Sefat v Minister for Immigration
[2016] FCCA 2501
•29 September 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SEFAT & ORS v MINISTER FOR IMMIGRATION & ANOR | [2016] FCCA 2501 |
| Catchwords: MIGRATION – Visa – Business Skills (Residence) Visa – ‘ownership interest’ – ‘sole proprietor’ – trust – co-trustee – appointor – failure to take into account a relevant matter – error demonstrated. |
| Legislation: Migration Act 1958 (Cth), ss.348, 360, 425 & 134(10) Migration Regulations 1994 (Cth), cl.892.211(1) to Sch.2 and regs.1.03 & 1.11 |
| Cases cited: Campbell v Minister for Immigration and Citizenship (2011) 122 ALD 560 Minister for Immigration and Citizenship v Hart (2009) 179 FCR 212 |
| First Applicant: | MOHAMMAD ALI SEFAT |
| Second Applicant: | NASRIN MOZAFFARI |
| Third Applicant: | NAJMEH SEFAT |
| Fourth Applicant: | ALIREZA SEFAT |
| Fifth Applicant: | AMIR MOHAMMAD SEFAT |
| First Respondent: | MINISTER FOR IMMIGRATION & BORDER PROTECTION |
| Second Respondent: | ADMINISTRATIVE APPEALS TRIBUNAL |
| File Number: | ADG 294 of 2015 |
| Judgment of: | Judge Heffernan |
| Hearing date: | 11 April 2016 |
| Date of Last Submission: | 11 April 2016 |
| Delivered at: | Adelaide |
| Delivered on: | 29 September 2016 |
REPRESENTATION
| Counsel for the Applicants: | Mr S Ower |
| Solicitors for the Applicants: | McDonald Steed McGrath Lawyers |
| Solicitors for the Respondents: | Ms C Stokes for the Australian Government Solicitors |
ORDERS
There be an order in the nature of certiorari that the decision of the Administrative Appeals Tribunal dated 23 July 2015 affirming the decision of the delegate of the first respondent made on 29 September 2014 rejecting the applicants’ applications for Business Skills (Residence) (Class DF) visas is quashed.
There be an order in the nature of mandamus that the Administrative Appeals Tribunal review according to law the decision of the delegate of the first respondent dated 29 September 2014 rejecting the applicants’ applications for Business Skills (Residence) (Class DF) visas.
The first respondent do pay the applicants’ costs as agreed or taxed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 294 of 2015
| MOHAMMAD ALI SEFAT |
First Applicant
| NASRIN MOZAFFARI |
Second Applicant
| NAJMEH SEFAT |
Third Applicant
| ALIREZA SEFAT |
Fourth Applicant
| AMIR MOHAMMAD SEFAT |
Fifth Applicant
And
| MINISTER FOR IMMIGRATION & BORDER PROTECTION |
First Respondent
| ADMINISTRATIVE APPEALS TRIBUNAL |
Second Respondent
REASONS FOR JUDGMENT
This is an application for judicial review of a decision of the Administrative Appeals Tribunal dated 23 July 2015 which affirmed an earlier decision of a delegate of the Minister not to grant the applicants’ Business Skills (Residence) (Class DF) visas (‘the visas’). The delegate refused the application on the basis that he was not satisfied that the first applicant had, and continued to have, an ‘ownership interest’ in the nominated main business. For that reason, the delegate concluded that the first applicant could not meet the criteria under cl.892.211(1) to Schedule 2 of the Migration Regulations 1994 (Cth) (‘the Regulations’). The application raises four grounds as follows:
“1.The Second Respondent committed jurisdictional error in that it committed an error of law in failing to properly interpret Section 134(10) of the Migration Act 1958.
PARTICULARS
1.1the Second Respondent failed to give meaning to the words “including such an interest held indirectly through one or more interposed companies partnerships or trusts” as it appears in Section 134(10) of the Migration Act 1958.
1.2The Second Respondent failed to note that as the main applicant and his wife are a married couple they act as partners in all respects including as co-trustees of a trust.
2.The Second Respondent committed jurisdictional error in finding that the decision of the Federal Magistrates Court in Campbell v MIAC [2011] FMCA81 was determinative of the question whether an ownership interest exists in this case pursuant to Section 134(10) of the Migration Act 1958.
3.The second respondent committed jurisdictional error in that it committed an error of law in not finding that the main applicant was the sole proprietor of the relevant business.
