Shuster and Minister for Immigration and Multicultural Affairs
[2007] AATA 1692
•24 August 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1692
ADMINISTRATIVE APPEALS TRIBUNAL )
) N2006/2605
GENERAL ADMINISTRATIVE DIVISION ) Re: SHUSTER, Solly Julius Applicant
And:
MINISTER FOR IMMIGRATION AND MULTICULTURAL AFFAIRS
Respondent
DECISION
Tribunal Ms N Isenberg, Senior Member Date 24 August 2007
PlaceSydney
Decision The decision under review is affirmed. ..................(sgd)............................
Ms. N Isenberg
Senior Member
CATCHWORDS
CANCELLATION OF BUSINESS VISA - whether Applicant has substantial ownership interest in an eligible business - whether Applicant utilised his skills in actively participating at a senior level in the day-to-day management of an eligible business in Australia - decision under review is affirmed.
LEGISLATION
(CTH) Migration Act 1958 s 134
(CTH) Migration Regulations 1994
CASE LAW
Commissioner for Superannuation v Scott (1987) 13 FCR 404
Freeman v The Secretary, Department of Social Security (1988) 19 FCR 341
Hope v Bathurst City Council (1980) 144 CLR 1
Re Griffiths and Migration Authority [2001] AATA 240
Re Ong v Minister For Immigration and Multicultural and Indigenous Affairs [2003] AATA 178
Re Huang and Minister for Immigration and Multicultural and Indigenous Affairs [2002] AATA 656
Re Tang v Minister for Immigration and Multicultural and Indigenous Affairs (2000) 32 AAR 103
Re Wong and Minister for Immigration and Multicultural and Indigenous Affairs [2002] AATA 54
Re Widjaja and Minister for Immigration and Multicultural and Indigenous Affairs [2003] AATA 380
Re Jo and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 77
Re Tang Minister for Immigration and Multicultural and Indigenous Affairs [2000] AATA 997
Re Yam and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 283
Re Ng v Minister for Immigration and Multicultural and Indigenous Affairs [2003] AATA 299
Re Robert Yonathon and Minister for Immigration and Citizenship [2007] AATA 1181
Re Leo and Minister for Immigration and Multicultural and Indigenous Affairs [2006] AATA 309
Kim v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 31
REASONS FOR DECISION
24 August 2007 Ms N Isenberg, Senior Member
DECISION UNDER REVIEW
1. The decision under review before the Administrative Appeals Tribunals (“the Tribunal") was the decision of the Respondent, the Minister for Immigration and Multicultural and Indigenous Affairs (“The Minister”) dated 6 December 2006 to cancel Mr Solly Shuster’s (“Mr Shuster”) Business Skills (Migrant) (Class AD) (Subclass 127-Business Owner) visa.
BACKGROUND
2. Mr Shuster was born in South Africa and started his career in the diamond industry at the age of 15. In about 1980 he opened his own factory in which he carried out cutting, polishing, sorting and sales of diamonds. The business, now known as Shuster Diamond Cutting Works grew substantially and employs about 170 people.
3. Mr Shuster’s grandson, Adam Selikman (“Adam”) trained in the diamond industry at the expense of Mr Shuster’s company. He then migrated to Australia with his family in 1998. A company, Flawless Investments Pty Ltd (“Flawless”) was set up in May 2003 and Mr. Shuster acquired a beneficial ownership in the company. Shuster Diamond Cutting Works supplied Flawless with diamond cutting and polishing tools and supplies the diamonds Flawless sells. Adam is Flawless’ only employee.
4. During the three years that Mr Shuster’s visa was granted (9 July 2003), Mr Shuster has on three occasions been outside Australia for 13, 11 and eight months respectively: that is, 1027 days outside Australia.
ISSUE BEFORE THE TRIBUNAL
5. Section 134 of the Migration Act 1958 provides that the Minister has discretion to cancel a business visa if certain criteria are not met.
6. The issues to be determined by the Tribunal are as follows:
· Had Mr Shuster obtained a substantial ownership interest in an eligible business in Australia?
