Sunway Holding Trust, for the benefit of the beneficiaries, of whom the primary named beneficiaries are Mr Ruan and Ms He.  As such, the Tribunal finds that Mt Ruan has had an ownership interest in the Business during the relevant period.

8. The delegate relied on the case of Shahpari and Ors v Minister for Immigration and Anor [2016] FCCA 513 (Shahpari) to decide that the absence of sales recorded on the business activity statements in the period from October 2015 to June 2016 denied the Business the ability to be seen as actively operating throughout the relevant period.

9. As submitted by the applicant, in contrast to the applicant in Shahpari, Mr Ruan was in Australia for the majority of the time and was significantly involved in developing all aspects of the Business.  Departmental records indicate that Mr Ruan was out of Australia for no more than between two and four weeks at a time at various intervals throughout the relevant period, totalling less than four months overall.  

10. Actively operating is not defined in the legislation.  However, in Shahpari reference was made to the case of Li & Ors v Minister for Immigration and Border Protection [2015] MRTA 807, where actively operating was interpreted as ‘describing the nature of an applicant’s involvement in that repetitive, continuous enterprise. In other words, the involvement of an applicant must be active in an enterprise that has a repetitive, continuous and permanent character’. Wilson J went on to express actively operating further as to whether the Business actively sought to generate business, in fact generated trade and custom and derived some financial gain from its activities in the relevant period.

11. The Tribunal does not accept that sales recorded on the business activity statements alone reflect whether the Business is actively operating.  This is especially so given that in practice business activity statements are often amended following finalisation of the annual reports.  In the Tribunal’s view other evidence such as sales journals, invoices and financial reports can all support the level of activity of a business. 

12. Mr Ruan failed to provide the sales journals and additional financial reports in respect of the relevant period, as requested by the Tribunal. Without such evidence, in particular in light of the discrepancies in the evidence discussed above, the Tribunal is unable to be satisfied that the Business was actively operating throughout the entirety of the relevant period. Therefore, it follows that the Tribunal can only conclude that Mr Ruan has not met the criterion under cl.888.222(1)(a) of Schedule 2 to the Regulations.

13. Clause 888.222((1)(b) of Schedule 2 to the Regulations requires that Mr Ruan continue to have the ownership interest in the actively operating main business. That is, the Business relied upon for cl.888.222(1)(a).

14. Based on ASIC records, the Tribunal is satisfied that Mr Ruan, together with Ms He, continues to be a director and shareholder of the corporate trustee company that operates the Business through Sunway Holding Trust, for the benefit of him and Ms He as the primary beneficiaries. Therefore, the Tribunal is satisfied that he continues to have an ownership interest in the Business. However, in the absence of any financial information in respect of the Business from 1 October 2017 to date, despite being given ample opportunity to provide such evidentiary material to the Tribunal, the Tribunal is unable to be satisfied that the Business continues to be actively operating, or whether it continues to meet all of the criteria in respect of being a ‘main business’. In particular, in regard to whether the Business continues to be a qualifying business, in the absence of sales journals, the Tribunal is unable to be satisfied that the Business is providing goods and services “to the public” and not solely to Shanghai Sunway. Therefore, the Tribunal must also conclude that the criterion under cl.888.222(1)(b) of Schedule 2 to the Regulations is not met.

15. Accordingly, the Tribunal finds that Mr Ruan has failed to meet the criteria under cl.888.222 of Schedule 2 to the Regulations. As one of the essential requirements for the visa is not met, the decision under review must be affirmed.

16. Further, because the first named applicant is unable to satisfy cl.888.222 of Schedule 2 to the Regulations, the second and third named applicants are unable to satisfy cl.888.311 of Schedule 2 to the Regulations because they are not members of a family unit of a person who holds a Subclass 888 visa granted on the basis of satisfying the primary criteria for the grant of the visa. Therefore, the decision in relation to the secondary applicants must also be affirmed.

    DECISION

17. The Tribunal affirms the decision not to grant the applicants’ Business Skills (Permanent) Subclass 888 visas.

    Robyn Anderson
    Member