4.The second respondent committed jurisdictional error in that it committed an error of law in disregarding a consideration of the policy as set out in PAM3 paragraph 39 point 7 ‘trust and “ownership interest” in a business’.”
At the hearing of this matter, Mr Ower, for the applicants, indicated that the applicants did not wish to proceed with ground four and relied only on grounds one to three, which Mr Ower acknowledged were to the same effect, contending that the Tribunal committed jurisdictional error by misconstruing the definition of ‘ownership interests’ in s.134(10) of the Migration Act 1958 (Cth) (‘the Act’).
The applicants in this matter are Iranian citizens. The first applicant, Mr Mohammad Ali Sefat, applied for the visas on 19 July 2013 with respect to one nominated main business, the Sefat Family Trust trading as Cozy Shoes and Gaptel Australia. The secondary applicants are the wife and children of the first applicant.[1] As its name suggests, Cozy Shoes is a business engaged in the retail sale of footwear. Gaptel Australia is engaged in providing voice over internet protocol (‘VOIP’) services. The success of the visa applications for the secondary applicants is contingent on the success of the first applicant, Mr Mohammed Ali Sefat.
[1] Court Book (‘CB’) pp 17 – 99.
The applicants relied on the materials in the Court Book, the affidavit of Mitchell Travis Simmons dated 29 January 2016 (which annexed the transcript of the Tribunal hearing) and the affidavit of Jane Louise McGrath dated 4 August 2015 (which annexed a copy of the Tribunal Decision Record dated 23 July 2015). The first respondent relies on the materials in the Court Book.
Legislative framework
The first applicant was assessed against subclass 892. In order to qualify for the visa, it was necessary for the applicant to satisfy the criteria in cl.892.211 of Schedule 2 of the Regulations. A primary criterion for a grant of the visa at the relevant time was as follows:
“(1)The applicant has had, and continues to have, an ownership interest in 1 or more actively operating main businesses in Australia for at least 2 years immediately before the application is made.
(2)For each business to which subclause (1) applies:
(a)an Australian Business Number has been obtained; and
(b)all Business Activity Statements required by the Australian Taxation Office (the ATO) for the period mentioned in subclause (1) have been submitted to the ATO and have been included in the application.”
At the relevant time the term ‘main business’ was defined by reg.1.11 of the Regulations as follows:
“(1)For the purpose of these Regulations and subject to subregulation (2), a business is a main business in relation to an applicant for a visa if:
(a)the applicant has, or has had, an ownership interest in the business; and
(b)the applicant maintains, 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; and
…
(d)If an applicant has, or has had, an ownership interest in more than 1 qualifying business that would, except for this subregulation, be a main business in relation to the applicant, the applicant must not nominate more than 2 of those qualifying businesses as main businesses.”
Of particular relevance to this application, the term ‘ownership interest’ was defined in reg.1.03 of the Regulations as having that definition given to the term in s.134(10) of the Act. The s.134(10) definition is as follows:
“ownership interest, in relation to a business, means an interest in the business as:
(a) a shareholder in a company that carries on the business; or
(b) a partner in a partnership that carries on the business; or
(c) the sole proprietor of the business;
Including such an interest held indirectly through one or more interposed companies, partnerships or trusts.”
The term ‘qualifying business’ was defined pursuant to reg.1.03 as being an enterprise that:
“(a)is operated for the purpose of making profit through the provision of goods, services or goods, and services (other than the provision of rental property) to the public; and
(b)is not operated primarily or substantially for the purpose of speculative or passive investment.”
Tribunal hearing and findings
The Tribunal hearing occurred on 11 June 2015. Prior to the hearing date, the applicants’ representative provided the Tribunal with a written submission which set out the factual background and arguments the first applicant sought to raise with the Tribunal, and referred it to various documents that had been submitted with the visa application.[2]
[2] CB pp 513 – 518.
The applicants were represented before the Tribunal by a registered migration agent who was also a solicitor, and had the assistance of an interpreter in the Farsi (Persian) and English languages.
The Tribunal identified the issue before it as being whether the first applicant had demonstrated an ownership interest, as defined in reg.1.03, in order to satisfy cl.892.211(1) of the Regulations.[3]
[3] CB p 545 at [3].
The Tribunal noted the definition of ownership interest in s.134(10) of the Act and that it represented a modification of the meaning of ownership interest which exists under general law.[4]
[4] CB p 546 at [5].