· Was Mr Shuster utilising his skills in actively participating at a senior level in the day-to-day management of the business as at the date of cancellation?
· Does Mr Shuster intend to continue to hold a substantial ownership interest in, and utilise his skills in actively participating at a senior level in the day-to-day management of an eligible business in Australia?
· Had Mr Shuster made a genuine effort to obtain a substantial ownership interest in an eligible business and to utilise his skills in actively participating at a senior level in the day-to-day management of that business?
LEGISLATION
7. The relevant legislation in this matter is the Migration Act 1958 (“the Act”), in particular section 134. This section, where relevant, provides as follows:
Section 134 Cancellation of business visas
(1)“Subject to subsection (2) and to section 135, the Minister may cancel a business visa (other than an established business in Australia visa, an investment‑linked visa or a family member’s visa), by written notice given to its holder, if the Minister is satisfied that its holder:
(a)has not obtained a substantial ownership interest in an eligible business in Australia; or
(b)is not utilising his or her skills in actively participating at a senior level in the day‑to‑day management of that business; or
(c) does not intend to continue to:
(i) hold a substantial ownership interest in; and
(ii)utilise his or her skills in actively participating at a senior level in the day‑to‑day management of;
an eligible business in Australia.”
(2)“The Minister must not cancel a business visa under subsection (1) if the Minister is satisfied that its holder:
(a)has made a genuine effort to obtain a substantial ownership interest in an eligible business in Australia; and
(b)has made a genuine effort to utilise his or her skills in actively participating at a senior level in the day‑to‑day management of that business; and
(c) intends to continue to make such genuine efforts.”
(3)“Without limiting the generality of matters that the Minister may take into account in determining whether a person has made the genuine effort referred to in subsection (2), the Minister may take into account any or all of the following matters:
(a) business proposals that the person has developed;
(b) the existence of partners or joint venturers for the business proposals;
(c)research that the person has undertaken into the conduct of an eligible business in Australia;
(d)the period or periods during which the person has been present in Australia;
(e)the value of assets transferred to Australia by the person for use in obtaining an interest in an eligible business;
(f)the value of ownership interest in eligible businesses in Australia that are, or have been, held by the person;
(g) business activity that is, or has been, undertaken by the person;
(h)whether the person has failed to comply with a notice under section 137;
(i)if the person no longer holds a substantial ownership interest in a particular business or no longer utilises his or her skills in actively participating at a senior level of a day‑to‑day management of a business:
(i)the length of time that the person held the ownership interest or participated in the management (as the case requires); and
(ii)the reasons why the person no longer holds the interest or participates in the management (as the case requires).”
Section 134 (10) defines eligible business as follows:
“eligible business means a business that the Minister reasonably believes is resulting or will result in one or more of the following:
(a) the development of business links with the international market;
(b) the creation or maintenance of employment in Australia;
(c) the export of Australian goods or services;
(d) the production of goods or the provision of services that would otherwise be imported into Australia;
(e) the introduction of new or improved technology to Australia;
(f) an increase in commercial activity and competitiveness within sectors of the Australian economy.”
CONSIDERATION OF THE EVIDENCE
8. In coming to the correct and preferable decision, I took into account all the evidence, submissions, case law and relevant legislation.
9. I had before me documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which I took into evidence.
10. In addition, there was tendered a bundle of telephone invoice statements (Exhibit A1), dated from August 2003 – October 2004 and a bundle of the Applicant’s Documents (Exhibit A2).
11. Mr Shuster gave evidence, as did Adam.
12. In conducting a review of the cancellation decision, I am to determine if section 134(1) of the Act applied to Mr Shuster at the date of cancellation of his visa: Freeman v The Secretary, Department of Social Security (1988) 19 FCR 341; Re Griffiths and Migration Authority [2001] AATA 240; Re Wong and Minister for Immigration and Multicultural and Indigenous Affairs [2002] AATA 54 at paragraph 37 ("Re Wong").