The Tribunal noted that one of the concerns expressed by the delegate was the lack of documentation relating to the purchase of the businesses, Cozy Shoes and Gaptel. This was not a concern shared by the Tribunal. The Tribunal concluded that it had sufficient documentary and oral evidence before it to be satisfied that those businesses were legitimately purchased and run in good faith by the applicants. It found that the Sefat Family Trust was set up as a trading trust in good faith and on the advice of an Australian accountant.
In addressing the definition of ‘ownership interest’ the Tribunal found that there was no evidence that the first applicant had an interest in the Sefat Family Trust as a shareholder in a company. It noted that the first applicant asserted his ownership interest was that of a sole proprietor, or in the alternative, as a partner in a partnership.
The Tribunal made it clear to the applicant that it did not have any issue with the proposition that he had the relevant involvement in the management and decision making process of the business, but that it doubted whether he could be said to come within the definition of ‘ownership interest’. In this regard, it referred him to the decision of Campbell v Minister for Immigration and Citizenship[5].
[5] (2011) 122 ALD 560.
The Tribunal took into account a written submission that was provided on behalf of the applicants after the hearing. It considered the contention of the applicant that his situation was distinguishable from Campbell’s case by virtue of he and the co-trustee being husband and wife. As the Tribunal noted, the submission referred to the Procedure Advice Manual (‘PAM3’) which indicated that where an applicant shares a trustee role with their spouse or de facto, they may be attributed 100% ownership. The Tribunal acknowledged that this was clearly stated in PAM3 but correctly noted that the Tribunal was not bound by that document because a policy document cannot be elevated to the level of legislation.[6]
[6] CB p 547 at [10].
The Tribunal followed Campbell’s case in finding that because s.134(10)(c) refers to ‘the sole proprietor’ of the business, there could not be more than one sole proprietor, even if those persons were husband and wife.[7] It was not satisfied that both trustees could be regarded as the sole proprietor because of the fact that the first applicant and his wife were bound to act jointly in the exercise of their powers and duties under the trust.[8] The practical reality of the husband’s day-to-day management and control of the business, in contrast to his wife’s passive role, did not alter the fact that they were co-trustees and accordingly the Tribunal found, they could not be regarded as sole proprietors. It found that the first applicant did not have an ‘ownership interest’ as sole proprietor indirectly through the trust.[9]
[7] CB p 547 at [11].
[8] CB p 547 at [11].
[9] CB p 547 at [11].
With respect to the submission that the first applicant could properly be regarded as being in partnership with his wife, and for that reason having an ownership interest held indirectly through the trust as a partner in a partnership that carried on the business, the Tribunal applied the reasoning in Campbell’s case and concluded that a co-trustee in a trust which is carrying on a business did not have an ownership interest as a partner in a partnership within the meaning of s.134(10)(b). It found that the first applicant and his wife were not discharging their duties as co-trustees in a partnership.[10]
[10] CB p 547 at [12].
The Tribunal acknowledged that it was unfortunate that the first applicant could not be regarded as having an ownership interest because of the manner in which he had legitimately structured his business affairs, but found that he could not establish that he had the necessary ownership interest. Accordingly, the Tribunal affirmed the decision of the delegate not to grant visas to the applicants.
Submissions
The first contention advanced by Mr Ower was that Campbell’s case does not stand for the proposition that simply because a person is a co-trustee of a trust that they cannot satisfy the definition of ‘ownership interest’ in s.134(10) of the Act. He submitted that the first applicant’s application had to be assessed in light of the actual wording of the trust deed for the Sefat Family Trust. His argument conceded that the first applicant could not be regarded as the sole proprietor by virtue of his appointment as trustee alone. Rather, he submitted that it was the first applicant’s role, both as a trustee and most significantly the appointor under the trust deed, which meant that he could properly be regarded as the ‘sole proprietor’. This was because he was the person who had ultimate control of the business. By virtue of his power to appoint and remove trustees it was within his power to operate the business entirely for his own benefit. Mr Ower did not pursue the ‘partnership’ argument advanced before the Tribunal.
Mr Ower referred the Court to a number of the authorities decided in different statutory contexts. He submitted that those authorities established that where the power of an appointor allowed that person to remove and appoint trustees in order to control the trust estate for the appointor’s own benefit, the trust property had been held as effectively owned by the appointor for the purposes of those relevant statutes.
On the same reasoning, counsel for the applicants submitted that it was Mr Sefat’s ultimate control by virtue of his positions as appointor, trustee, and one of the beneficiaries, that made him ‘sole proprietor’ within the terms of s.134(10)(c).
By ignoring the implications of the first applicant’s position as appointor, the Tribunal had either ignored relevant material or asked itself the wrong question when considering ‘ownership interest’, and for that reason, had fallen into jurisdictional error.
For the purposes of his argument, Mr Ower identified the relevant parts of the trust deed as being:
a)Clause 2 in which ‘the Trustee’ was declared to stand possessed of a fund and net income thereof upon trust for the ‘Beneficiaries’;[11]
b)Clause 1.1 in which ‘the Trustee’ was defined to mean ‘the Original Trustee and each of them or any other trustee for the time being of this settlement’;[12]
c)The definition of ‘Original Trustee’ which was “Mohammad Ali Sefat and Nasrin Mozaffari’;[13] and
d)Clause 13 which provided:
i)“The power of appointing a new Trustee in place of a deceased or retiring trustee or in addition to an existing Trustee and also the power to remove any Trustee shall be vested in MO HAMMED ALI SEFAT or such other persons as he may nominate in writing and on the death of said MOHAMMED ALI SEFAT or the said other person (as the case may be) in his legal personal representatives. The Settlor shall not at any time be eligible for appointment as a Trustee.”
[11] CB p 280.
[12] CB p 279.
[13] CB p 277.
The ‘Beneficiaries’ of the trust were persons or entities related to ‘the Primary Beneficiary’ which was defined to mean Mr Mohammad Ali Sefat, Alireza Sefat, Nasrin Mozaffari, Najmeh Sefat and Amir Mohammed Sefat.
The first respondent submitted that the Tribunal had acknowledged that, as identified in Minister for Immigration and Citizenship v Hart,[14] the definition of ‘ownership interest’ under s.134(10) was significantly broader than entailed in the orthodox use of that expression at general law. It submitted that the Tribunal had correctly applied the decision in Campbell’s case and that there was no reason to distinguish between the factual scenario in that matter and the position of the first respondent. Campbell’s case stood for the proposition that where there are multiple co-trustees, then it is not possible for any of them to be regarded as the ‘sole proprietor’ for the purposes of s.134(10) of the Act. It submitted that the situation was not altered by the first applicant being ‘appointor’ under the trust deed.
[14] (2009) 179 FCR 212.
In any event, it submitted that the first applicant had not raised his role as ‘appointor’ as part of his case before the Tribunal, and a failure to consider the significance of that role, if any, could hardly be said to be a jurisdictional error.
Consideration
I will refer to the decision in Campbell’s case before referring to the other authorities cited by Mr Ower.
In Campbell’s case the appellant had established a business enterprise structured in a way he contended gave him an ‘ownership interest’ for the purpose of s.134(10).
The Court held that the fact that the business enterprise, in which he had an interest had been structured as a trust in a particular way for legitimate commercial and asset protection purposes, was not a relevant consideration. Nor was the fact that at general law, he might be recognised as having a proprietary interest as a co-trustee.
The Court found that Mr Campbell was unable to overcome the obstacle that his interest was merely as a trustee and a beneficiary. His interest as a trustee was not sufficient to bring him within the terms of s.134(10) because he was a co-trustee with Chez Alison Pty Ltd. The Court rejected an argument that a reference to ‘the’ sole proprietor could be read as meaning ‘a’ sole proprietor and that each of the co-trustees was ‘a’ sole proprietor. His honour observed:
“In ordinary usage a “sole proprietor” is a one-person business where the owner is responsible for the debts of the business, takes all the profits and bears all the losses. Section 134(10)(c) contemplates one, sole proprietor, a concept underscored by the use of the definite article qualifying the expression. In my view, the position contended by the appellants defies both common sense and the plain meaning of the words of s 134(10)(c) of the Act (compare Spender J in Hart at [8]).”
In the course of argument, counsel for the appellant in Campbell’s case advanced a submission that invited the Court to take a very broad interpretation of s.134(10), in light of the departure from the ordinary understanding of what is entailed in an ‘ownership interest’ at general law, in order to reflect the commercial reality of the arrangements encompassed in the relevant business enterprise. His honour dealt with that submission in this way:
“I do not accept, as submitted by Mr Boccabella, that for the purposes of considering whether the types of ownership interests defined by s 134(10) apply to particular facts, the Court can impose on an existing legal structure a difference structure representing “the plain commercial reality of the situation. (transcript p 13 11 34-35).”