Has Mr Shuster obtained a substantial ownership interest in an eligible business in Australia?
13. There was no dispute that Mr Shuster has 100% beneficial ownership in Flawless. This appeared to be news to Adam, who thought that he was a shareholder in the company and not just a director. Indeed, in his statement he wrote that he had “established a company known as Flawless Investments Pty Ltd’ and that he holds”50% of the shares in Flawless Investments Pty Ltd. The remaining shares are beneficially owned by my grandfather Solly Shuster”.
14. In any event, Mr Shuster has obtained a substantial ownership in Flawless.
15. The question remains though: is Flawless an eligible business?
16. The Respondent referred me to Hope v Bathurst City Council (1980) 144 CLR 1 at paragraph 14 for the definition of business. The Court in that case stated that carrying on a business denotes: “pursing activities for the purpose of profit, undertaken on a continuous and repetitive basis which can be revealed by inspecting financial records, examining g who the clients are and consideration of whether the activities are genuine and real.” In order for the activities of Flawless to be found to constitute ‘business’ it would need to be shown that during the period Mr Shuster’s visa was current (9 July 2003 until 6 December 2006) Flawless engaged in activities ‘for the purpose of profit on a continuous and repetitive basis’.
17. The Respondent contended that Flawless is not carrying on activities for the purpose of profit, undertaken on a continuous and repetitive basis.
18. Mr Shuster provided profit and loss statements for the 2004, 2005 and 2006 tax years. For the year ended 30 June 2004, Flawless traded at a loss of $31,429 and in 2005 there was a loss of $72,275. In 2006 the loss was $111,769. Mr. Shuster considered that the business was improving every year although it is not yet profitable. Sales are improving according to the profit and loss statements provided although the company is running at an increasing loss. ‘Shuster Diamonds’ is the major creditor of the company, being owed nearly $400,000.
19. Adam said his grandfather had provided approximately $350,000 in stock and approximately $100,000 in cash to set up the business. It is unclear if these funds were provided to Flawless by Shuster Diamond Cutting Works or by Mr Shuster personally, but the diamonds were provided by Shuster Diamond Cutting Works.
20. Evidence was provided as to sales made by Flawless from 1 September 2003 through 11 April 2007.
21. There were said to have previously been two or three Australian staff members employed by Flawless, but now Adam is the only employee.
22. In ReHuang and Minister for Immigration and Multicultural and Indigenous Affairs [2002] AATA 656 at paragraph 11 (“Re Huang”), the Tribunal described the requirements in the following terms:
"One of the most significant factors to be taken into account in determining whether or not an activity amounts to carrying on a business is whether or not there is an intention to make a profit. If an activity has not and is not likely to result in a reasonable return for energy and money expended, then it is more likely than not that the person so engaging in the activity does so for motives other than the carrying on of a business."
23. I accept, based on the financial evidence that Flawless is a relatively new company which has increasing sales. It was carrying on activities for the purpose of profit, albeit unsuccessfully during the relevant period. It has undertaken the business on a continuous and repetitive basis.
24. I therefore find that Flawless was an eligible business.
Was Mr Shuster utilising his skills in actively participating at a senior level in the day-to-day management of the business as at the date of cancellation?
25. It was Mr Shuster‘s submission that he plays a key role in Flawless by providing his extensive management experience and by sourcing and producing the essential product of the business (i.e. diamonds). He said he holds discussions by telephone and through faxes on a daily basis with Adam in relation to a range of management issues concerning the operation of the business. He said Adam is new to the industry and, although he is proving to be a good salesperson, he has a substantial amount of knowledge still to acquire. During the course of their discussions topics would include: the types of gemstones presently being sold, new customers, existing customers, marketing and general day to day issues which arise in the diamond business.
26. Adam said that he carries out the daily functions of the business such as opening up in the morning, advertising, acquiring stock and attracting customers, as well as the accounting functions. Adam said, each sale is ‘clarified’ through his grandfather. He produced the phone records that show frequent calls between Flawless and Shuster Diamond Cutting Works in South Africa, where Mr Shuster has been located for the duration of his visa, except for approximately five and half months which was spent in Australia.