I am satisfied that Campbell’s case is authority for the proposition that where there are two or more trustees who have an interest in a business, then neither of them could be said to be the ‘sole proprietor’ for the purposes of s.134(10) of the Act by virtue of their status as a trustee alone. However, I am persuaded by the submission of Mr Ower that given the clear intention of the legislature in having expanded the concept of ownership interest for the purposes of the scheme of business visas created under the Migration Act by virtue of the definition in s.134(10), it is necessary to look at the state of affairs created by the trust deed itself.
I am persuaded that in this matter the Tribunal did not do this, rather, regarded the decision in Campbell’s case as being entirely determinative of the issue because the applicant was one of two co-trustees.
In Campbell’s case, the Court emphasised that the relationship between Mr Campbell and Chez Alison Pty Ltd was governed by a deed of trust.[15] In my view, Campbell’s case was an example of the Court closely scrutinizing the interest created by the trust deed. There is no reference in Campbell’s case as to whether Mr Campbell was the appointor under the trust deed and it does not appear that any argument was advanced on this basis.
[15] Campbell (op cite) at [37].
I am satisfied that in this matter, the Tribunal erred as a matter of law in its approach to the meaning of the term ‘sole proprietor’ under the definition of ‘ownership interest’ in s.134(10) of the Act. In considering whether the applicant had an ‘ownership interest’ by virtue of the definition of ‘sole proprietor’ in s.134(10)(c) of the Act, the Tribunal was required to include in its consideration “such an interest held indirectly through one or more interposed companies, partnerships or trusts.” The words “such an interest” suggest that, as Mr Ower has submitted, the Tribunal was required to have regard to the nature of the interests actually created by the trust deed. The interest identified in Campbell’s case was the applicant’s role as a co-trustee and beneficiary and nothing more. In my view, that is materially different to the facts of this matter. The role of appointor and the significance that this had for the ability of the applicant to run the affairs of the company, meant that in the context of the relationships established by this trust deed, it was at least arguable that the first applicant was within the definition in s.134(10) the ‘sole proprietor’.
I reject the submission by the first respondent that the issue was not raised by the first applicant when he appeared before the Tribunal. The case presented by the first applicant was that encompassed not just by the submissions presented on his behalf but also by the documents he presented to the Tribunal. In these circumstances, a consideration of his case required a proper consideration and construction of the trust deed and the interests and roles created by that instrument. The Tribunal was required to consider the trust deed to determine whether the first applicant could rely on it for the purposes of establishing an ‘ownership interest’. This was so irrespective of whether the first applicant’s representative drew to the attention of the Tribunal that he was the appointor under the deed in addition to being a co-trustee. Rather than doing this, the Tribunal appears to have approached the matter on the basis that once it was conceded that the first applicant was a co-trustee, Campbell’s case stood for the proposition that he could not in any circumstances be then regarded as a sole proprietor. In my view, this was an error and amounted to a failure to take into account relevant material.
In that sense, the Tribunal fell into jurisdictional error in that it failed in its duty to conduct a hearing pursuant to s.348 of the Act by virtue of its failure to properly interpret s.134(10) of the Act, its misinterpretation of Campbell’s case, and its failure to have regard to the terms of the trust deed.
Section 360 of the Act mirrors the wording at s.425. In considering the statutory obligation to issue an invitation pursuant to s.425, the Full Court of the Federal Court, citing Mazhar v Minister for Immigration and Multicultural Affairs,[16] observed that “the invitation must not be a hollow shell or an empty gesture”.[17] The Court held that the statutory obligation upon the Tribunal was to provide a “real and meaningful” invitation.[18] In failing to take into account relevant material the Tribunal, albeit unwittingly, failed to provide a real and meaningful invitation to the applicant.
[16] (2000) 64 ALD 395 at [31].
[17] Minister for Immigration and Multicultural and Indigenous Affairs v SCAR (2003) 75 ALD 151 at [33].
[18] Ibid at [37].
Ground four of the application was not pursued by the applicant and I dismiss this ground. The particulars asserted in ground 1.1 of the application were not pursued by the applicant and I have disregarded them.
Ground one of the application has been made out by the applicants for the reasons I have identified.
Ground two of the application has been made out by the applicants.
Ground three is misconceived in that it invites this Court to finally determine the question of fact on which the merits review before the Tribunal proceeded. I dismiss ground three.
Accordingly, I make the orders to be found at the beginning of these reasons.
I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of Judge Heffernan
Date: 29 September 2016
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