27. Mr. Shuster told me of his commitment to work: he ‘never stops’, frequently working to midnight. I note though that in his 24-month survey he stated that he works only ‘15 hours per week’ in Flawless. If this is the case, only a very small portion of his total work time is spent on Flawless.
28. I was referred to Re Huang where Senior Member Muller said at [12]:
"Not only must the eligible business operate in Australia to comply with the Act, the visa holder must participate at a senior level in the day-to-day management of the Australian business in Australia, albeit with trips overseas from time to time". (my underlining)
29. Also, in Re Ng v Minister for Immigration and Multicultural Affairs [2003] AATA 299 Deputy President Wright QC commented at paragraph 12:
"This does not mean that the visa holder is confined to working within the geographical limits of Australia. Obviously overseas trips may be a vitally important part of fostering and expanding the business. However the Act does not contemplate an absentee entrepreneur directing operations from afar. Direct "hands on" involvement within the Commonwealth of Australia is essential". (my underlining)
30. Notwithstanding the frequent telephone (and also fax) contact it remains that Mr. Shuster spent very little time managing the business in Australia.
31. I acknowledge that the Tribunal in some cases e.g. Re WidjajaandRe Jo and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 77 has come to a different view about the need for the business involvement to occur in Australia. In preferring the Re Huang line of cases I have especially considered the reasons for Mr Shuster’s prolonged absences from Australia.
32. I accept the evidence that the sourcing of diamonds must occur overseas. However, Mr Shuster‘s evidence was that he was given a calendar annually with the dates he would be invited to purchase diamonds. Hence, he was provided with advance notice of when he would be required to be in South Australia to make purchases, and could make visits as necessary. He described that presently, while in Australia, he has someone making purchases on his behalf, (although, he had previously said in his evidence that he was obliged to attend in person or lose his right to be offered to buy diamonds). His ability to buy diamonds for Flawless and otherwise is not jeopardised by his residence in Australia, as he suggested. Travel from Australia to South Africa for the purpose of the monthly purchase, or reliance upon his nominee is just not his preferred course.
33. Mr Shuster also gave evidence that supervision of the entire process of sorting and cutting diamonds is critical due to the risk of staff substituting a valuable diamond with one which is of lesser value or smaller in size. I accept that supervision is critical but do not accept that this needs to be personally undertaken by Mr Shuster. The need for trustworthy staff is an essential element of any business, not just the diamond industry; notwithstanding that diamonds have an intrinsic value.
34. Given that Mr Shuster spent only five and a half months in Australia during the three years that he held his business visa, I do not accept that these significant periods spent outside of Australia fall within what the Tribunal contemplated in Re Huang where Senior Member Muller said at paragraph [12]:
“Not only must the eligible business operate in Australia to comply with the Act, the visa holder must participate at a senior level in the day-to-day management of the Australian business in Australia, albeit with trips from overseas from time to time.”
35. Mr Shuster did not go overseas from “time to time”. He spent significantly more time in South Africa than he did in Australia.
36. Mr Shuster also gave evidence that he selects the diamonds based on their saleability in Australia. He said he had ascertained that stones having better colour and purity sell best in Australia. Those stones not falling into this category would be sold in South Africa or in his other business in America. That evidence would suggest that a major part of his purchase of diamonds was for the benefit of Flawless. Adam’s evidence was that 95% of Flawless’s diamonds were from Shuster Diamond Cutting Works. In 2006, however, Flawless’s stock on hand was about $AUD 400,000 with revenue of about $200,000. This is a very small fraction of the total annual purchases of $US20-30 million made by Shuster Diamond Cutting Works. I reject the evidence that the purchases by Shuster Diamond Cutting Works were primarily to source diamonds for Flawless.
37. Further, Deputy President McMahon found in ReTang and Minister for Immigration and Multicultural Affairs [2000] AATA 997 at [21] “that the Act is intended to benefit business owners who settle in Australia and actively manage an eligible business here”. In Re Robert Yonathon and Minister for Immigration and Citizenship [2007] AATA 1181, Senior Member Sweidan at [37] referred to the “Second Reading Speech of the Minister for Immigration and Ethnic Affairs introducing the Migration Amendment Bill (No 2) 1992 which introduced the new section 134 into the Act”. Senior Member Sweidan stated:
"It is clear from that speech... that it was understood that migrants who arrived in Australia on a business skills visa would remain resident in Australia".
38. Mr Shuster‘s extensive absences suggest to me that he does not intend to settle in Australia and actively manage an eligible business here. Furthermore, he has a far greater business in South Africa – employing many staff, and, significantly, purchasing, he said, up to $US2-3 million of diamonds every month or so. While he has an apartment in Australia and some shares, he gave no indication in his evidence that he had any intention whatsoever of settling here or of winding back his South Africa business. In ReHuang and Re Tang the Applicants also were making no efforts whatsoever to sever financial ties with their country of origin.
39. I therefore find that Mr Shuster was not utilising his skills in actively participating at a senior level in the day-to-day management of an eligible business in Australia.
Had Mr Shuster made a genuine effort to obtain a substantial ownership interest in an eligible business and to utilise his skills in actively participating at a senior level in the day-to-day management of that business?
40. The Respondent contended that Mr Shuster has not made a genuine effort to participate at a senior level in the day-to-day management of an eligible business.
41. I was referred to the case of Yam and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 283 at [53] where the Tribunal said “that the word "genuine" and the matters mentioned in s134 (3) show that there is a requirement of a level of effort beyond that which is purely superficial or token". The Respondent contended that the level of effort which has been made by Mr Shuster has only been a "superficial or token" level of effort.
42. In Re Leo andMinister for Immigration and Multicultural and Indigenous Affairs [2006] AATA 309 at [58] the Tribunal found that ‘Genuine’ “means truly what something is said to be; authentic” and ‘effort’ means “a vigorous or determined attempt;” Oxford Dictionary of English, second edition, 2003’. In the section 37 ‘T’ documents (p165) Mr Shuster said that he is seeking a replacement for his business in South Africa so that he can "expand the Australian business opportunities further". While Mr. Shuster may be looking to expand his business into Australia, I am not satisfied he is looking to replace his business in South Australia with the one in Australia. I do not accept that his efforts are “vigorous and determined’ to participate at a senior level in the day-to-day management of an eligible business, but are properly characterised as ‘superficial and token’.
43. I find that the requirements in s134 (1) of the Act are satisfied for cancellation of Mr Shuster’s visa. Further, Mr Shuster has not made any genuine effort to utilise his skills in actively participating in a senior level in the day to day management of that business and does not intend to continue to make such genuine efforts (s134(2)).
Residual discretion
44. Further, being satisfied that Mr Shuster's visa may be cancelled pursuant to s134 (1) of the Act, there are no issues which would lead me to exercise the residual discretion (as discussed in Kim v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 31) in Mr Shuster's favour and that, as such, the residual discretion should not be exercised in his favour.
45. Having regard to all the evidence before me, I am satisfied that Mr Shuster at the time of the cancellation of his visa:
1. Mr. Shuster has failed to utilise his skills in actively participating at a senior level in the day-to-day management of an eligible business in Australia; and
2. Mr. Shuster has failed to make any genuine efforts to obtain a substantial interest in an eligible business in Australia or to utilise his skills in actively participating at a senior level in the day-to-day management of an eligible business.
DECISION
46. The decision under review is affirmed.
I certify that the preceding paragraphs are a true copy of the reasons for the decision herein of MS N ISENBERG, SENIOR MEMBER
Signed: Felicia Daniele............................................................
AssociateDate of Hearing: 9 July 2007
Date of Decision: 24 August 2007
Solicitor for the Applicant: Mr Arnold Conner
Solicitor for the Respondent: Ms Tessa Van Duyn
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